SERVOTRONICS, INC. Shareholder Rights Plan Dated as of October 15, 2012 TABLE OF CONTENTS

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Shareholder Rights Plan

 

Dated as of October 15, 2012

 

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TABLE OF CONTENTS

 

 

 

On October 15, 2012, the Board of Directors of Servotronics, Inc., a Delaware corporation (the “Company”), authorized and declared a dividend distribution of one Right (as hereinafter defined) for each outstanding share of common stock, par value $.20 per share, of the Company (“Common Stock”) outstanding at the close of business on October 15, 2012 (the “Record Date”), and contemplates the issuance of one Right (subject to adjustment as provided herein) for each share of Common Stock of the Company issued between the Record Date and the earlier of the Distribution Date and the Expiration Date (as such terms are defined herein), each Right representing the right to purchase one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company having the rights, powers and preferences set forth in the Certificate of Designation, Preferences and Rights attached hereto as Exhibit C, upon the terms and subject to the conditions hereinafter set forth (the “Rights”);

 

Section 1.              Certain Definitions. For purposes of this Plan, the following terms have the meanings indicated.

 

(a)           “Acquiring Person” shall mean any Person who or which, together with all Affiliates and Associates of such Person, without the prior approval of a majority of the Continuing Directors, shall be the Beneficial Owner of 25% or more of the then Outstanding Non-ESOT Shares, provided, however, that Acquiring Person shall not mean (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or any Subsidiary of the Company (including without limitation the Servotronics, Inc. Employee Stock Ownership Plan [the “ESOP”]), (iv) any entity holding shares of Common Stock organized, appointed, or established by the Company or any of its Subsidiaries for or pursuant to the terms of any such plan (including without limitation the Servotronics, Inc. Employee Stock Ownership Trust [the “ESOT“]), (v) Dr. Nicholas D. Trbovich (“Dr. Trbovich”) or any executor, administrator, attorney-in-fact, agent, proxy or personal representative (acting in his or her capacity as such), or lineal descendant of Dr. Trbovich, (vi) any trustee serving under the last will and testament of Dr. Trbovich (acting in his or her capacity as such), or (vii) a Person who inadvertently becomes the beneficial owner of 25% or more of the then Outstanding Non-ESOT Shares and who (A) represents to the Board of Directors of the Company that the acquisition of such shares was inadvertent without intent to make a tender offer; (B) undertakes to sell, within five Business Days, to a Person other than the Company, enough shares so that his total Beneficial Ownership is less than 25% of the then Outstanding Non-ESOT Shares; and (C) in fact does sell such shares within five Business Days.

 

(b)          “Affiliate” shall mean, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Person specified.

 

 

(c)          “Associate” shall mean, with respect to a specified Person, (i) any corporation or organization (other than the Company or a Subsidiary of the Company) of which such Person is an officer or partner or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity security as defined in Rule 3a11-l of the General Rules and Regulations under the Exchange Act, (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity, and (iii) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person, or is an officer or director of any corporation controlling or controlled by such Person.

 

(d)          “Beneficial Ownership” shall be determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act (or any successor rule or statutory provision) or, if Rule 13d-3 shall be rescinded and there shall be no successor rule or statutory provision thereto, pursuant to Rule 13d-3 as in effect on the date hereof; provided, however, that a Person shall, in any event, also be deemed to be the “Beneficial Owner” of any securities:

 

i)            which such Person or any Affiliate or Associate thereof beneficially owns, directly or indirectly;

 

ii)           which such Person or any Affiliate or Associate thereof, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the “Beneficial Owner of,” or to “beneficially own,” (A) securities tendered pursuant to a tender or exchange offer made by such Person or any Affiliate or Associate thereof until the tendered securities are accepted for purchase or exchange, or (B) securities issuable upon exercise of Rights;

 

iii)          which such Person or any Affiliate or Associate thereof, directly or indirectly, has sole or shared voting or investment power with respect thereto pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security under this subparagraph (iii) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding (A) arises solely from a revocable proxy given in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act, and (B) is not also then reportable by such Person on Schedule 13D under the Exchange Act; or

 

iv)          which are beneficially owned, directly or indirectly, by any other Person or any Affiliate or Associate thereof with which such Person or any Affiliate or Associate thereof has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in subparagraph (iii) of this paragraph (d)) or disposing of any voting securities of the Company.

 

 

Notwithstanding the foregoing, a Person shall not be deemed to be the “Beneficial Owner of,” or to “beneficially own,” any security as to which such person may be deemed to have voting or investment power solely by reason of such Person’s position as a trustee of the ESOT or other entity described in clause (iv) of Section 1(a).

 

(e)          “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

 

(f)           “Close of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

 

(g)          “Common Stock” shall mean the common stock, par value $.20 per share, of the Company and “common stock” when used with reference to any Person other than the Company shall mean the capital stock with the greatest voting power, or the equity securities or other equity interest having power to control or direct the management, of such Person.

 

(h)          “Company” shall mean Servotronics, Inc., a Delaware corporation, until a successor corporation shall have become such or until a Principal Party shall assume, and thereafter be liable for, all obligations and duties of the Company hereunder, pursuant to the applicable provisions of this Plan, and thereafter “Company” shall mean such successor corporation or Principal Party.

 

(i)           “Continuing Director” shall mean any director of the Company who is not an Acquiring Person or a representative or nominee of an Acquiring Person, and (i) who was elected by the stockholders or appointed by the Board of Directors of the Company prior to the date as of which the Acquiring Person in question became an Acquiring Person, or (ii) who was designated (before his initial election or appointment as a director) as a Continuing Director by a majority of the Whole Board, but only if a majority of the Whole Board shall then consist of Continuing Directors, or, if a majority of the Whole Board shall not then consist of Continuing Directors, by a majority of the then Continuing Directors.

 

 

(j)           “Current Market Price” per share of Common Stock on any date shall be deemed to be the average of the daily closing prices per share of such Common Stock for the 30 consecutive Trading Days immediately prior to such date; provided, however, that in the event that the current per share market price of the Common Stock is determined during a period following the announcement by the issuer of such Common Stock of (A) a dividend or distribution on such Common Stock payable in shares of such Common Stock or securities convertible into shares of such Common Stock, or (B) any subdivision, combination, or reclassification of such Common Stock, and prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination, or reclassification, then, and in each such case, the Current Market Price shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE MKT or, if the shares of Common Stock are not listed or admitted to trading on the NYSE MKT, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading or, if shares of Common Stock are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported on the quoting or reporting system then in use, or, if on any such date the shares of Common Stock are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Company. If on any such date no market maker is making a market in the Common Stock, the Current Market Price per share shall mean the fair value per share as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive for all purposes.

 

“Current Market Price” of the Preferred Stock shall be determined in accordance with the preceding paragraph if the Preferred Stock is publicly traded. If the Preferred Stock is not publicly traded, the Current Market Price of the Preferred Stock shall be conclusively deemed to be the Current Market Price of the Common Stock as determined pursuant to the preceding paragraph, multiplied by one hundred. If neither the Common Stock nor the Preferred Stock is publicly traded, the Current Market Price of the Preferred Stock shall be determined in accordance with the last sentence of the preceding paragraph.

 

(k)          “Distribution Date” shall mean the earlier of (i) the Stock Acquisition Date or (ii) the tenth day after the date of the commencement of, or first public announcement of the intent of any Person to commence (which intention to commence remains in effect for five Business Days after such announcement) a tender or exchange offer which would result in such Person becoming an Acquiring Person, unless such date is extended by a majority of the Continuing Directors (including any such date which is after the date of this Plan and prior to the issuance of the Rights).

 

(l)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended and in effect from time to time, and all references to any rule or regulation of the General Rules and Regulations under the Exchange Act shall be, except as otherwise specifically provided herein, to such rule or regulation as was in effect from time to time.

 

(m)         “Merger Right” shall mean the Rights described in Section 12(a) hereof.

 

(n)          “Outstanding Non-ESOT Shares” shall mean the number of shares of Common Stock outstanding exclusive of shares held by the ESOT (including both allocated and unallocated shares) as reported in whichever of the following documents has most recently been filed with the Securities and Exchange Commission as of the date the determination of the ESOT Shares is made: (i) the most recent amendment to the ESOT’s Schedule 13G; (ii) the Company’s most recent amendment to its Form 10-K which contains the information required by Part IV of Form 10-K; or (iii) the Company’s most recent proxy statement.

 

 

(o)         “Person” shall mean any individual, firm, corporation, partnership or other entity, and shall include any successor (by merger of otherwise) of such entity, except that Person shall include any person who is excluded from the definition of Acquiring Person by clauses (i) through (v) of paragraph (a) of Section 1.

 

(p)         “Preferred Stock” shall mean shares of Series A Junior Participating Preferred Stock, par value $.20 per share, of the Company.

 

(q)         “Stock Acquisition Date” shall mean the first date of a public announcement by the Company or an Acquiring Person that an Acquiring Person has become such.

 

(r)          “Subscription Right” shall mean the Rights described in Section 11(a) hereof.

 

(s)          “Subsidiary” shall mean, with reference to any Person, any corporation of which a majority of any class of equity security is Beneficially Owned, directly or indirectly, by such Person.

 

(t)          “Trading Day” with respect to any security 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.

 

(u)         “Triggering Event” shall mean an event giving rise to the Subscription Rights or Merger Rights.

 

(v)         “Whole Board” shall mean the total number of directors which the Company would have if there were no vacancies on the Board of Directors.

 

(w)        “Voting Stock” shall mean (i) the Common Stock and (ii) any other shares of capital stock of the Company entitled to vote generally in the election of directors or entitled to vote together with the Common Stock in respect of any merger, consolidation, sale of all or substantially all of the Company’s assets, liquidation, dissolution or winding up.

 

Any determination required by the definitions contained in this Section 1 shall be made by the Board of Directors of the Company in its good faith judgment, which determination shall be final and binding.

 

Section 2.             Authority to Appoint Rights Agent.  The Company may appoint a Rights agent (or one or more co-rights agents) 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 Stock) in accordance with the terms and conditions hereof.

 

 

Section 3.              Issue of Rights Certificates.

 

(a)          Until the Distribution Date, (x) the Rights will be evidenced by the certificates for the Common Stock registered in the names of the holders of the Common Stock (which certificates for Common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company). As soon as practicable after the Distribution Date, the Company, or the Rights Agent, as the case may be, will send by first-class, insured, postage prepaid mail, to each record holder of the Common Stock as of the Close of Business on the Distribution Date, at the address of such holder shown on the records of the Company or the Rights Agent, if any, a Rights Certificate, in substantially the form of Exhibit A hereto (the “Rights Certificates”), evidencing one Right for each share of Common Stock so held, subject to adjustment as provided herein. As of and after the Distribution Date, the Rights will be evidenced solely by such Rights Certificates.

 

(b)          As promptly as practicable following the Record Date, the Company or the Rights Agent, if any, will send a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form attached hereto as Exhibit B (the “Summary of Rights”), by first-class, postage prepaid mail to each record holder of the Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company or the Rights Agent, as the case may be.

 

(c)          Rights shall be issued in respect of all shares of Common Stock (whether originally issued or delivered from the Company’s treasury) issued after the Record Date but prior to the earlier of the Distribution Date or the Final Expiration Date (as hereinafter defined). Certificates representing such shares of Common Stock shall bear the following legend:

 

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Shareholder Rights Plan of Servotronics, Inc. (the “Company”), dated as of October 15, 2012 (the “Rights Plan”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal offices of the Company. Under certain circumstances, as set forth in the Rights Plan, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. The Company will mail to the holder of this certificate a copy of the Rights Plan without charge promptly after receipt of a written request therefor. Under certain circumstances, Rights beneficially owned by Acquiring Persons (as that term is defined in the Rights Plan) and any subsequent holder of such Rights may become null and void.

 

With respect to such certificates containing the foregoing legend, until the Distribution Date, the Rights associated with the Common Stock represented by such certificates alone, and the surrender for transfer of any of such certificates, shall also constitute the transfer of the Rights associated with the Common Stock represented by such certificate.

 

 

Section 4.              Form of Rights Certificates.

 

(a)          The Rights Certificates (and the forms of election to purchase and of assignment to be printed on the reverse thereof) shall be substantially in the form set forth in Exhibit A 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 Plan, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed or to conform to usage. Subject to the provisions of Section 11, Section 12 and Section 18 hereof, the Rights Certificates, whenever distributed, shall be dated as of the Record Date and on their face shall entitle the holders thereof to purchase such number of one one-hundredths of a share of preferred Stock as shall be set forth therein at the price per share set forth therein (the “Purchase Price”), but the number of such shares and the Purchase Price shall be subject to adjustment as provided herein.

 

(b)          Any Rights Certificate issued pursuant to Section 3 (a) hereof that represents Rights beneficially owned by an Acquiring Person, or that represents any Rights owned on or after the Distribution Date by any Person who subsequently becomes an Acquiring Person or any Rights Certificate issued at any time upon the transfer of any Rights to an Acquiring Person or any Affiliate or Associate of an Acquiring Person or to any nominee of such Acquiring Person, Affiliate or Associate and any Rights Certificate issued pursuant to Section 6 or Section 13 upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, may contain the following legend:

 

The Rights represented by this Rights Certificate were issued to a Person who was or became an Acquiring Person. This Rights Certificate and the Rights represented hereby may become void in the circumstances specified in Section 7(e) of the Rights Plan.

 

The provisions of Section 7(e) of this Rights Plan shall be operative whether or not the foregoing legend is contained on any such Rights Certificate.

 

Section 5.              Registration.

 

(a)          The Rights Certificates shall be executed on behalf of the Company by its Chairman of the Board or any other executive officer, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by the Secretary or an Assistant Secretary of the Company, either manually or by facsimile signature. In case any officer of the Company who shall have signed any of the Rights Certificates shall cease to be such officer of the Company before issuance and delivery by the Company, such Rights Certificates, nevertheless, may be issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such officer of the Company and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the execution of such Rights Certificate, shall be a proper officer of the Company to sign such Rights Certificate, although at the date of the execution of this Rights Plan any such person was not such an officer.

 

 

(b)          Following the Distribution Date, the Company or the Rights Agent, if any, will keep or cause to be kept, at the principal executive office of the Company or at the principal shareholder services office or offices of the Rights Agent, as the case may be, books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

 

Section 6.              Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated. Destroyed. Lost or Stolen Rights Certificates.

 

(a)          Subject to the provisions of Section 14 hereof, at any time after the Close of Business on the Distribution Date, and at or prior to the Close of Business on the Expiration Date, any Rights Certificate or Certificates may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-hundredths of a share of Preferred Stock as the rights Certificate or Certificates surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Rights Certificate or Certificates shall make such request in writing delivered to the Company or Rights Agent, if any, and shall surrender the Rights Certificate or Certificates to be transferred, split up, combined or exchanged at the principal executive office of the Company or the principal office of the Rights Agent designated for such purpose, as the case may be. Thereupon, the Secretary of the Company or the Rights Agent, as the case may be, shall deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as so requested. The Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Rights Certificates.

 

(b)          Upon receipt by the Company or the Rights Agent, if any, of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company or the Rights Agent, as the case may be, of all reasonable expenses incidental thereto, and upon surrender to the Company or Rights Agent, as the case may be, and cancellation of the Rights Certificate if mutilated, the Company or the Rights Agent, as the case may be, will execute and deliver a new Rights Certificate of like tenor to the registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

 

Section 7.              Exercise of Rights: Purchase Price; Expiration Date of Rights.

 

(a)          Subject to Sections 7(e) and 19(a) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form of election to purchase on the reverse side thereof including the certificate contained therein duly executed, to the Company or the Rights Agent, if any, at the principal executive office of the Company or the principal shareholder services office or offices of the Rights Agent, as the case may be, together with payment of the Purchase Price for each one one-hundredth of a share of Preferred Stock as to which the Rights are exercised prior to the earlier of (i) the Close of Business on October 15, 2022 (the “Expiration Date”), or (ii) the time at which the Rights are redeemed as provided in Section 19 hereof.

 

 

(b)          The Purchase Price for each one-hundredth of a share of Preferred Stock pursuant to the exercise of a Right shall initially be $32.00, shall be subject to adjustment from time to time as provided in Section 13 hereof and shall be payable in lawful money of the United States of America in accordance with Paragraph (c) below.

 

(c)          Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase including the certificate contained therein duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable transfer tax in cash, or by certified check or bank draft payable to the order of the Company, and a completed letter of transmittal (which shall be in such form as the Company, in its sole discretion shall determine), the Company or the Rights Agent, if any, shall thereupon promptly (i) (A) requisition from any transfer agent, if any (but only to the extent such transfer agent expressly assumes such duty), or, if none, from the Company’s Secretary or Assistant Secretary, of the shares of Preferred Stock certificates for the number of shares of Preferred Stock to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or, (B) if the Company, at its sole discretion, shall have elected to deposit the shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of shares of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented by such receipts shall be deposited by the transfer agent, if any (but only to the extent such transfer agent expressly assumes such duty), or, if none, from the Company’s Secretary or Assistant Secretary, with the depositary agent) and the Company will direct the depositary agent to comply with such request, (ii) when appropriate requisition from the Company the amount of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14, (iii) 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 Rights Certificate, registered in such name or names as may be designated by such holder, and (iv) after receipt deliver such cash, if any, to or upon the order of the registered holder of such Rights Certificate. Notwithstanding the foregoing, the Company, at the sole discretion of the Board of Directors, may permit holders of Rights to pay the Purchase Price by tendering a promissory note in the principal amount of the Purchase Price in such form and with such terms and conditions as the Board of Directors, in its sole discretion, may determine. In the case of an exercise of the Rights by a holder pursuant to Section 11(a), the Company or the Rights Agent, if any, shall return such Rights Certificate to the registered holder thereof after imprinting, stamping, or otherwise indicating thereon that the rights represented by such Rights Certificate no longer include the rights provided by Section 11(a) of the Rights Plan and if less than all the Rights represented by such Rights Certificate were so exercised, the Company or the Rights Agent, as the case may be, shall indicate on the Rights Certificate the number of Rights represented thereby which continue to include the rights provided by Section 11 (a).

 

(d)          In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Company or the Rights Agent, if any, and delivered to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 14 hereof.

 

 

(e)          Notwithstanding anything in this Plan to the contrary, if there occurs one or more of the transactions set forth in Section 11(a) or Section 12(a) on or after the time an Acquiring Person has become such, then any Rights that are or were on or after the earlier of the Distribution Date or the Stock Acquisition Date beneficially owned by an Acquiring Person or any Associate or Affiliate of an Acquiring Person, shall become void and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Plan.

 

(f)           Notwithstanding anything in this Plan to the contrary, neither the Company nor the Rights Agent, if any, shall be obligated to undertake any action with respect to a registered holder of any Rights Certificate upon the occurrence of any purported exercise thereof unless such registered holder shall have (i) completed and signed the certificate contained in the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates thereof as the Company shall reasonably request.

 

Section 8.              Cancellation and Destruction of Rights Certificates.  All Rights Certificates surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or any of its agents or to the Rights Agent, if any, shall be cancelled by the Company or the Rights Agent, as the case may be, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Plan. The Company or the Rights Agent, if any, shall cancel and retire any other Rights Certificates purchased or acquired by the Company or the Rights Agent, as the case may be, otherwise than upon the exercise thereof.

 

Section 9.              Reservation and Availability of Capital Stock.

 

(a)          The Company shall cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock, or any authorized and issued shares of Preferred Stock held in its treasury (and, following the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and unissued shares held in treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) that will be sufficient to permit the exercise in full of all outstanding Rights.

 

(b)          So long as the shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

 

 

(c)          The Company shall use its best efforts to (i) file, as soon as practicable following the Stock Acquisition Date, or, if required under the Securities Act of 1933, as amended (the “Act”), following the Distribution Date, a registration statement under the Act, with respect to the securities purchasable upon exercise of the rights, (ii) cause such registration statement to become effective as soon as practicable after the 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 expiration of the Subscription Period (as defined in Section 19 (a) (ii)) and thereafter if required under the Act until the Expiration Date. The Company will also take all action necessary to ensure compliance with the securities laws of the various states in connection with the exercisability of the Rights. The Company may temporarily suspend, for a period of time not to exceed ninety (90) days after the date set forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file such registration statements. Upon any suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Plan to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualifications in that jurisdiction shall have been obtained.

 

(d)          The Company shall take all such action as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.

 

(e)          The Company shall pay when due and payable any and all federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of (i) any transfer or delivery of Rights Certificates to a Person other than the registered holder of Rights Certificate, or (ii) the issuance or delivery of a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in respect of a name other than that of the registered holder of the Rights Certificates evidencing the Rights surrendered for exercise, and may refuse to issue or deliver any certificates for a number of one one-hundredths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder of such Rights Certificates upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due.

 

Section 10.            Preferred Stock Record Date.  Each person in whose name any certificate for a number of one one-hundredths of a share of Preferred Stock (or Common Stock 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 such fractional shares of preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and all applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the preferred Stock (or Common Stock 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 Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books of the Company are open.

 

 

Section 11.            Subscription Right.

 

(a)          Subject to the provisions of Section 20, in the event that any Person, alone or together with its Affiliates and Associates, shall become an Acquiring Person, then proper provision shall be made so that each holder of a Right, except as provided in Section 7(e) hereof, shall, for a period of 60 days (or such other shorter or longer period as may be established by action of a majority of the Continuing Directors) after the later of the Stock Acquisition Date and the effective date of an appropriate registration statement as permitted pursuant to Section 9, have a right to receive (“Subscription Right”), upon exercise thereof at the then current Purchase Price in accordance with the terms of this Plan, in lieu of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 33-1/3% of the Current Market Price per one share of Common Stock on the date of the occurrence of the event set forth in this paragraph (such number of shares being referred to as the “number of 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 12 hereof, then only the provisions of Section 12 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a).

 

(b)          In the event that there shall not be sufficient authorized but unissued Common Stock to permit the exercise in full of the Subscription Rights, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exercise of the Subscription Rights, including the calling of a meeting of stockholders; provided, however, that if the Company is unable to cause the authorization of a sufficient number of additional shares of Common Stock, then, in the event the Rights become so exercisable, the Company shall substitute, for each share of Common Stock that would otherwise be issuable upon exercise of a Right, a number of shares of Preferred Stock or fraction thereof such that the Current Market Price of one share of Preferred Stock multiplied by such number or fraction is equal to the Current Market Price of one share of Common Stock as of the date of issuance of such Preferred Stock. To the extent that the Company determines that some action need be taken pursuant to the provision of this Section 11 (b), the Board of Directors may temporarily suspend the exercisability of the Subscription Rights for a period of up to 75 days following the date on which the event described in Section 11(a) shall have occurred, in order to seek any authorization of additional shares of Common Stock. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended.

 

 

Section 12.            Merger Right.

 

(a)          In the event that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any other Person, (y) any Person shall consolidate with the Company, or merge with and into the Company and the Company shall be the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of Common Stock shall be changed into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property, or (z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell, mortgage or otherwise transfer), in one or more 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, then, and in each such case, proper provision shall be made so that (i) following the Distribution Date, each holder of a Right, except as provided in Section 7(e), shall have the right (“Merger Right”) to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Plan, such number of shares of freely tradable common stock of the Principal Party, free and clear of any liens, encumbrances, or other adverse claims, as shall be equal to the result obtained by (1) multiplying the then current Purchase Price by the number of one one-hundredths of a share of Preferred Stock for which a right is then exercisable (without taking into account any adjustment previously made pursuant to a Subscription Right) and (2) dividing that product by 33-1/3% of the Current Market Price per share of the common stock of such Principal Party on the date of consummation of such consolidation, merger, sale, or transfer; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, sale or transfer, all the obligations and duties of the Company pursuant to this Plan; (iii) the term “Company” shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of Section 13 hereof shall apply to such Principal Party; (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its common stock) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be applicable, as nearly as reasonably may be, in relation to its shares of common stock thereafter deliverable upon the exercise of the Merger Right.

 

(b)          “Principal Party” shall mean:

 

 

(ii)           in the case of any transaction described in (z) of the first sentence in this Section 12, the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions;

 

 

provided, however, that in any such case, (1) if the common stock of such Person is not at such time and has not been continuously over the preceding 12-month period registered under Section 12 of the Exchange Act, as then in effect, and such Person is a direct or indirect Subsidiary or Affiliate of another Person the common stock of which is and has 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 shares of common stock of two or more of which are and have been so registered, “Principal Party” shall refer to whichever of such Persons is the issuer of the common stock having the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a “subsidiary” of both or all of such joint venturers and the Principal Parties in each such chain shall bear the obligations set forth in this Section 12 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 authorized shares of its common stock that have not been issued or reserved for issuance to permit the exercise in full of the Merger Rights and unless prior thereto the Company and each Principal Party and each other Person who may become a Principal Party, as a result of such consolidation, merger, sale or transfer, shall have executed and delivered to the Rights Agent, if any, or if no Rights Agent has been appointed, to the Company’s Secretary or Assistant Secretary, a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section 12 and further providing that, as soon as practicable after the date of any consolidation, merger, sale or transfer, the Principal Party at its own expense will:

 

(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, will use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and will use its best efforts to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Expiration Date;

 

(ii)           use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the securities laws of such jurisdictions as may be necessary or appropriate; and

 

(iii)           will deliver to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates which comply in all respects with the requirements for registration on Form 10 under the Exchange Act.

 

The rights under this Section 12 shall be in addition to the rights under Section 11 and shall survive any exercise thereof.

 

 

Section 13.            Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights. The Purchase Price, the number and kind of shares covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 13 or as otherwise provided in this Plan.

 

(a)           In the event the Company shall at any time after the date of this Plan (A) declare a dividend on the Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 13(a) and Section 7(e), the Purchase Price in effect at the time of the record date for such dividend or 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 if a holder of Rights after such time were to exercise that number of Rights which would result in the aggregate amount of the Purchase Price payable upon such exercise (at the Purchase Price then in effect) being equal to the amount of the Purchase Price that was payable prior to such time upon exercise of a Right, he would be entitled to receive the aggregate number and kind of shares of capital stock which, if such Rights had been exercised immediately prior to such date and at a time when the Preferred Stock transfer books of the Company were open, he would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination or reclassification. If an event occurs which would require an adjustment under both Section 11(a) hereof and this Section 13(a), the adjustment provided for in this Section 13(a) shall be in addition to, and shall be made prior, to any adjustment required pursuant to Section 11(a).

 

(b)          If the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling them to subscribe for or purchase (for a period expiring within 45 calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock [“equivalent preference stock”]) or securities convertible into Preferred Stock or equivalent preferred stock at a price per share of Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or equivalent preferred stock) less than the Current Market Price per share of Preferred Stock on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or equivalent preferred stock to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price and the denominator of which shall be the number of shares of Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or equivalent preferred stock to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive for all purposes. Shares of Preferred Stock owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

 

(c)          If the Company shall fix a record date for a distribution to all holders of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation) of evidences of indebtedness, cash (other than a regular semi-annual cash dividend), assets (other than a dividend payable in Preferred Stock), or subscription rights or warrants (excluding those referred to in Section 13 (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 Current Market Price per share of the preferred Stock on such record date, less the fair market value (as determined in good faith by the Board of Directors of the Company, whose determination shall be conclusive for all purposes) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants in respect of one share of Preferred Stock and the denominator of which shall be such Current Market Price per share of Preferred Stock. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would be in effect if such record date had not been fixed.

 

(d)          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 13 (d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 13 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other shares or one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of this Section 13(d), any adjustment required by this Section 13 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment or (ii) the Expiration Date.

 

(e)          If as a result of an adjustment made pursuant to Section 11 or 12 (a), the holder of any Rights thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Right and the Purchase Price thereof shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the shares contained in Sections 11 and 13 (a), (b), (c), (d), (f), (g), (h), (i), (j), and (1) and the provisions of Sections 7, 9, 10, 12, 14 and 20 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.

 

(f)           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 shares of Preferred Stock purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

 

(g)          Unless the Company shall have exercised its election as provided in Section 13(h), upon each adjustment of the Purchase Price as a result of the calculations made in Sections 13 (b) and (c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a share of Preferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of shares covered by a Right immediately prior to this adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

(h)          The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a share of Preferred Stock purchasable upon the exercise of a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one one-hundredths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one-millionth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least 10 days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 13(h), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date, Rights Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.

 

(i)           Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one one-hundredth of a share and the number of one one-hundredths of a share which were expressed in the initial Rights Certificates issued hereunder.

 

(j)           Before taking any action that would cause an adjustment reducing the Purchase Price below the par value or the then stated value, if any, of the number of one one-hundredths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable such number of one one-hundredths of a share of Preferred Stock at such adjusted Purchase Price.

 

 

(k)          In any case in which this Section 13 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 Rights exercised after such record date the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-hundredths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares (fractional or otherwise) upon the occurrence of the event requiring such adjustment.

 

(l)           Anything in this Section 13 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 13, as and to the extent that in its sole discretion the Company shall determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends, or (v) issuance of rights, options or warrants referred to in this Section 13, hereafter made by the Company to holders of its Preferred Stock shall, if practicable, not be taxable to such stockholders.

 

(m)         Anything in this Plan to the contrary notwithstanding, in the event that the Company shall at any time after the date of this Plan and prior to the Distribution Date (i) declare a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares, or (iv) issue any shares of its capital stock in a reclassification of the outstanding Common Stock, then in any such case (i) the number of one one-hundredths of a share of Preferred Stock purchasable upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a share so purchasable immediately prior to such event by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and (ii) each share of Common Stock outstanding immediately after such event shall have issued with respect to it that number of Rights which each share of Common Stock outstanding immediately prior to such event had issued with respect to it. The adjustments provided for in this Section 13(m) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. If an event occurs which would require an adjustment under this Section 13 (m), the adjustments provided for in this Section 13 (m) shall be in addition and prior to any adjustment required pursuant to the Triggering Event.