SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): 1-8233
March 13, 1997 (February 26, 1997) (Commission File Number)
USF&G CORPORATION
(Exact Name of Registrant as Specified in Charter)
Maryland 52-1220567
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation)
6225 Smith Avenue Baltimore, Maryland 21209
(Address of Principal Executive Offices) (ZIP Code)
Registrant's telephone number, including area code: (410) 547-3000
(Former Name or Former Address, if Changed Since Last Report)
100 Light Street Baltimore, Maryland 21202
Item 5. Other Events.
On February 26, 1997, the Board of Directors of USF&G CORPORATION (the
"Company") approved a number of amendments to and restated the Rights Agreement,
dated as of September 18, 1987 (the "Rights Agreement) between the Company and
The Bank of New York, as successor Rights Agent. The key provisions of the
amendments extend the expiration date of the Rights Agreement to October 14,
2007, decrease the exercise price of the Rights to $105, reduce to 15% the
percentage ownership threshold at which the Rights issued pursuant to the Rights
Agreement will become exercisable, require "disinterested directors" of the
Board (as herein defined) to approve certain actions under the Rights Agreement
and permit the Board of Directors to exchange the Rights for Common Shares under
certain circumstances.
Until the earlier to occur of (i) 10 days (or such later date as
may be determined by Valid Board Action (as herein defined)) following a public
announcement that an "Acquiring Person" acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding Common Shares or
(ii) 10 business days (or such later date as may be determined by Valid Board
Action) following the commencement or announcement of an intention of any person
to make a tender offer or exchange offer the consummation of which would result
in such person becoming the beneficial owner of 15% or more of such outstanding
Common Shares (the earlier of such dates being called the "Distribution Date"),
the Rights will be evidenced by such Common Share certificate with a copy of a
Summary of Rights or Amended and Restated Summary of Rights attached thereto.
Acquiring Person is defined as any person or group of affiliated or associated
persons, other than employee benefit plans of the Company and its subsidiaries,
who has acquired beneficial ownership of 15% or more of the outstanding Common
Shares. Valid Board Action is defined as the affirmative vote of a majority of
the entire Board of Directors, which includes the concurrence of one or more
members of the Board of Directors who is not an Acquiring Person or an
affiliate, associate or representative thereof, or an affiliate, associate or
representative of a person who has stated an intent to take any action which
would result in such person becoming an Acquiring Person (the foregoing a
"Disinterested Director") through the affirmative vote of a majority of the
Disinterested Directors. The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred with and only with the Common
Shares. Until the Distribution Date (or earlier redemption or expiration of the
Rights), new Common Share certificates issued after March 14, 1997 upon transfer
or new issuance of the Common Shares will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights), the surrender for transfer of
any certificates for Common Shares outstanding, even without such notation or a
summary description of the Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on October 14, 2007, unless earlier redeemed or exchanged by
the Company as described below.
The Purchase Price payable, and the number of Common Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares, (ii) upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for Common Shares or convertible securities at less than
the current market price of the Common Shares or (iii) upon the distribution to
holders of the Common Shares of evidences of indebtedness or assets (excluding
regular periodic cash dividends out of earnings or retained earnings or
dividends payable in Preferred Shares) or of subscription rights or warrants
(other than those referred to above).
No adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% of such Purchase
Price. No fractional Common Shares will be issued and in lieu thereof, a payment
in cash will be made based on the market price of the Common Shares on the last
trading date prior to the date of exercise.
In the event that any person becomes the beneficial owner of 15%
or more of the Company's Common Shares and hence an Acquiring Person (other than
pursuant to a cash tender offer for all outstanding shares which is determined
by Valid Board Action to be fair and otherwise in the best interests of the
Company and its stockholders) (a "Flip-In Event"), proper provision will be made
so that each holder of a Right, other than Rights that are or were beneficially
owned by the Acquiring Person and certain other related persons (which will
thereafter be void), will thereafter have the right to receive upon exercise and
payment of the Purchase Price that number of Common Shares having a market value
of two times the exercise price of the Right (or Preferred Shares if so elected
by the Board of Directors). Rights are not exercisable following the occurrence
of a Flip-In Event until such time as the Rights are no longer redeemable by the
Corporation as set forth below. At any time after a Distribution Date, in the
event that the Company were acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power were
sold, proper provision will be made so that each holder of a Right shall
thereafter have the right to receive, upon the exercise thereof and payment of
the Purchase Price at the then current exercise price of the Right, that number
of shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times the exercise price of the
Right.
At any time until ten days following the date a person becomes
an Acquiring Person (or such later date as designated by Valid Board Action),
the Company, by Valid Board Action, may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The right of
redemption also may be reinstated under certain circumstances described in the
Rights Agreement, including if a term, provision, covenant or restriction of the
Rights Agreement is held by a court or other authority to be invalid, void or
unenforceable. Under no circumstances following the occurrence of a Flip-In
Event may the Rights be exercised prior to the expiration of the Company's right
of redemption. Immediately upon Valid Board Action by the Board of Directors
ordering redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
At any time after any person becomes an Acquiring Person, the
Board of Directors of the Company may, at its option, by Valid Board Action,
exchange all or part of the then outstanding and exercisable Rights (excluding
Rights of an Acquiring Person that have become void) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof. Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Acquiring Person,
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Company, stockholders may,
depending upon the circumstances, recognize taxable income in the event that the
Rights become exercisable for Common Stock (or other consideration) of the
Company or for common stock of the acquiring company as set forth above.
Other than an amendment to those provisions relating to the
principal economic terms of the Rights or to shorten the final expiration date
of the Rights Agreement, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company by Valid Board Action prior to
the Distribution Date, including, without limitation, any amendment deemed to be
necessary or appropriate in light of any judicial or other legal developments,
whether or not binding precedent in respect of the Rights Agreement. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board by Valid Board Action in order to cure any ambiguity, to make changes
which do not adversely affect the interest of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to lengthen the
time period governing redemption shall be made at such time as the Rights are
not redeemable. Without limiting any of the foregoing, at any time prior to a
Person (other than certain employee benefit plans of the Company) becoming an
Acquiring Person, the Board may amend the Rights Agreement to lower the
threshold for exercisability of the Rights (and the determination of the
existence of an Acquiring Person) from 15% to any percentage greater than the
greater of (i) the largest percentage of outstanding Common Shares then known to
the Company to be beneficially owned by any Person or group of affiliated or
associated persons (other than employee benefit plans of the Company and its
subsidiaries) and (ii) 10%.
The form of Rights Agreement between the Company and The Bank
of New York specifying the terms of the Rights is attached hereto as an exhibit
and is incorporated herein by reference. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, as amended from time to time.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) and (b) Financial Statements and Pro Forma Information. None.
(c) Exhibits. The following exhibits are filed with this report, and the
foregoing description is modified by reference to such exhibits:
4. Amended and Restated Rights Agreement between the
Company and The Bank of New York, as Rights Agent,
dated as of March 11, 1997, which includes as Exhibit
B the Form of Right Certificate. Pursuant to the
Rights Agreement, Right Certificates will not be
mailed until as soon as practicable after the earlier
of the tenth day following announcement that a person
or group has acquired beneficial ownership of 15% or
more of the Common Shares or the tenth business day
after a person commences or announces its intention to
commence an offer the consummation of which would
result in a person beneficially owning 15% or more of
the Common Shares. In either case the ten (10) day
time period is subject to extension by Valid Board
Action.
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 hereunto duly authorized.
USF&G CORPORATION
By: /s/DAN L. HALE
Dan L. Hale
Executive Vice President -
Chief Financial Officer
Date: March 13, 1997
EXHIBIT INDEX
Exhibit Description Page No.
4. Amended and Restated Rights Agreement between the
Company and The Bank of New York, as Rights Agent,
dated as of March 11, 1997, which includes as Exhibit
B the Form of Right Certificate. Pursuant to the
Rights Agreement, Right Certificates will not be
mailed until as soon as practicable after the earlier
of the tenth day following announcement that a person
or group has acquired beneficial ownership of 15% or
more of the Common Shares or the tenth business day
after a person commences or announces its intention to
commence an offer the consummation of which would
result in a person beneficially owning 15% or more of
the Common Shares. In either case the ten (10) day
time period is subject to extension by Valid Board
Action.
EXHIBIT 4
USF&G CORPORATION
and
THE BANK OF NEW YORK,
Rights Agent
Amended and Restated Rights Agreement
Dated as of March 11, 1997
TABLE OF CONTENTS
Page
Section 1. Certain Definitions.............................................2
Section 2. Appointment of Rights Agent.....................................7
Section 3. Issue of Right Certificates.....................................7
Section 4. Form of Right Certificates.....................................10
Section 5. Countersignature and Registration..............................10
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates...........................................11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights; Nullification of Rights..............................12
Section 8. Cancellation and Destruction of Right Certificates.............16
Section 9. Reservation and Availability of Preferred Shares...............16
Section 10. Preferred Shares Record Date...................................17
Section 11. Adjustment of Purchase Price, Number of Shares or Number
of Rights....................................................18
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....30
Section 13. Consolidation or Sale or Transfer of Assets or Earning Power...30
Section 14. Fractional Rights and Fractional Shares........................37
Section 15. Rights of Action...............................................38
Section 16. Agreement of Right Holders.....................................39
Section 17. Right Certificate Holder Not Deemed a Stockholder..............39
Section 18. Concerning the Rights Agent....................................40
Section 19. Merger or Consolidation or Change of Name of Rights Agent......41
Section 20. Duties of Rights Agent.........................................42
Section 21. Change of Rights Agent.........................................44
Section 22. Issuance of New Right Certificates.............................45
Section 23. Redemption.....................................................46
Section 24. Notice of Certain Events.......................................47
Section 25. Notices........................................................48
Section 26. Supplements and Amendments.....................................49
Section 27. Exchange.......................................................51
Section 28. Successors.....................................................52
Section 29. Determinations and Actions by the Board of Directors, etc......52
Section 30. Benefits of this Agreement.....................................53
Section 31. Severability...................................................53
Section 32. Governing Law..................................................54
Section 33. Counterparts...................................................54
Section 34. Descriptive Headings...........................................54
Exhibit A -- Form of Articles Supplementary
Exhibit B -- Form of Right Certificate
Exhibit C -- Amended and Restated Summary of Rights to Purchase Preferred Shares
AMENDED AND RESTATED RIGHTS AGREEMENT
Amended and Restated Agreement, dated as of March 11, 1997,
between USF&G Corporation, a Maryland corporation (the "Company"), and The Bank
of New York, a New York corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
share of Common Stock, par value $2.50 per share, of the Company (each a "Common
Share") outstanding on October 15, 1987, each Right representing the right to
purchase one one-hundredth of a share of Junior Participating Preferred Stock,
$50 par value, of the Company having the rights and preferences set forth in the
Articles Supplementary filed with the State Department of Assessments and
Taxation of the State of Maryland (the "SDAT") on October 7, 1987 as revised and
restated by the Articles Supplementary filed with the SDAT on April 27, 1995,
upon the terms and subject to the conditions herein set forth, and further
authorized the issuance of one Right with respect to each Common Share that the
Company has issued or does issue between October 15, 1987 and the earlier of the
Distribution Date, the Redemption Date and the Final Expiration Date (as such
terms are defined in Sections 3 and 7 hereof); and
WHEREAS, the Board of Directors has authorized and approved an
amendment and restatement of the Rights Agreement dated as of September 18,
1987, between the Company and the Rights Agent (the "Original Rights
Agreement"), pursuant to Section 26 of such Agreement, including authorization
of an extension thereof; and
WHEREAS, the Company and the Rights Agent therefore wish to
enter into this Amended and Restated Rights Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the
meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
then outstanding, but shall not include (i) the Company, any wholly-owned
Subsidiary of the Company or any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan or (ii) any Person who
has become such a Beneficial Owner solely because (A) of a reduction in the
number of Common Shares outstanding or (B) it acquired such Beneficial Ownership
in the good faith belief that such acquisition would not (x) cause such
Beneficial Ownership to exceed 15% of the Common Shares then outstanding and
such Person relied in good faith in computing the percentage of its Beneficial
Ownership on publicly filed reports or documents of the Company which are
inaccurate or out-of-date or (y) otherwise cause a Distribution Date or a
Conversion (as hereinafter defined) to occur. Notwithstanding clause (ii) of the
prior sentence, if any Person that is not an Acquiring Person due to such clause
(ii) does not reduce its percentage of Beneficial Ownership of Common Shares to
less than 15% by the Close of Business on the fifth Business Day after notice
from the Company (the date of notice being the first day) that such Person's
Beneficial Ownership of Common Shares so exceeds 15%, such Person shall at the
end of such five Business Day period, become an Acquiring Person (and such
clause (ii) shall no longer apply to such Person). For purposes of this
definition, the determination whether any Person acted in "good faith" shall be
conclusively determined by Valid Board Action (as hereinafter defined).
(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) "Approved Tender Offer" means an all cash tender offer for
all outstanding Common Shares, which remains open for at least 45 days and for
at least 20 business days following any amendment in its terms or the
commencement of any competing offer, on terms determined by Valid Board Action,
after receiving advice and a fairness opinion from one or more nationally
recognized investment banking firms selected by a majority of the Disinterested
Directors, to be (i) at a price which is fair to stockholders (taking into
account all factors which such members of the Board deem relevant) and (ii)
otherwise in the best interests of the Company and its stockholders.
(d) 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 is deemed to beneficially own within
the meaning of Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, as in effect on the date of this
Agreement;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right to acquire (whether
such right is exercisable immediately or only after the
occurrence of certain events or the passage of time or both)
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 (whether such right is exercisable immediately
or only after the occurrence of certain events or the passage
of time or both), alone or in concert with others, 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 in response to a public proxy or consent solicitation
made pursuant to the applicable rules and regulations of the
Exchange Act and (2) is not reportable by such Person on a
Schedule 13D report under the Exchange Act (or any comparable
or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any
of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for
the purpose of acquiring, holding, voting (except pursuant to
a revocable proxy or consent as described in the proviso to
clause (B) of subparagraph (ii) of this paragraph (c)) or
disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, (A) the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially hereunder and (B) a Person engaged in
business as an underwriter of securities shall not be considered to be the
"Beneficial Owner" of or to "beneficially own" any securities acquired through
such Person's participation in good faith in a firm commitment underwriting
until the expiration of forty (40) days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the States of New York or
Maryland 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., Baltimore time, on such date; provided, however, that if such date is not
a Business Day it shall mean 5:00 P.M., Baltimore time, on the next succeeding
Business Day.
(g) "Common Shares" when used with reference to the Company
shall mean shares of Common Stock, par value $2.50 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or in the case of any unincorporated entity, the
equivalent 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.
(h) "Conversion" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(i) "Disinterested Director" shall mean any member of the
Board of Directors of the Company, while such Person is a member of the Board,
who is not (i) an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person or a representative of an Acquiring Person or of any such Affiliate or
Associate, or (ii) a Person or an Affiliate, Associate or representative of a
Person, any of whom has stated an intent to take, or to consider taking, any
action which would result in such Person becoming an Acquiring Person, or which
would cause a Triggering Event.
(j) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(k) "Exchange Act" shall have the meaning set forth in
Section 1(b) hereof.
(l) "Final Expiration Date" shall have the meaning set
forth in Section 7 hereof.
(m) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, association, trust, unincorporated
organization or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(n) "Preferred Shares" shall mean shares of Junior
Participating Preferred Stock, $50 par value, of the Company.
(o) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(p) "Purchase Price" shall have the meaning set forth in
Section 4 hereof.
(q) "Redemption Date" shall have the meaning set forth in
Section 7 hereof.
(r) "Right Certificate" means a certificate representing
one or more preferred share purchase rights of the Company.
(s) "Securities Act" shall mean the Securities Act of 1933,
as amended.
(t) "Share Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act or any comparable or successor report) by the Company or an Acquiring Person
that an Acquiring Person has become such; provided, however, that no Share
Acquisition Date shall be deemed to have occurred on such date if, pursuant to
the definition of "Acquiring Person", a Person is deemed (whether prior to or
after the date that would otherwise be a Share Acquisition Date) not to be or
have become an Acquiring Person.
(u) "Share Certificate" means a certificate representing
one or more Common Shares of the Company.
(v) "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.
(w) "Triggering Event" shall mean (i) any action which
would cause a Conversion or (ii) the occurrence of any event described in
Section 13(a) hereof.
(x) "Valid Board Action" shall mean the affirmative vote of a
majority of the entire Board of Directors, which includes the concurrence of one
or more Disinterested Directors through the affirmative vote of a majority of
the Disinterested Directors; provided, however, that in the event no directors
would be deemed to be "Disinterested Directors" and there is no Acquiring
Person, Valid Board Action shall mean the affirmative vote of a majority of the
entire Board of Directors.
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 (the term "Rights Agent" being used herein to
refer collectively, to the Rights Agent together with any such Co-Rights
Agents). In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agent and any Co-Rights Agent shall be as the
Company shall determine.
Section 3. Issue of Right Certificates. (a) Until the earlier
of (i) the Close of Business on the tenth day after the Share Acquisition Date
(or such later date as may be determined by Valid Board Action) or (ii) the
tenth Business Day (or such later date as may be determined by Valid Board
Action) after the date of the commencement of, or first public announcement of
the intention of any Person to commence, a tender or exchange offer the
consummation of which would result in such Person becoming an Acquiring Person
(the earlier of the dates in subsections (i) and (ii) hereof 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 of the
Common Shares (which certificates for the Common Shares 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 Common Shares. As soon as practicable after the Distribution Date,
the Rights Agent will send, by first-class, insured, postage-prepaid mail, to
each record holder of Common Shares as of the Close of Business on the
Distribution Date (except as otherwise provided in Section 7(g)), at the address
of such holder shown on the records of the Company, one or more Right
Certificates, in substantially the form of Exhibit B hereto, evidencing one
Right for each Common Share so held. If an adjustment in the number of Rights
for each Common Share has been made pursuant to Section 11(n), the Company
shall, at the time of distribution of the Right Certificates, make the necessary
and appropriate rounding adjustments in accordance with Section 14(a) so that
Right Certificates representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. As of the Distribution Date, the
Rights will be evidenced solely by the Right Certificates.
(b) On October 15, 1987, the Company sent a copy of a Summary
of Rights to Purchase Preferred Shares, to each record holder of Common Shares
as of October 15, 1987. Share Certificates issued after October 15, 1987 but on
or prior to March 14, 1997 shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
USF&G Corporation and Morgan Shareholder Services Trust
Company, dated as of September 18, 1987 (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 USF&G Corporation. 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. USF&G Corporation
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,
Rights beneficially owned by Acquiring Persons (as defined in
the Rights Agreement) and any subsequent holder of such Rights
may become null and void.
The Company will send a copy of an Amended and Restated
Summary of Rights to Purchase Preferred Shares, in substantially the form
attached hereto as Exhibit C (the "Amended Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as of March 14,
1997, at the address of the record holder shown on the records of the Company.
With respect to Share Certificates dated on or prior to March 14, 1997, until
the Distribution Date, the Rights will be evidenced by such Share Certificates
registered in the names of the holders thereof (together with a copy of the
Amended Summary of Rights). Until the Distribution Date (or the earlier of the
Redemption Date or Final Expiration Date), the surrender for transfer of any
Share Certificate dated on or prior to March 14, 1997, with or without a copy of
the Summary of Rights or Amended Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the Common Shares
represented thereby.
(c) Share Certificates issued after March 14, 1997 but prior
to the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date shall have impressed on, printed on, written or otherwise
affixed to them the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in an Amended and Restated
Rights Agreement between USF&G Corporation and The Bank of New
York, dated as of March 11, 1997, as amended from time to time
(the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on
file at the principal executive offices of USF&G Corporation.
Under certain circumstances, as set forth in the Rights
Agreement, the Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. USF&G Corporation will mail to the holder of this
certificate a copy of the Rights Agreement as in effect on the
date of the mailing without charge promptly following receipt
of a written request therefor. Under certain circumstances,
Rights owned by or transferred to any person who becomes an
Acquiring Person or their Affiliates or Associates (as such
terms are defined in the Rights Agreement) and certain
transferees thereof will become null and void and will no
longer be transferable.
With respect to the Share Certificates containing the
foregoing legend, until the Distribution Date, the Rights associated with the
Common Shares represented by such Share Certificates shall be evidenced by such
Share Certificates alone, and the surrender for transfer of any such Share
Certificate shall also constitute the transfer of the Rights associated with the
Common Shares represented by such Share Certificate. Notwithstanding this
paragraph (c), the omission of a legend shall not affect the enforceability of
any part of this Agreement or the rights of any holder of the Rights.
Section 4. Form of Right Certificates. The Right Certificates
(and the forms of election to purchase Preferred Shares and of assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or automated quotation system 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 Right Certificates, whenever issued, which are issued in respect
of Share Certificates dated on or prior to October 15, 1987 shall be dated as of
October 15, 1987, and all Right Certificates which are issued in respect of
other Share Certificates shall be dated as of the respective dates of such Share
Certificates, and in either case on their face shall entitle the holders thereof
to purchase the number of Preferred Shares as shall be set forth therein at the
price per one one-hundredth of a Preferred Share set forth therein (the
"Purchase Price"), but the number of such Preferred Shares and the Purchase
Price shall be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The Right
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary, or an Assistant Secretary, of
the Company, either manually or by facsimile signature. Each Right Certificate
shall be manually countersigned by an authorized signatory of the Rights Agent,
but it shall not be necessary for the same signatory to countersign all of the
Right Certificates issued hereunder. No Right Certificate shall be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed the Right Certificate shall cease to be an officer of the Company
before countersignature by the Rights Agent and issuance and delivery of the
certificate by the Company, such Right Certificate, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Right Certificate
had not ceased to be an officer of the Company. Any Right Certificate may be
signed on behalf of the Company by any person who, on the date of the execution
of the Right Certificate, shall be a proper officer of the Company to sign the
Right Certificate, although at the date of the execution of this Rights
Agreement that person was not an officer.
Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office, 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 Section 14 hereof, at any time after the Close of
Business on the Distribution Date, and at or prior to the Close of Business on
the earlier of the Redemption Date and the Final Expiration Date, any Right
Certificate or Certificates (other than Right Certificates representing Rights
that have become void pursuant to Sections 7(g) or 11(a)(ii) hereof or that have
been exchanged pursuant to Section 27 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Certificates, entitling
the registered holder to purchase a like number of Preferred Shares as the Right
Certificate or Certificates surrendered then entitled such holder to purchase.
Any registered holder desiring to transfer, split up, combine or exchange any
Right Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office of the
Rights Agent 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 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 the Right Certificate and shall have provided additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall countersign and deliver to the person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment from the holders of Right
Certificates of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split-up, 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 execute 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.
Notwithstanding any other provision hereof, the Company and
the Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Right Certificates.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights; Nullification of Rights. (a) Subject to Sections 7(f), 7(g), 9,
11(a)(ii) and the final sentence of Section 23(a) 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 on the reverse side thereof duly executed (with signatures
duly guaranteed), to the Rights Agent at the principal office of the Rights
Agent in New York City, together with payment of the aggregate Purchase Price
with respect to the Rights then to be exercised, at or prior to the earlier of
(i) the Close of Business on October 14, 2007 (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided in Section 23 hereof
(the "Redemption Date") or (iii) the time at which the Rights are exchanged as
provided in Section 27 hereof.
(b) The Purchase Price for each one one-hundredth of a
Preferred Share pursuant to the exercise of a Right shall initially be $105. The
Purchase Price and the number of Preferred Shares to be acquired upon exercise
of a Right shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof. The Purchase Price shall be payable in lawful money
of the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the remainder of
the reverse side of the Right Certificate duly executed, accompanied by payment
of the Purchase Price for the Preferred Shares to be purchased and an amount
equal to any applicable transfer tax required to be paid by the holder of such
Right Certificate in accordance with Section 9 hereof in cash, or by certified
check or bank draft payable to the order of the Company, and subject to Sections
7(f) and 20(j) the Rights Agent shall thereupon promptly (i) (A) requisition
from any transfer agent of the Preferred Shares certificates representing 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)
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs the depositary agent to comply with 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 the holder and (iv) when appropriate, after receipt thereof,
promptly deliver such cash, if any, to or upon the order of the registered
holder of the Right Certificate.
(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 and delivered to the registered holder of
such Right Certificate or to his duly authorized assigns, subject to the
provisions of Section 14 hereof.
(e) In the event that the Company is obligated to issue other
securities (including Common Shares) of the Company, pay cash and/or distribute
other property pursuant to Sections 11(a) or 13 hereof, then the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(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 or the transfer of any
surrendered Right Certificates under Section 6, unless and until such registered
holder shall have (i) completed and signed (A) in the case of a Section 7
exercise, a form of election or (B) in the case of a Section 6 transfer, a form
of assignment, as set forth on the reverse side of the Right Certificate, 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.
(g) Notwithstanding anything in this Agreement to the
contrary, from and after a Conversion, any Rights beneficially owned by (i) an
Acquiring Person or an Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person (or any such Associate or
Affiliate) becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or in any such Associate or Affiliate) or to any Person
with whom the Acquiring Person (or any such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Disinterested Directors has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(g), 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(g) 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. No Right
Certificate shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would be void pursuant to
the preceding sentence or any Associate or Affiliate thereof; no Right
Certificate shall be issued at any time upon the transfer of any Rights to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof or to any nominee of such Acquiring
Person, Associate or Affiliate; and any Right Certificate delivered to the
Rights Agent for transfer to an Acquiring Person (or any Associate, Affiliate or
nominee thereof) whose Rights would be void pursuant to the preceding sentence
shall be canceled.
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 it will cause to be reserved and kept
available out of its authorized and unissued Preferred Shares the number of
Preferred Shares that will be sufficient to permit the exercise in full of all
outstanding Rights.
So long as the Preferred Shares issuable upon the exercise of
Rights may be listed on any national securities exchange or automated quotation
system, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed on such exchange or automated quotation system upon official notice of
issuance upon such exercise.
If necessary to permit the issuance of Common or Preferred
Shares pursuant to the Rights, the Company shall use its best efforts from and
after such time as the Rights become exercisable to register such Common or
Preferred Shares under the Securities Act, and any applicable state securities
laws, cause such registration statement to become effective as soon as possible
after such filing and keep such registration effective until the earlier of the
expiration date of the Rights or the date as of which the Rights are no longer
exercisable. The Company may temporarily suspend, for a period of time not to
exceed 90 days, the exercisability of the Rights in order to prepare and file a
registration statement under the Securities Act and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained and until
a registration statement under the Securities Act (if required) shall have been
declared effective.
The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the issuance or delivery of the Right Certificates
or of any Preferred Shares 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 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 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.
Section 10. Preferred Shares Record Date. Each person in whose
name any certificate for Preferred Shares is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Shares 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 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 Shares transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Preferred Shares for which
the Rights shall be exercisable, including, without limitation, the right to
vote, to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number of Preferred 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 or split the
outstanding Preferred Shares into a greater number of
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, merger or statutory share
exchange in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section
11(a), the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such
subdivision, split, combination or reclassification, and the
number and kind of Preferred Shares (or other 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
Preferred Shares (or other 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, the holder would have owned upon such exercise and
been entitled to receive by virtue of such dividend,
subdivision, split, 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 this Section 11(a)(i) and a
Conversion under Section 11(a)(ii) hereof occurs, then 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) hereof.
(ii) If any Person shall, at any time after the date
of this Agreement, become an Acquiring Person other than as a
result of an acquisition of Common Shares pursuant to an
Approved Tender Offer (the foregoing event a "Conversion,"
regardless of whether the Board of Directors exercises its
discretion as set forth below), then proper provision shall be
made so that each holder of a Right, except as provided below
and in Section 7(g) hereof, shall thereafter have a right to
receive, upon exercise thereof (which exercise is subject to,
among other things, the last sentence of Section 23), on or
after the Distribution Date at the then current Purchase Price
in accordance with the terms of this Agreement, and in lieu of
the right to purchase Preferred Shares, such number of Common
Shares as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (y) 50% of the
current per share market price of the Common Shares
(determined pursuant to Section 11(d)) on the date an
Acquiring Person becomes such; 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 the foregoing adjustment shall not be made. At its
discretion, the Board of Directors of the Company may, by
Valid Board Action, provide that holders of Rights, upon
exercise thereof, shall receive, in lieu of Common Shares,
such number of one-hundredths of a share of Preferred Shares
as shall equal the result obtained by (X) multiplying the then
current Purchase Price by the number of one one-hundredths of
a share of Preferred Shares for which a Right is then
exercisable and dividing the 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 an
Acquiring Person becomes such. Notwithstanding the foregoing,
upon a Conversion, any Rights that are or were beneficially
owned on or after the earlier of the Distribution Date or the
Shares Acquisition Date by an Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) shall become
null and void in accordance with the provisions of Section
7(g) of this Agreement and any holder of such Rights shall
thereafter have no right to exercise or transfer such Rights
under any provision of this Agreement.
(iii) Any Right Certificate issued pursuant to
Section 3 or Section 22 hereof that represents Rights
beneficially owned by an Acquiring Person or any Associate or
Affiliate thereof and any Right Certificate issued at any time
upon the transfer of any Rights to an Acquiring Person or any
Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate, and any Right
Certificate issued pursuant to Section 6 hereof or this
Section 11 upon transfer, exchange, replacement or adjustment
of any other Right Certificate referred to in this sentence,
shall contain the following legend:
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 an Associate of
an Acquiring Person (as such terms are defined in the
Rights Agreement). This Right Certificate and the
Rights represented hereby may become null and void in
the circumstances specified in Section 11(a)(ii) of the
Rights Agreement.
(iv) In the event a Conversion occurs and there shall
not be sufficient authorized but unissued Common Shares to
permit the exercise in full of the Rights in accordance with
Section 11(a)(ii) and the Board of Directors has not exercised
its discretion pursuant to Section 11(a)(ii) to provide for
the issuance of Preferred Shares in lieu of Common Shares,
then the Company shall use its best efforts to carry out all
such action as may be necessary to authorize additional Common
Shares for issuance upon exercise of the Rights; provided,
however, if the Company is unable to cause the authorization
of additional Common Shares sufficient for issuance upon
exercise of the Rights within forty-five (45) days from the
date the adjustment was required, then the Company shall: (A)
determine the excess of (1) the value of the Common Shares
(the "Exercise Shares") issuable upon the exercise of a Right
(the "Current Value") over (2) the then current Purchase Price
(such excess, the "Spread"), and (B) with respect to each
Right, make adequate provision to substitute for the Exercise
Shares, upon payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock
or other equity securities of the Company (including, without
limitation, shares, or units of shares, of preferred stock
which the Board of Directors by Valid Board Action has deemed
to be essentially equivalent to shares of Common Stock in
respect of dividend, liquidation preference and voting rights
(such shares of preferred stock, "common share equivalents")),
(4) debt securities of the Company, (5) other assets, or (6)
any combination of the foregoing, having an aggregate value
equal to the Current Value, where such aggregate value has
been determined by Valid Board Action based upon the advice of
a nationally recognized investment banking firm selected by a
majority of the Disinterested Directors; provided, however, if
the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within ninety (90) days
following the occurrence of a Conversion, then the Company
shall be obligated to deliver, upon the surrender for exercise
of a Right (which exercise is subject to the limitations set
forth in the last sentence of Section 23(a)) and without
requiring payment of the Purchase Price, Common Shares (to the
extent available) and then, if necessary, cash, securities
and/or assets having an aggregate value (together with such
Common Shares) equal to the Spread, where such aggregate value
has been determined by Valid Board Action based upon the
advice of a nationally recognized investment banking firm
selected by a majority of the Disinterested Directors. To the
extent that the Company determines that some action need be
taken pursuant to this subparagraph (iv), the Company (x)
shall provide, subject to Section 7(g) and the last sentence
of subparagraph (ii) of this Section 11(a), that such action
shall apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights for such time as may
be reasonably necessary in order to seek any authorization of
additional shares and/or to decide the appropriate form of
distribution to be made pursuant hereto and to determine the
value thereof.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
current per share market price of the Preferred Shares (as defined in Section
11(d)) on such record date, then 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). In case such
subscription price may be paid in a consideration part or all of which may be in
a form other than cash, the value of such consideration shall be as determined
in good faith by the Board of Directors of the Company (or, if at the time of
such determination there is an Acquiring Person, by a majority of the
Disinterested Directors), whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. 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 or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for 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 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 current per
share market price of the Preferred Shares (as defined in Section 11(d)) on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company (or, if at the time of such determination
there is an Acquiring Person, by a majority of the Disinterested Directors),
whose determination shall be described in a statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon the 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 the Common Shares on any
date shall be deemed to be the average of the daily closing
prices per share of such Common Shares 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 Common
Shares is determined during a period following the
announcement by the issuer of such Common Shares of (1) a
dividend or distribution on such Common Shares payable in such
Common Shares or securities convertible into such Common
Shares, or (2) any subdivision, combination or
reclassification of such Common Shares, 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
appropriately adjusted to reflect the current market price per
Common Share equivalent. 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 Common Shares 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 Common Shares are
listed or admitted to trading or, if the Common Shares 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 closing bid and 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 Common Shares 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 Shares selected by the Board of Directors of the
Company (or, if at the time of such determination there is an
Acquiring Person, by a majority of the Disinterested
Directors). The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Common
Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not
listed or admitted to trading on any national securities
exchange, a Monday, Tuesday, Wednesday, Thursday or Friday on
which banking institutions in the State of New York are not
authorized or obligated by law or executive order to close.
(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 above for
Common Shares in clause (i) of this Section 11(d). If the
current per share market price of the Preferred Shares cannot
be determined in the manner provided above, 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 (appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one hundred. 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 (or, if at the time of
such determination there is an Acquiring Person, by a majority
of the Disinterested Directors), whose determination shall be
described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least l% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of
a Common Share or other share or one-millionth of a Preferred Share as the case
may be.
(f) If as a result of a Conversion, 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 shares contained in Section
11(a), (b), (c), (e), (h), (i) and (m) 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 (or
other capital stock of the Company, as the case may be) purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Section 11(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 Preferred Share (calculated to the nearest one one-millionth
of a Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a Preferred Share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) 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 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-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 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(i), 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 the holders shall be entitled
as a result of the adjustment, or, at the option of the Company, shall cause to
be distributed to the holders of record in substitution and replacement for the
Right Certificates held by the 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 the holders shall be entitled after such adjustment.
Right Certificates 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.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of Preferred Shares issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price per one one-hundredth of a Preferred Share and the
number of shares which were expressed in the initial Right Certificates issued
hereunder but they shall be deemed to represent the Purchase Price and number of
Preferred Shares as adjusted from time to time hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at the adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Preferred Shares and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to the 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 the adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any consolidation or subdivision of the Preferred
Shares, issuance wholly for cash of any of Preferred Shares at less than the
current market price, issuance wholly for cash of Preferred Shares or securities
which by their terms are convertible into or exchangeable for Preferred Shares,
dividends on Preferred Shares payable in Preferred Shares or issuance of rights,
options or warrants referred to hereinabove in subsection (b) of this Section
11, hereafter made by the Company to holders of its Preferred Shares shall not
be taxable to such shareholders.
(n) 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 (i) the
number of one-hundredths of a Preferred Share purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the number of
one one-hundredths of a Preferred Share so purchasable immediately prior to such
event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number of Common Shares outstanding immediately after such event, and (ii) each
Common Share outstanding immediately after such event shall have issued with
respect to it that number of Rights which each Common Share outstanding
immediately prior to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such subdivision, combination or consolidation
is effected.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Sections 11 and 13
hereof, the Company shall (a) promptly prepare a certificate setting forth the
adjustment, and a brief statement of the facts accounting for the adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Common Shares or the Preferred Shares a copy of the certificate and (c) mail a
brief summary thereof to each record holder of a Right Certificate in accordance
with Section 25 hereof.
Section 13. Consolidation, Merger, Share Exchange or Sale or
Transfer of Assets or Earning Power. (a) In the event at any time after a
Distribution Date, directly or indirectly, (w) the Company shall consolidate
with, or merge with and into or otherwise combine with, any other Person and the
Company shall not be the continuing or surviving corporation of such
consolidation, merger or combination, (x) any Person shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other Person (or of the Company) or cash or any
other property, (y) the Company shall engage in any statutory share exchange
whereby the Company's Common Shares are converted into stock, securities, cash
or any other property of any other Person or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more 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 other Person other than the Company or one or more of
its wholly owned Subsidiaries, then, on the first occurrence of any such event,
proper provision shall be made so that (i) each holder of a Right other than
Rights that have become void pursuant to Sections 7(g) or 11(a)(ii) hereof shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement and in
lieu of the right to purchase Preferred Shares, such number of validly issued,
fully paid, nonassessable and freely tradable Common Shares of the Principal
Party (as hereinafter defined), not subject to any rights of call or first
refusal, 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 Preferred Share
for which a Right is then exercisable and dividing that product by (2) 50% of
the then current per share market price of the Common Shares of the Principal
Party (determined pursuant to Section 11(d)) on the date of consummation of such
consolidation, merger, combination, statutory share exchange, sale or transfer;
provided, however, that the Purchase Price and the number of Common Shares of
such Principal Party issuable upon exercise of each Right shall be further
adjusted as provided in Section 11(f) of this Agreement to reflect any events
occurring in respect of such Principal Party after the date of such
consolidation, merger, combination, statutory share exchange, sale or transfer;
(ii) the Principal Party shall thereafter be liable for, and shall assume, by
virtue of such consolidation, merger, combination, statutory share exchange,
sale or transfer, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to the
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall apply to the Principal Party; and (iv) the Principal Party shall
take such steps (including, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with the provisions of Section 9
hereof) in connection with the consummation of any transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to the Common Shares thereafter
deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (w),
(x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which Common Shares
of the Company are converted in such merger, consolidation,
combination or statutory share exchange, or, if there is more
than one such issuer, the issuer the Common Shares of which
has the greatest aggregate market value of shares outstanding,
or if no securities are so issued, (A) the Person that is the
other party to the merger, consolidation, combination or
statutory share exchange, if such Person survives said merger
or statutory share exchange, or, if there is more than one
such Person, the Person the Common Shares of which has the
greatest aggregate market value of shares outstanding or (B)
if the Person that is the other party to the merger or
statutory share exchange does not survive the merger or
statutory share exchange, the Person that does survive the
merger or statutory share exchange (including the Company if
it survives) or (C) the Person resulting from the
consolidation or combination.
(ii) in the case of any transaction described in (z)
of the first sentence in this Section 13, the Person that is
the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or
transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person
receiving the greatest portion of the assets or earning power
cannot be determined, whichever of such Persons is the issuer
of Common Shares having the greatest aggregate market value of
shares outstanding;
provided, however, that in any such case, (x) if the Common Shares of such
Person are not at such time and have not been continuously during the preceding
12-month period registered under Section 12 of the Exchange Act and such Person
is a direct or indirect subsidiary of another Person the Common Shares of which
are and have been so registered, "Principal Party" shall refer to such other
Person; (y) in case such Person is a subsidiary, directly or indirectly, of more
than one Person, the Common Shares of all 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 market value of shares
outstanding, and (z) 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 (x) and (y) above shall
apply to each of the owners having an interest in such joint venture as if the
Person owned by the joint venture were a "subsidiary" of both or all of such
joint venturers and the Principal Parties in each such case 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, combination, statutory share exchange, sale or transfer unless prior
thereto the Company and the Principal Party shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger, combination, statutory
share exchange, sale or transfer mentioned in paragraph (a) of this Section 13,
the Principal Party 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, use its best efforts to cause such registration
statement to become effective as soon as practicable after
such filing and 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
date of expiration of the Rights and similarly comply with
applicable state securities laws;
(ii) deliver to holders of the Rights 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;
(iii) use its best efforts, if the Common Shares of
the Principal Party shall be listed or admitted to trading on
any national securities exchange or quoted on any automated
quotation system, to list or admit to trading (or continue the
listing or trading of) the Rights and the securities
purchasable upon exercise of the Rights on such national
securities exchange or have the Rights or such securities
quoted on such automated quotation system and, if the Common
Shares of the Principal Party shall not be listed or admitted
to trading on any national securities exchange or quoted on
any automated quotation system, to cause the Rights and the
securities purchasable upon exercise of the Rights to be
listed or admitted to trading on a national securities
exchange or quoted in an automated quotation system then in
use; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Shares of the
Principal Party subject to purchase upon exercise of
outstanding Rights.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or combinations or statutory share exchanges or sales or other
transfers. In the event that one of the transactions described in Section 13(a)
hereof shall occur at any time after the occurrence of a Conversion, then the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Furthermore, in case the Principal Party which is to be a
party to a transaction referred to in this Section 13 has provision in any of
its authorized securities or in its certificate of incorporation or by-laws or
other instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the consummation of a transaction referred to in this Section 13, Common Shares
of such Principal Party at less than the then current market price per share
(determined pursuant to Section 11(d) hereof) or securities exercisable for, or
convertible into, Common Shares of such Principal Party at less than such then
current market price, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Shares of such
Principal Party pursuant to the provisions of Section 13, then, in such event,
the Company hereby agrees with each holder of Rights that it shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees not to enter into any
transaction of the kind listed in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights.
(f) If, for any reason, the Rights cannot be exercised for
Common Shares of the Principal Party, then a holder of Rights will have the
right to exchange such Rights, without payment of the applicable exercise price,
for cash from the Company or such Principal Party in an amount equal to the
number of Common Shares he would otherwise be entitled to purchase times 50% of
the then current market price, as determined pursuant to Section 11(d) hereof,
of such Common Shares of the Principal Party. If, for any reason, including,
without limitation, if such Principal Party is an individual, private
partnership or private company, the foregoing cannot be applied to determine the
cash amount into which the Rights are exchangeable, then the Board of Directors
of the Company, by Valid Board Action and based upon the advice from one or more
nationally recognized investment banking firms selected by Valid Board Action,
shall determine such amount reasonably and with utmost good faith to the holders
of the Rights. Any such determination shall be binding and final.
(g) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparts (w), (x), (y) and (z) of paragraph (a) of this Section 13 if (i) such
transaction is consummated with a Person or Persons who acquired Common Shares
pursuant to an Approved Tender Offer (or a wholly-owned subsidiary of 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 Approved Tender Offer and (iii) the
form of consideration being offered to the remaining holders of Common Shares is
cash. Upon consummation of any such transaction contemplated by this paragraph
(g), 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 of a Right for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the closing bid and 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 Valid Board
Action. 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
Valid Board Action shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to issue
certificates which evidence fractions of Preferred Shares (other than fractions
that are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts pursuant to an appropriate agreement between the Company and a
depositary selected by it, provided that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not integral multiples of one one-hundredth of a Preferred
Share, the Company shall pay to the registered holders of Right Certificates at
the time the 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) hereof, the current market value of a Preferred
Share shall be the closing price of a Preferred Share (as determined pursuant to
the second sentence of Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares (except as provided above) upon exercise of a Right.
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 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 the Right Certificate in the manner
provided in and subject to the limitations set forth in the Right Certificate
and in this Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of
a Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the
Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent
if surrendered at the principal office of the Rights Agent,
duly endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Sections 6 and 7, the Company and the Rights
Agent may deem and treat the person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common Shares certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificates
or the associated Common Shares certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary;
and
(d) as a condition to the exercise, exchange or transfer of
any Right, such holder will disclose to the Company the Beneficial Ownership of
such Right and provide such other evidence relating to Beneficial Ownership of
such Right as the Company shall reasonably request.
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 this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, 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 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, or otherwise upon the advice of its counsel as set
forth in Section 20 hereof.
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 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 the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Right Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, the 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 the 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 Sections 7(g) or 11(a)(ii)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Sections 3, 11, 13, 23 or 27 or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares to be
issued pursuant to this Agreement or any Right Certificate or as to whether any
Preferred 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 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 in accordance
with instructions of any such officer.
(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) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate contained in the form
of assignment or the form of election to purchase set forth on the reverse
thereof, as the case may be, has not been completed to certify the holder is not
an Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent
shall not take any further action with respect to such requested exercise or
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 thirty (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
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares and 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 the
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with the 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
a court, shall be (a) a corporation organized and doing business under the laws
of the United States or of the States of Maryland or New York (or of any other
state of the United States so long as such corporation is authorized to do
business as a banking institution in the States of Maryland or New York), in
good standing, that is authorized under those laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authorities and that has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50 million or (b) an affiliate of a
corporation described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and 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 a majority of the
Disinterested 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 Expiration Date, the Company may with respect to Common
Shares so issued or sold pursuant to (i) the exercise of stock options; (ii) any
employee plan or arrangement, (iii) the exercise, conversion or exchange of
notes, debentures or other securities issued by the Company or (iv) any other
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale.
Section 23. Redemption. (a) The Board of Directors of the
Company may, at its option, by Valid Board Action, at any time prior to the
earlier of (i) the Close of Business on the tenth day following the Share
Acquisition Date (or such later date as designated by Valid Board Action prior
to such time as the Rights are no longer redeemable), or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.01 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"); provided, however, that if, following
the occurrence of a Conversion and following the expiration of the right of
redemption hereunder, (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of Common Shares in one
transaction, or series of transactions, not directly or indirectly involving the
Company or any of its Subsidiaries, which did not result in the occurrence of a
Triggering Event such that such Person is thereafter a Beneficial Owner of 10%
or less of the outstanding Common Shares, and (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement to the contrary, the Rights shall not be
exercisable pursuant to Section 11(a)(ii) until such time as the Company's right
of redemption hereunder has expired.
(b) Immediately upon Valid Board Action ordering the
redemption of the Rights (or such later time as established by Valid Board
Action for the effectiveness of such redemption), 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. Within 10 days after Valid Board Action ordering the
redemption of the Rights, the Company shall mail a notice of such redemption to
the holders of the then outstanding Rights by mailing the notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or 27, and other than in connection with the purchase of Common Shares prior to
the Distribution Date. In any case, failure to give such notice by mail, or any
defect in the notice to any particular holder of Rights shall not affect the
sufficiency of the notice to other holders of Rights.
Section 24. Notice of Certain Events. In case the Company
shall propose at any time following the Distribution Date (a) 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) or (b) 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, or (c) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), or (d) to effect any consolidation, merger or
statutory share exchange into or with, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one or more transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person, or (e) 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, in accordance with Section 25 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend, or
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, statutory share exchange, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or 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 (a) or (b) above at least 20 days prior to the record date for
determining holders of the Preferred Shares for purposes of such action, and in
the case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, whichever shall be the
earlier. The failure to give notice required by this Section 24 or any defect
therein shall not affect the legality or validity of the action taken by the
Company or the vote upon any such action.
In case a Triggering Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each holder of
a Right (or if occurring prior to the Distribution Date, the holders of Common
Shares), in accordance with Section 25 hereof, a notice of the occurrence of
such event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) or 13 hereof, as the case may be, and
all references in this Section 24 to Preferred Shares shall be deemed thereafter
to refer to Common Shares or other capital stock, as the case may be.
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
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
USF&G Corporation
6225 Smith Avenue
Baltimore, Maryland 21209
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right 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 Bank of New York
101 Barclay Street
New York, New York 10286
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 26. Supplements and Amendments. Prior to the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company, by Valid Board Action, and the Rights Agent shall, if the Company
so directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing Common Shares, including,
without limitation, any supplement or amendment deemed necessary or appropriate
by the Company in light of any judicial or other legal developments, whether or
not controlling precedent in respect of this Agreement. From and after the
Distribution Date and subject to the penultimate sentence of this Section 26,
the Company, by Valid Board Action, and the Rights Agent shall, if the Company
so directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder, or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of any Acquiring Person);
provided, however, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating
to when the Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Without limiting the foregoing, the Company
may at any time prior to such time as any Person becomes an Acquiring Person
amend this Agreement to lower the thresholds set forth in Section 1(a) and 3(a)
hereof for a Person to become an Acquiring Person, from 15% to any percentage
greater than the greater of (i) the largest percentage of the outstanding Common
Shares then known by the Company to be beneficially owned by any Person (other
than the Company, any wholly-owned Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary, or any Person holding Common
Shares for or pursuant to the terms of any such plan) and (ii) 10%.
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 and shall be fully protected by Section 18 in so
doing. Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Final Expiration Date to
a date earlier than October 14, 2007, or which changes the Redemption Price or
the number of Common Shares for which a Right is exercisable. Prior to the
Distribution Date, the interest of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares.
Section 27. Exchange (a) Subject to any limitations of
applicable law, the Board of Directors by Valid Board Action may, at its option,
at any time after any person becomes an Acquiring Person (other than as a result
of an Approved Tender Offer), exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares at an
exchange ratio of one Common Share per Right, appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be
empowered to effect such exchange at any time after any Person (other than the
Company, any wholly-owned Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary, or any Person holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares then outstanding.
(b) Immediately upon Valid Board Action ordering the exchange
of any Rights pursuant to subsection (a) of this Section 27 and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only rights thereafter of a holder of such Rights shall be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights (other than Rights
which have become void pursuant to the provisions of Section 7(g) or 11(a)(ii)
hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Shares authorized but unissued to permit any exchange of Rights as contemplated
in accordance with this Section 27, the Company shall take all such action as
may be necessary to authorize additional Common Shares for issuance upon
exchange of the Rights.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holder of the Right Certificates with regard to which such fractional
Common Shares would otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole Common Share. For the purposes
of this subsection (d), the current market value of a whole Common Share shall
be the closing price of a Common Share (as determined pursuant to Section 11(d)
hereof) for the Trading Day immediately after the public announcement by the
Company that an exchange is to be effected pursuant to this Section 27.
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. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, except as explicitly
otherwise provided in this Agreement, the Board of Directors of the Company
(with, where specifically provided for herein, the concurrence or approval of
the Disinterested Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board (with, where specifically provided for herein, the
concurrence or approval of the Disinterested Directors) or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement, and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board (with, where specifically provided for herein, the concurrence
or approval of the Disinterested Directors) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board or the Disinterested
Directors to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Shares) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable, and the Board of Directors of the Company (or,
after any Person has become an Acquiring Person, a majority of the Disinterested
Directors) determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth day
following the date of such determination by such Board action.
Section 32. Governing Law. This Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Maryland and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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.
USF&G CORPORATION
Attest:
By By
Title:
THE BANK OF NEW YORK
Attest:
By By
Title:
Exhibit A
ARTICLES SUPPLEMENTARY
Junior Participating Preferred Stock
OF
USF&G CORPORATION
USF&G CORPORATION, a Maryland corporation, having its principal office
in Baltimore City, Maryland (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors
of the Corporation by Article Seventh of the Charter of the Corporation, the
Board of Directors has previously duly divided and classified 2,400,000 shares
of the Preferred Stock of the Corporation into a series designated "Junior
Participating Preferred Stock" and has provided for the issuance of such series.
SECOND: No shares of Junior Participating Preferred Stock have been
issued, and the Board of Directors wishes to reclassify the Junior Participating
Preferred Stock.
THIRD: The Junior Participating Preferred Stock as previously divided
and classified by the Board of Directors are hereby reclassified as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Junior Participating Preferred Stock" (the "Junior Preferred
Stock") and the number of shares constituting such series shall initially be
2,400,000, subject to increase or decrease by action of the Board of Directors
effectuated by further Articles Supplementary.
2. Dividends and Distributions.
(i) The holders of shares of Junior Preferred Stock, in
preference to the holders of Common Stock and of any other junior
stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose,
quarterly dividends payment in cash on the last day of March, June,
September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Junior Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) Twenty
dollars ($20.00) or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all
cash dividends, and 100 times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock of the Corporation or a
subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Junior Preferred Stock.
In the event the Corporation shall at any time after the date hereof
declare or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise)
into a greater or lesser number of shares of Common Stock, then in each
such case the amount to which holders of shares of Junior Preferred
Stock were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by
a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(ii) The Corporation shall declare a dividend or distribution
on the Junior Preferred Stock as provided in subparagraph (i) of this
paragraph 2 immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date, a dividend of Twenty Dollars ($20.00)
per share on the Junior Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(iii) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares
of Junior Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date,
in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for
the determination of holders of shares of Junior Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Junior Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Junior
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than
60 days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Junior Preferred
Stock shall have the following voting rights:
(i) Subject to the provision for adjustment hereinafter set
forth, each share of Junior Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the
shareholders of the Corporation. In the event the Corporation shall at
any time after the date hereof declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per
share to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(ii) Except as otherwise provided herein or by law, the
holders of shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters
submitted to a vote of shareholders of the Corporation.
(iii) (a) If on the date used to determine stockholders of
record for any meeting of stockholders for the election of directors,
accrued dividends on the shares of Junior Preferred Stock shall not
have been paid in an aggregate amount equal to or greater than six
quarterly dividends on the shares of Junior Preferred Stock at the time
outstanding, then, and in any such event, the number of Directors then
constituting the entire Board of Directors of the Corporation shall
automatically be increased by two Directors and the holders of shares
of Junior Preferred Stock and holders of any other shares of the
Preferred Stock of the Corporation then outstanding ranking on a parity
with the Junior Preferred Stock as to dividends and upon liquidation
("Parity Stock"), voting together as a single class, shall be entitled
at such meeting to fill such newly created directorships. Such right to
vote as a single class to elect two Directors shall, when vested,
continue until all dividends in default on the shares of Junior
Preferred Stock shall have been paid in full and, when so paid, such
right to elect two Directors separately as a class shall cease,
subject, always, to the same provisions for the vesting of such right
to elect two Directors separately as a class in the case of future
dividend defaults.
(b) So long as any shares of Junior Preferred Stock
are outstanding the number of Directors of the Corporation shall at all
times be such that the exercise, by the holders of shares of Junior
Preferred Stock and the holders of shares of Parity Stock, of the right
to elect Directors under the circumstances provided in paragraph (a) of
this subclause (iii) will not contravene any provision of the Maryland
General Corporation Law or the Charter of the Corporation.
(c) Directors elected pursuant to paragraph (a) of
this subclause (iii) shall serve until the earlier of (x) the next
annual meeting of the stockholders of the Corporation and the election
(by the holders of shares of Junior Preferred and Parity Stock) and
qualification of their respective successors or (y) the date upon which
all dividends in default on the shares of Junior Preferred and such
Parity Stock shall have been paid in full. Directors elected pursuant
to paragraph (a) of this subclause (iii) may be removed by, and shall
not be removed except by, the vote of the holders of record of the
outstanding shares of Junior Preferred and Parity Stock, voting
together as a single class without regard to series, at a meeting of
the stockholders, or the holders of shares of Junior Preferred and
Parity Stock, called for that purpose. If, prior to the end of the term
of any Director elected as aforesaid, a vacancy in the office of such
Director shall occur during the continuance of a default in dividends
on the shares of Junior Preferred Stock by reason other than removal,
such vacancy shall be filled for the unexpired term by the appointment
by the remaining Director elected as aforesaid of a new Director for
the unexpired term of such former Director.
(iv) Except as set forth herein, holders of Junior Preferred
Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with
holders of Common Stock and any other capital stock of the Corporation
having general voting rights as set forth herein) for taking any
corporate action.
4. Certain Restrictions.
(i) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in
paragraph 2 of this Section are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on shares of Junior Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(a) declare or pay dividends on, make other
distributions on, or redeem or purchase or otherwise acquire
for consideration any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Junior Preferred Stock;
(b) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except dividends
paid ratably on the Junior Preferred Stock and all such parity
stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(c) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior either as to
dividends or upon liquidation, dissolution or winding up) with
the Junior Preferred Stock, provided that the Corporation may
at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Junior
Preferred Stock; or
(d) purchase or otherwise acquire for consideration
any shares of Junior Preferred Stock or Parity Stock, except
in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(ii) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subparagraph (i) of
this paragraph 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be classified again and reissued as part of a new series or class of
Preferred Stock to be created by the Board of Directors pursuant to its power
contained in the Charter, subject to the conditions and restrictions on issuance
set forth herein.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (a)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock unless,
prior thereto, the holders of shares of Junior Preferred Stock shall have
received One Hundred Five dollars ($105) per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, provided that the holders of shares of Junior
Preferred Stock shall be entitled to receive an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Stock, or (b) to the holders of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except distributions made ratably on the Junior Preferred Stock
and all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time after the date hereof
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Junior Preferred Stock were
entitled immediately prior to such event under the proviso in clause (a) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, share exchange, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case the shares
of Junior Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the date hereof declare or
pay any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
8. No Redemption. The shares of Junior Preferred Stock shall not
be redeemable.
9. Rank. The Junior Preferred Stock shall rank junior with respect to
payment of dividends and on liquidation to all other Preferred Stock of the
Corporation unless the terms of any other Preferred Stock specifically provide
that it shall rank junior to, or on a parity with, the Junior Preferred Stock.
10. Amendment. The Charter of the Corporation shall not be amended in
any manner that would materially alter or change the powers, preferences or
special rights of the Junior Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds of the outstanding
shares of Junior Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, USF&G Corporation has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on March __, 1997.
WITNESS: USF&G CORPORATION
______________________________ By_______________________________________
THE UNDERSIGNED, President of USF&G Corporation, who executed
on behalf of the Corporation Articles Supplementary of which this Certificate is
made a part, hereby acknowledges in the name and on behalf of said Corporation
the foregoing Articles Supplementary to be the corporate act of said Corporation
and hereby certifies that the matters and facts set forth herein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
------------------------------------
Exhibit B
[Form of Right Certificate]
Certificate No. R- Rights
NOT EXERCISABLE AFTER OCTOBER 14, 2007 OR EARLIER IF NOTICE OF
REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$0.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN
ASSOCIATE OF AN ACQUIRING PERSON (AS EACH IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID.
Right Certificate
USF&G CORPORATION
This certifies that , or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Amended and
Restated Rights Agreement dated as of March 11, 1997 (the "Rights Agreement")
between USF&G Corporation, a Maryland corporation (the "Company"), and The Bank
of New York, a New York Corporation (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. Baltimore time on October 14, 2007 at
the principal office of the Rights Agent in New York City, or at the office of
its successors as Rights Agent, one one-hundredth of a fully paid non-assessable
share of Junior Participating Preferred Stock, $50.00 par value (the "Preferred
Shares"), of the Company, at a purchase price of $105.00 per one one-hundredth
of a Preferred Share (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of
Preferred Shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
March 11, 1997, based on the Preferred Shares as constituted at such date.
Upon the occurrence of a Conversion, all Rights evidenced by
this Rights Certificate which are beneficially owned by (i) an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person, shall become void and no such holder
hereof shall have any right with respect to such Rights from and after the
occurrence of such event. As a condition to the exercise, exchange or transfer
of any Right, the holder agrees to disclose to the Company the beneficial owner
thereof
As provided in the Rights Agreement, the Purchase Price and the
number of Common Shares or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the Rights Agent, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may, but are not required to be (i) redeemed by
the Company at a redemption price of $.01 per Right or (ii) exchanged in whole
or in part for Common Shares.
No fractional Preferred Shares will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractional shares which are
integral multiples of one one-hundredth of a Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a 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 stock-holders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of , .
------ --- ----
ATTEST: USF&G CORPORATION
By:
Secretary President or Executive
Vice President
Countersigned:
THE BANK OF NEW YORK
By:
Authorized Signature
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificates.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ____________, 19__
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
[Form of Reverse Side of Right Certificate -- continued]
CERTIFICATION FOR TRANSFER
(To be executed in connection with any
transfer of the Right Certificate.)
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Right Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________________, 19__ ________________________
Signature
- --------------------------------------------------------------------------------
[Form of Reverse Side of Right Certificate -- continued]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To: USF&G CORPORATION
The undersigned hereby irrevocably elects to exercise _________________
Rights represented by this Right Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated _____________________, 19__
----------------------------------------
Signature
(Signature must conform in all respects
to name of holder as specified on the
face of this Right Certificate in
every particular, without alteration or
enlargement or any change whatsoever)
[Form of Reverse Side of Right Certificate -- continued]
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
- --------------------------------------------------------------------------------
CERTIFICATION FOR ELECTION TO PURCHASE
The undersigned hereby certifies by checking the appropriate boxes that:
(1)______the Rights evidenced by this Right Certificate [ ]are [ ]are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement);
(2)______after due inquiry and to the best knowledge of the
undersigned, it [ ]did [ ]did not acquire the Rights evidenced by this Right
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 19__
Signature
- --------------------------------------------------------------------------------
NOTICE
The signatures in the foregoing Forms of Assignment and Election must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Forms of
Assignment and Election is not completed, the Company will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any
Right Certificates issued in exchange for this Rights Certificate.
Exhibit C
USF&G CORPORATION
AMENDED AND RESTATED SUMMARY OF
RIGHTS TO PURCHASE PREFERRED SHARES
On September 18, 1987 the Board of Directors of USF&G Corporation (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of Common Stock, par value $2.50 per share (the
"Common Shares"), of the Company. The dividend was paid on October 15, 1987 to
the stockholders of record on that date (the "Record Date"). On February 26,
1997, the Board of Directors of the Company authorized the Company to amend and
restate, and the Company amended and restated, the terms of the rights agreement
governing the terms and provisions of the Rights. Each Right entitles the
registered holder to purchase from the Company one one-hundredth of a share of
Junior Participating Preferred Stock, $50.00 par value, of the Company (the
"Preferred Shares") at a price of $105 per one one-hundredth of a Preferred
Share (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and The Bank of New York, as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons has
become an Acquiring Person (or such later date as may be determined by the Board
of Directors by Valid Board Action (as herein defined)) or (ii) 10 business days
(or such later date as may be determined by Valid Board Action) following the
commencement or announcement by a person of an intention to make a tender offer
or exchange offer the consummation of which would result in such person becoming
an Acquiring Person (the earlier of the dates referred to in (i) or (ii) being
called the "Distribution Date"), the Rights will be evidenced, with respect to
any Share Certificates dated on or prior to March 14, 1997 by such Share
Certificate with a copy of this Amended and Restated Summary of Rights attached
thereto. An Acquiring Person is defined as any Person or group of affiliated or
associated persons, other than employee benefit plans of the Company and its
subsidiaries, who is the Beneficial Owner (as defined in the Rights Agreement)
of 15% or more of the Company's outstanding Common Shares. The Rights Agreement
provides that, until the Distribution Date, the Rights will be transferred with
and only with the Common Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Share certificates issued
after March 14, 1997 upon transfer or new issuance of the Common Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any Share Certificates dated on or prior to March 14,
1997, even without such notation or a copy of this Amended and Restated Summary
of Rights being attached thereto, will also constitute the transfer of the
Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Shares as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights, which will then
be transferable separate and apart from the Common Shares.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on October 14, 2007, unless earlier redeemed by the Company as
described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for Preferred Shares or convertible securities at less
than the current market price of the Preferred Shares of (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends out of earnings or retained
earnings or dividends payable in Preferred Shares) or of subscription rights or
warrants (other than those referred to above).
In the event that any person, alone or together with its affiliates and
associates, becomes an Acquiring Person (other than by reason of the acquisition
of 15% or more of the outstanding Common Shares pursuant to an offer for all
outstanding Common Shares at a uniform cash price open equally to all holders
except the offeror, which is determined by Valid Board Action to be fair and
otherwise in the best interests of the Company and its shareholders), proper
provision will be made so that each holder of a Right, other than Rights that
were beneficially owned by the Acquiring Person and certain other persons (which
will thereafter be void), will thereafter have the right to receive upon
exercise and payment of the Purchase Price that number of Common Shares of the
Company (or in certain circumstances other securities, cash or property) having
a market value of two times the Purchase Price. In addition, in the event that
the Company were acquired in a merger or other business combination transaction
or 50% or more of its consolidated assets or earning power were sold, proper
provision will be made so that each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value of two times the
Purchase Price. However, Rights are not exercisable following the occurrence of
the foregoing event until such time as the Rights are no longer redeemable by
the Company as set forth below.
No adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No
fractional Preferred Shares will be issued (other than fractional shares which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depository receipts) and in lieu
thereof, a payment in cash will be made based on the market price of the
Preferred Shares on the last trading date prior to the date of exercise.
At any time after any person becomes an Acquiring Person, the Board of
Directors of the Company may, by Valid Board Action, at its option, exchange all
or part of the then outstanding and exercisable Rights (excluding Rights of an
Acquiring Person that have become void) for Common Shares at an exchange ratio
of one Common Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof.
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Acquiring Person, together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
At any time prior to the earlier of ten days following the Share
Acquisition Date (or such later date as may be determined by Valid Board Action)
or the date the Rights expire, the Rights are redeemable at the election of a
majority of the Board of Directors of the Company (by Valid Board Action), in
whole, but not in part, at a price of $.01 per Right.
The term "Disinterested Directors" means any member of the Board of
Directors of the Company who while a member of the Board is not (i) an Acquiring
Person or an Affiliate, Associate or representative thereof or (ii) any other
Person or an Affiliate, Associate or representative thereof who has stated an
intent to take or consider taking any action which would result in such Person
becoming an Acquiring Person, or which would cause a Triggering Event.
The term Valid Board Action means the affirmative vote of a majority of
the entire Board of Directors which includes the concurrence of one or more
Disinterested Directors through the affirmative vote of a majority of the
Disinterested Directors.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above. As a condition to the
exercise, exchange or transfer of any Right, each holder of a Right agrees to
disclose to the Company the Beneficial Owner of such Right.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, only with the concurrence of a majority of the
Disinterested Directors) in order to cure any ambiguity, to make changes which
do not adversely affect the interest of holders of Rights (excluding the
interests of any Acquiring Person), or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to lengthen the
time period governing redemption shall be made at such time as the Rights are
not redeemable. Without limiting any of the foregoing, at any time prior to a
Person becoming an Acquiring Person, the Board may amend the Rights Agreement to
lower the threshold for exercisability of the Rights (and the determination of
the existence of an Acquiring Person) from 15% to any percentage greater than
the greater of (i) the largest percentage of outstanding Common Shares then
known to the Company to be beneficially owned by any Person or group or
affiliated or associated persons and (ii) 10%.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-K dated
March 13, 1997. A copy of the Rights Agreement is available free of charge from
the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
Dated: , 1997