CAPITAL GOLD CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
RIGHTS AGREEMENT
Dated as of August 15, 2006
TABLE OF CONTENTS
Page
Section 1. Definitions....................................................................................1
Section 2. Appointment of Rights Agent....................................................................5
Section 3. Issue of Right Certificates....................................................................5
Section 4. Form of Right Certificates.....................................................................6
Section 5. Countersignature and Registration..............................................................7
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificates...................................................7
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..................................8
Section 8. Cancellation and Destruction of Right Certificates.............................................9
Section 9. Availability of Series B Shares................................................................9
Section 10. Series B Shares Record Date...................................................................10
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights............................10
Section 12. Certificate of Adjusted Purchase Price or Number of Shares....................................17
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........................17
Section 14. Fractional Rights and Fractional Shares.......................................................18
Section 15. Rights of Action..............................................................................19
Section 16. Agreement of Right Holders....................................................................19
Section 17. Right Certificate Holder Not Deemed a Stockholder.............................................20
Section 18. Concerning the Rights Agent...................................................................20
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....................................21
Section 20. Duties of Rights Agent........................................................................21
Section 21. Change of Rights Agent........................................................................23
Section 22. Issuance of New Right Certificates............................................................24
Section 23. Redemption....................................................................................24
Section 24. Exchange......................................................................................25
Section 25. Notice of Certain Events......................................................................26
Section 26. Notices.......................................................................................26
Section 27. Supplements and Amendments....................................................................27
Section 28. Successors....................................................................................27
Section 29. Benefits of This Agreement....................................................................27
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TABLE OF CONTENTS
(continued)
Page
Section 30. Severability..................................................................................29
Section 31. Governing Law.................................................................................29
Section 32. Counterparts..................................................................................29
Section 33. Descriptive Headings..........................................................................29
Section 34. Effective Date................................................................................29
Section 35. Determinations and Actions by the Board of Directors..........................................29
Exhibit A - Form of Certificate of Designations
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Series B Shares
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Agreement, dated as of August 15, 2006, between Capital Gold Corporation,
a Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, as rights agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one Series B common stock purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Company outstanding on August 14, 2006
(the "Record Date"), each Right representing the right to purchase one
one-thousandth of a Series B Share (as hereinafter defined), upon the terms and
subject to the conditions herein set forth, and has further authorized and
directed the issuance of one Right with respect to each Common Share that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Final Expiration Date (as such terms are
hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
20% or more of the Common Shares of the Company then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such plan or (iv) any
Person who is, as of the date of this Agreement, the Beneficial Owner of 20% or
more of the Common Shares of the Company then outstanding, but only so long as
such Person thereafter does not, at any time while the Beneficial Owner of 20%
or more of the Common Shares of the Company then outstanding, acquire Beneficial
Ownership of any additional Common Shares (other than upon the exercise of any
rights hereunder or pursuant to a stock dividend or distribution or similar
action by the Company); provided, however, that such Person shall cease to be
excluded from the definition of Acquiring Person pursuant to this clause (iv)
immediately at such time as such Person ceases to be the Beneficial Owner of 20%
or more of the Common Shares of the Company then outstanding. Notwithstanding
the foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
Common Shares of the Company outstanding, increases the proportionate number of
Common Shares of the Company beneficially owned by such Person to 20% or more of
the Common Shares of the Company then outstanding; provided, however, that, if a
Person shall become the Beneficial Owner of 20% or more of the Common Shares of
the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company, then such Person shall be deemed to
be an "Acquiring Person." Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for any purposes of this Agreement.
(b) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement.
(c) "Associate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act as in effect on the
date of this Agreement.
(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
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
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(iii) which are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or Associates
has any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B)
hereof) or disposing of any securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in New York State are authorized or
obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M., New York,
New York time, on such date; provided, however, that, if such date is not a
Business Day, it shall mean 5:00 P.M., New York, New York time, on the next
succeeding Business Day.
(g) "Common Shares" when used with reference to the Company shall mean the
shares of common stock, par value $0.0001 per share, of the Company, other than
the Series B Shares. "Common Shares" when used with reference to any Person
other than the Company shall mean the capital stock (or equity interest) with
the greatest voting power of such other Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(k) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(l) "NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.
(m) "Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
(n) "Series B Shares" shall mean shares of Series B Common Stock, par
value $0.0001 per share, of the Company having the rights and preferences set
forth in the Form of Certificate of Designations attached to this Agreement as
Exhibit A.
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(o) "Purchase Price" shall have the meaning set forth in Section 4 hereof.
(p) "Record Date" shall have the meaning set forth in the second paragraph
hereof.
(q) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
(r) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(s) "Right" shall have the meaning set forth in the second paragraph
hereof.
(t) "Right Certificate" shall have the meaning set forth in Section 3(a)
hereof.
(u) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(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 interest is owned, directly or indirectly, by such Person.
(w) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.
(x) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
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Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for the acts or omissions of any such co-Rights Agent.
Section 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the tenth Business Day (or
such later date as may be determined by action of the Board of Directors of the
Company prior to such time as any Person becomes an Acquiring Person) after the
date of the commencement by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any entity holding Common Shares of the Company for or pursuant
to the terms of any such plan) of a tender or exchange offer the consummation of
which would result in any Person becoming the Beneficial Owner of Common Shares
of the Company aggregating 20% or more of the then outstanding Common Shares of
the Company (including any such date which is after the date of this Agreement
and prior to the issuance of the Rights; the earlier of such dates being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
Common Shares of the Company registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of Common Shares of
the Company. As soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign, and the Company
will send or cause to be sent (and the Rights Agent will, if requested and
provided with the necessary information, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares of the Company as
of the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one Right for each
Common Share so held. As of the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Series B Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the Company. With respect to certificates for Common Shares of
the Company outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares of the Company outstanding on the Record Date, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the Common Shares of the Company represented thereby.
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(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date 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 the Rights Agreement between Capital Gold
Corporation (the "Company") and American Stock Transfer & Trust Company
(the "Rights Agent"), dated as of August 15, 2006, as it may be 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 offices of the Company. 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. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge promptly
after receipt of a written request therefor. As set forth in the Rights
Agreement, Rights beneficially owned by any Person (as defined in the
Rights Agreement) who becomes an Acquiring Person (as defined in the
Agreement) become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares of the Company
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares of the Company
represented thereby. In the event that the Company purchases or acquires any
Common Shares of the Company after the Record Date but prior to the Distribution
Date, any Rights associated with such Common Shares of the Company shall be
deemed cancelled and retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Shares of the Company which are
no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Series B 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 (but which
do not affect the duties, rights or responsibilities of the Rights Agent) 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 applicable rule or
regulation made pursuant thereto or with any applicable rule or regulation of
any stock exchange or the National Association of Securities Dealers, Inc., or
to conform to usage. Subject to the provisions of Section 22 hereof, the Right
Certificates shall entitle the holders thereof to purchase such number of one
one-thousandths of a Series B Share as shall be set forth therein at the price
per one one-thousandth of a Series B Share set forth therein (the "Purchase
Price"), but the number of such one one-thousandths of a Series B Share and the
Purchase Price shall be subject to adjustment as provided herein.
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Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, any of its Vice Presidents or its Treasurer,
either manually or by facsimile signature, shall have affixed thereto the
Company's seal or a facsimile thereof, and shall be attested by the Secretary or
an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the individual who
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any
individual who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Agreement any such individual was
not such an officer.
Following the Distribution Date, and receipt by the Rights Agent of all
necessary information, the Rights Agent will keep or cause to be kept, at its
office designated for such purpose (the "Designated 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 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 or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates
entitling the registered holder to purchase a like number of one one-thousandths
of a Series B Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the Designated Office of the
Rights Agent. 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 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. The Rights
Agent shall have no duty or obligation under this Section 6 unless and until it
is reasonably satisfied that all such taxes and/or charges have been paid.
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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 satisfactory to them, and, at the Company's request, reimbursement to
the Company and the Rights Agent of all reasonable expenses incidental thereto,
and upon surrender to the Rights Agent and cancellation of the Right Certificate
if mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a)Subject to Section 34 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 properly and duly executed, to the Rights Agent at the Designated Office
of the Rights Agent, together with payment of the Purchase Price for each one
one-thousandth of a Series B Share as to which the Rights are exercised, at or
prior to the earliest of (i) the Close of Business on August 15, 2016 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-thousandth of a Series B Share
purchasable pursuant to the exercise of a Right shall initially be $3.00, and
shall be subject to adjustment from time to time as provided in Section 11 or 13
hereof, and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase properly and duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable tax or charge required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Series B
Shares certificates for the number of Series B Shares to be purchased and the
Company hereby irrevocably authorizes any such transfer agent to comply with all
such requests, or (B) requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Series B Share as are to be
purchased (in which case certificates for the Series B Shares represented by
such receipts shall be deposited by the transfer agent of the Series B Shares
with such depositary agent) and the Company hereby directs such 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 shares in
accordance with Section 14 hereof; (iii) promptly after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder; and (iv) when appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such 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 to the registered holder of such Right Certificate or to such
holder's duly authorized assigns, subject to the provisions of Section 14
hereof.
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Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such cancelled Right Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.
Section 9. Availability of Series B Shares. The Company covenants and
agrees that it will cause to be reserved and kept available out of its
authorized and unissued Series B Shares or any Series B Shares held in its
treasury the number of Series B Shares that will be sufficient to permit the
exercise in full of all outstanding Rights in accordance with Section 7 hereof.
The Company covenants and agrees that it will take all such action as may be
necessary to ensure that all Series B Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such Series B 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 taxes and charges which may be payable in respect of the
issuance or delivery of the Right Certificates or of any Series B Shares upon
the exercise of Rights. The Company shall not, however, be required to pay any
tax or charge which may be payable in respect of any transfer or delivery of
Right Certificates to a Person other than, or the issuance or delivery of
certificates or depositary receipts for the Series B Shares in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Series B Shares upon the exercise of any Rights until
any such tax or charge shall have been paid (any such tax or charge being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax or charge is due.
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Section 10. Series B Shares Record Date. Each Person in whose name any
certificate for Series B Shares is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Series B
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 tax or charge) was made;
provided, however, that, if the date of such surrender and payment is a date
upon which the Series B 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
Series B 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 Series B 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 Series B 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 Series B Shares payable in Series B
Shares, (B) subdivide the outstanding Series B Shares, (C) combine the
outstanding Series B Shares into a smaller number of Series B Shares or (D)
issue any shares of its capital stock in a reclassification of the Series B
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Series B Shares transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right.
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(ii) Subject to Section 24 hereof, in the event any Person becomes an
Acquiring Person, each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-thousandths of a Series B Share for
which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of Series B Shares, such number of Common Shares of the
Company as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-thousandths of a Series B Share for
which a Right is then exercisable and dividing that product by (B) 50% of the
then current per share market price of the Common Shares of the Company
(determined pursuant to Section 11(d) hereof) on the date of the occurrence of
such event. In the event that any Person shall become an Acquiring Person and
the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.
From and after the occurrence of such event, any Rights that are or were
acquired or beneficially owned by any Acquiring Person (or any Associate or
Affiliate of such Acquiring Person) shall be null and void, and any holder of
such Rights shall thereafter have no right to exercise such Rights under any
provision of this Agreement. No Right Certificate shall be issued pursuant to
Section 3 hereof that represents Rights beneficially owned by an Acquiring
Person whose Rights would be null and 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 null and 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 whose Rights would be null and void pursuant to the
preceding sentence shall be cancelled.
(iii) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit the exercise in full of
the Rights in accordance with subparagraph (ii) above, the Company shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exercise of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exercise of a Right, a number of
Series B Shares or fraction thereof such that the current per share market price
of one Series B Share multiplied by such number or fraction is equal to the
current per share market price of one Common Share as of the date of issuance of
such Series B Shares or fraction thereof.
11
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Series B Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Series B Shares (or shares having the same rights,
privileges and preferences as the Series B Shares ("equivalent shares")) or
securities convertible into Series B Shares or equivalent shares at a price per
Series B Share or equivalent share (or having a conversion price per share, if a
security convertible into Series B Shares or equivalent shares) less than the
then current per share market price (as defined in Section 11(d)) of the Series
B Shares on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Series B Shares outstanding on such record date plus the
number of Series B Shares which the aggregate offering price of the total number
of Series B Shares and/or equivalent 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 Series B Shares outstanding on such record date
plus the number of additional Series B Shares and/or equivalent shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and holders
of the Rights. Series B Shares owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and,
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall 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 Series B Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Series B Shares) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then-current per share market price of the Series B Shares on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and holders
of the Rights) of the portion of the assets or evidences of indebtedness so to
be distributed or of such subscription rights or warrants applicable to one
Series B Share and the denominator of which shall be such then-current per share
market price of the Series B Shares on such record date; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and, in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
12
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the 30 consecutive Trading Days
immediately prior to but not including such date; provided, however, that, in
the event that the current per share market price of the Security is determined
during a period following the announcement by the issuer of such Security of (A)
a dividend or distribution on such Security payable in shares of such Security
or Securities convertible into such shares, or (B) any subdivision, combination
or reclassification of such Security and prior to the expiration of 30 Trading
Days after but not including the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, reported at or prior to 4:00 P.M. Eastern time or,
in case no such sale takes place on such day, the average of the bid and asked
prices, regular way, reported as of 4:00 P.M. Eastern time, in either case, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
reported at or prior to 4:00 P.M. Eastern time or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as reported
as of 4:00 P.M. Eastern time by NASDAQ or such other system then in use, or, if
on any such date the Security is not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Security selected by the Board of Directors
of the Company. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business, or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.
(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Series B Shares shall be determined in accordance with the
method set forth in Section 11(d)(i). If the Series B Shares are not publicly
traded, the "current per share market price" of the Series B Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares as determined pursuant to Section 11(d)(i) hereof (appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof), multiplied by one thousand. If neither the Common Shares
nor the Series B Shares are publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
13
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Series B Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Series B 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 Series
B Shares contained in Section 11(a) through (c) hereof, inclusive, and the
provisions of Sections 7, 9, 10 and 13 hereof with respect to the Series B
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Series B Share 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) hereof, upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-thousandths of a Series B Share (calculated to the nearest one one-millionth
of a Series B Share) obtained by (A) multiplying (x) the number of one
one-thousandths of a 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 (B) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.
14
(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 one one-thousandths of a Series B Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Series B 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 (with prompt notice thereof to the
Rights Agent) 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 such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein, and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or in
the number of one one-thousandths of a Series B Share issuable upon the exercise
of the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price and the number of one one-thousandths of
a Series B Share which were expressed in the initial Right Certificates issued
hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the then par value, if any, of the
Series B 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
Series B Shares at such adjusted Purchase Price.
15
(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 (with prompt notice thereof to the Rights
Agent) until the occurrence of such event the issuing to the holder of any Right
exercised after such record date of the Series B Shares and other capital stock
or securities of the Company, if any, issuable upon such exercise over and above
the Series B 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 such adjustment; provided, however, that the Company shall deliver to
such holder a due xxxx or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it, in its sole discretion, shall determine to be advisable in
order that any consolidation or subdivision of the Series B Shares, issuance
wholly for cash of any Series B Shares at less than the current market price,
issuance wholly for cash of Series B Shares or securities which by their terms
are convertible into or exchangeable for Series B Shares, dividends on Series B
Shares payable in Series B Shares or issuance of rights, options or warrants
referred to in Section 11(b) hereof, hereafter made by the Company to holders of
the Series B Shares shall not be taxable to such stockholders.
(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, (A)
the number of one one-thousandths of a Series B Share purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-thousandths of a Series B 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 (B) 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 a subdivision, combination
or consolidation is effected.
16
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth the amount of the
adjustment and a brief statement of the facts and computations accounting for
such adjustment (including, without limitation, the record date for the
adjustment), (b) file with the Rights Agent and with each transfer agent for the
Common Shares or the Series B Shares and the Securities and Exchange Commission
a copy of such certificate and (c) if such adjustment occurs at any time after
the Distribution Date, mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained and shall have no duty with respect to and shall not be deemed to have
knowledge of any such adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. In the event, directly or indirectly, at any time after a Person has
become an Acquiring Person, (a) the Company shall consolidate with, or merge
with and into, any other Person, (b) 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 the Company) or cash or any
other property, or (c) 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, and in each such case, proper provision shall be made so
that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at a price equal
to the then current Purchase Price multiplied by the number of one
one-thousandths of a Series B Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Series B Shares, such
number of Common Shares of such other Person (including the Company as successor
thereto or as the surviving corporation) as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the number of one
one-thousandths of a Series B Share for which a Right is then exercisable and
dividing that product by (B) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement; (iii) the
term "Company" shall thereafter be deemed to refer to such issuer; and (iv) such
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares or Series B Shares of the Company
thereafter deliverable upon the exercise of the Rights. The Company shall not
consummate any such consolidation, merger, sale or transfer unless, prior
thereto, the Company and such issuer shall have executed and delivered to the
Rights Agent a supplemental agreement so providing. The Company shall not enter
into any transaction of the kind referred to 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 eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers.
17
Section 14. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of Series B
Shares (other than fractions which are integral multiples of one one-thousandth
of a Series B Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Series B Shares (other than fractions which are
integral multiples of one one-thousandth of a Series B Share). Fractions of
Series B Shares in integral multiples of one one-thousandth of a Series B 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 Series B Shares
represented by such depositary receipts. In lieu of fractional Series B Shares
that are not integral multiples of one one-thousandth of a Series B Share, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Series B Share. For the purposes of
this Section 14(b), the current market value of a Series B Share shall be the
closing price of a Series B Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right, by the acceptance of the Right, expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above). The Rights Agent
shall have no duty or obligation with respect to this Section 14 and Section
24(d) unless and until it has received specific instructions (and sufficient
cash, if required) from the Company with respect to its duties and obligations
under such Sections.
18
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action expressly 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 such holder's own behalf
and for such holder's own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise the Rights evidenced by such Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement, and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the Designated
Office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) 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 Certificate or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
19
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 Series B Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder,
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration 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, damage, judgment, fine, penalty, claim, demand, settlement,
cost or expense incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance, amendment and
administration of this Agreement, including without limitation the costs and
expenses of defending against any claim of liability arising therefrom directly
or indirectly in the premises.
The Rights Agent shall be authorized and 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 Series B 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 counsel as set
forth in Section 20 hereof.
20
Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the shareholder services 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 Person
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 expressly 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 advice or opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken, suffered or omitted by it in accordance with such advice or
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking, suffering or omitting any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization and protection to the Rights Agent for any action
taken or suffered or omitted by it under the provisions of this Agreement in
reliance upon such certificate.
21
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross 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 liability or 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 or liable 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 or liable for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of the
Rights (including the manner, method or amount thereof) provided for in Section
3, 11, 13, 23 or 24 hereof, 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
Series B Shares to be issued pursuant to this Agreement or any Right Certificate
or as to whether any Series B Shares will, when issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered or omitted by it in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, affiliate, 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 Person.
22
(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 that reasonable care was exercised in the
selection and continued employment thereof.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares or Series B Shares by registered or certified mail, and to
the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares or Series B Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (which holder
shall, with such notice, submit such holder's Right Certificate for inspection
by the Company), then the registered holder of any Right Certificate may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (i) a Person organized and doing business and in good standing
under the laws of any state of the United States, so long as such Person is
authorized under such laws to exercise all of the duties of the Rights Agent
under this Agreement and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $50 million or (ii) an Affiliate of
such Person. 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 or Series B 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.
23
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 the Board of Directors of the Company 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.
Section 23. Redemption. (a) The Board of Directors of the Company may, at
its option, at any time prior to such time as any Person becomes an Acquiring
Person, redeem all but not less than all the then outstanding Rights at a
redemption price of $0.001 per Right, 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"). The redemption of the Rights by the Board of Directors of the Company
may be made effective at such time, on such basis and with such conditions as
the Board of Directors of the Company, in its sole discretion, may establish.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, 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. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors of the Company
ordering the redemption of the Rights, the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 24 hereof, and
other than in connection with the purchase of Common Shares prior to the
Distribution Date.
24
Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person becomes an Acquiring Person, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become null and 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 adjustment in the number
of Rights pursuant to Section 11(i) (such exchange ratio being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board
of Directors of the Company shall not be empowered to effect such exchange at
any time after any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or any such Subsidiary, or any
entity holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of the holders 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 the Rights Agent and 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 null and void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be necessary to authorize
such additional Common Shares, the Company shall substitute, for each Common
Share that would otherwise be issuable upon exchange of a Right, a number of
Series B Shares or fraction thereof such that the current per share market price
of one Series B Share multiplied by such number or fraction is equal to the
current per share market price of one Common Share as of the date of issuance of
such Series B Shares or fraction thereof.
(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
holders 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
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
25
Section 25. Notice of Certain Events. (a) In case the Company shall, at
any time after the Distribution Date, propose (i) to pay any dividend payable in
stock of any class to the holders of the Series B Shares or to make any other
distribution to the holders of the Series B Shares (other than a regular
quarterly cash dividend), (ii) to offer to the holders of the Series B Shares
rights or warrants to subscribe for or to purchase any additional Series B
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of the Series B Shares (other than
a reclassification involving only the subdivision of outstanding Series B
Shares), (iv) to effect any consolidation or merger 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, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend on the Common
Shares payable in Common Shares or to effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares), then, in each such case, the Company
shall give to the Rights Agent and to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common Shares and/or Series B Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of the
Series B Shares for purposes of such action, and, in the case of any such other
action, at least 10 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
Series B Shares, whichever shall be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall occur,
then the Company shall, as soon as practicable thereafter, give to each holder
of a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Capital Gold Corporation
00 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
26
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. The Company, by action of its
Board of Directors, may from time to time supplement or amend this Agreement
without the approval of any holders of Right Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, or to make any other
changes or provisions that the Board of Directors may deem necessary or
desirable, any such supplement or amendment to be evidenced by a writing signed
by the Company and the Rights Agent; provided, however, that, from and after
such time as any Person becomes an Acquiring Person, this Agreement shall not be
amended in any manner which would adversely affect the interests of the holders
of Rights (other than Rights that have become null and void pursuant to Section
11(a)(ii) hereof).
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any Person 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).
27
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 34. Effective Date. This Agreement is effective and in full force
and effect in accordance with its terms as of and after the date hereof. If this
Agreement is not ratified by resolution passed by a majority of the votes cast
by stockholders present or represented by proxy at a meeting of stockholders of
the Company held on or prior to February 4, 2007, or any other applicable
stockholder ratification requirement of the Toronto Stock Exchange is not
satisfied at such meeting, then this Agreement and any then outstanding Rights
shall, without further formality, be terminated and of no further force or
effect as at the earlier of February 4, 2007 and the close of the meeting of
stockholders at which this Agreement is not ratified; provided, however, that
termination shall not occur if an event of the nature contemplated by Section
11(a)(ii) has occurred prior to the date upon which this Agreement would
otherwise terminate pursuant to this Section 34.
Section 35. Determinations and Actions by the Board of Directors. Except
as otherwise specifically provided herein, the Board of Directors shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors or to the
Company hereunder, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power (a) to
interpret the provisions of this Agreement and (b) to make all determinations
deemed necessary or advisable for the administration of this Agreement. All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors 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 of Directors or any member thereof
to any liability to the holders of the Rights.
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the day and year first above written.
Attest: CAPITAL GOLD CORPORATION
By /s/ Xxxxxxx X. Xxxxxxxxx By /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------------------------- -------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President and Assistant Secretary Title: Chairman
Attest: AMERICAN STOCK TRANSFER & TRUST COMPANY
By /s/ Xxxxxx Xxxxx By /s/ Xxxxxxx X. Xxxxxx
-------------------------------------------------- -------------------------------------
Name: Xxxxxx Xxxxx Name: Xxxxxxx X. Xxxxxx
Title: Vice President Title: Vice President
29
Exhibit A
FORM
of
CERTIFICATE OF DESIGNATIONS
of
SERIES B COMMON STOCK
of
CAPITAL GOLD CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
--------------------
Capital Gold Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on August 14, 2006:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a new series of common
stock, par value $0.0001 per share, of the Corporation, and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series B Common Stock" (the "Series B Stock") and the number of
shares constituting the Series B Stock shall be 200,000. Such number of shares
may be increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series B Stock to a number
less than the number of shares then outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series B Stock.
A-1
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any series
of preferred stock ("Preferred Stock") (or any similar stock) ranking
prior and superior to the Series B Stock with respect to dividends, the
holders of shares of Series B Stock, in preference to the holders of the
existing Common Stock, par value $0.0001 per share (the "Existing Common
Stock"), of the Corporation, 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
payable in cash on the first day of March, June, September and December in
each year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series B Stock, in an amount per share (rounded to the nearest cent) equal
to the greater of (a) $1 or (b) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all
cash dividends, and 1,000 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 Existing Common Stock or a subdivision of
the outstanding shares of Existing Common Stock (by reclassification or
otherwise), declared on the Existing Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Stock. In the event the Corporation shall
at any time declare or pay any dividend on the Existing Common Stock
payable in shares of Existing Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Existing Common
Stock (by reclassification or otherwise than by payment of a dividend in
shares of Existing Common Stock) into a greater or lesser number of shares
of Existing Common Stock, then in each such case the amount to which
holders of shares of Series B 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 Existing Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Existing Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series B Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Existing Common Stock
(other than a dividend payable in shares of Existing Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Existing Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1 per share on the Series B Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series B 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 Series
B Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders
of shares of Series B 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.
A-2
Section 3. Voting Rights. The holders of shares of Series B Stock shall
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth
and the terms of the Certificate of Incorporation, each share of Series B
Stock shall entitle the holder thereof to one vote on all matters
submitted to a vote of the stockholders of the Corporation. In the event
the Corporation shall at any time declare or pay any dividend on the
Existing Common Stock payable in shares of Existing Common Stock, or
effect a subdivision or combination or consolidation of the outstanding
shares of Existing Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Existing Common Stock) into a greater
or lesser number of shares of Existing Common Stock, then in each such
case the number of votes per share to which holders of shares of Series B
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 Existing Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of
Existing Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or
by law, the holders of shares of Series B Stock and the holders of shares
of Existing 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 stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series B 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 Existing Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series B Stock outstanding shall
have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B Stock;
A-3
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series B Stock, except dividends paid ratably on the Series B
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of
all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series B Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Stock, or any shares of stock ranking on a
parity with the Series B Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series
or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares
of stock of the Corporation unless the Corporation could, under paragraph
(A) of this Section 4, purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of common stock and may
be reissued as part of a new series of common stock subject to the conditions
and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
common stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Stock unless, prior
thereto, the holders of shares of Series B Stock shall have received $1,000 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 Series B Stock shall be entitled to receive an aggregate
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 times the aggregate amount to be distributed per share to holders
of shares of Existing Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Stock, except distributions made proportionally on
the Series B Stock and all 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
declare or pay any dividend on the Existing Common Stock payable in shares of
Existing Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Existing Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Existing Common Stock) into
a greater or lesser number of shares of Existing Common Stock, then in each such
case the aggregate amount to which holders of shares of Series B Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Existing Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Existing Common Stock that were outstanding immediately
prior to such event.
A-4
Section 7. Consolidation, Merger, Etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Existing Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series B Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth,
equal to 1,000 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 Existing Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Existing Common
Stock payable in shares of Existing Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Existing Common Stock
(by reclassification or otherwise than by payment of a dividend in shares of
Existing Common Stock) into a greater or lesser number of shares of Existing
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 Series B Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Existing Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Existing Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Stock shall not be
redeemable.
Section 9. Rank. The Series B Stock shall rank, with respect to the
payment of dividends and the distribution of assets, senior to the Existing
Common Stock and junior to all series of any other class of the Corporation's
Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series B Stock so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series B Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Corporation by its Chairman of the Board and attested by its Assistant
Secretary this 15th day of August, 2006.
--------------------------------------------
Chairman
Attest:
------------------------------------
Assistant Secretary
A-5
Exhibit B
Form of Right Certificate
Certificate No. R- _____ Rights
NOT EXERCISABLE AFTER AUGUST 15, 2016 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.
Right Certificate
CAPITAL GOLD 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 Agreement, dated
as of August 15, 2006 (the "Agreement"), between Capital Gold Corporation, a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company (the "Rights Agent"), to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Agreement) and prior to 5:00
P.M., New York City time, on August 15, 2016 at the designated office of the
Rights Agent, or at the office of its successor as Rights Agent, one
one-thousandth of a fully paid non-assessable share of Series B Common Stock,
par value $0.0001 per share, of the Company (the "Series B Shares"), at a
purchase price of $3.00 per one one-thousandth of a Series B Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The number of Rights
evidenced by this Right Certificate (and the number of one one-thousandths of a
Series B Share which may be purchased upon exercise hereof) set forth above, and
the Purchase Price set forth above, are the number and Purchase Price as of
August 15, 2006, based on the Series B Shares as constituted at such date. As
provided in the Agreement, the Purchase Price and the number of one
one-thousandth of a Series B Share 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 Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which 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 Agreement are
on file at the principal executive offices of the Company and the offices of the
Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the designated 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
Series B 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.
B-1
Subject to the provisions of the Agreement, the Rights evidenced by this
Right Certificate (i) may be redeemed by the Company at a redemption price of
$0.001 per Right or (ii) may be exchanged in whole or in part for Series B
Shares or shares of the Company's Common Stock, par value $0.0001 per share.
No fractional Series B Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Series B 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 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 Series B 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 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 stockholders (except as provided in the 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 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: CAPITAL GOLD CORPORATION
By
--------------------------------------- ----------------------------------
Name: Name:
Title: Title:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By
------------------------------------
Name:
Title:
B-2
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________ hereby sells, assigns and transfers unto
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _____ Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.
Dated:
---------------------
--------------------------------------
Signature
Signature Guaranteed:
All Guarantees must be made by a financial institution (such as a bank or
broker) which is a participant in the Securities Transfer Agents Medallion
Program ("STAMP"), the New York Stock Exchange, Inc. Medallion Signature Program
("MSP"), or the Stock Exchanges Medallion Program ("SEMP") and must not be
dated. Guarantees by a notary public are not acceptable.
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement).
--------------------------------------
Signature
Form of Reverse Side of Right Certificate - continued
B-3
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: CAPITAL GOLD CORPORATION
The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Right Certificate to purchase the Series B Shares issuable
upon the exercise of such Rights and requests that certificates for such Series
B 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:_____________________________
-------------------------------------
Signature
Signature Guaranteed:
All Guarantees must be made by a financial institution (such as a bank or
broker) which is a participant in the Securities Transfer Agents Medallion
Program ("STAMP"), the New York Stock Exchange, Inc. Medallion Signature Program
("MSP"), or the Stock Exchanges Medallion Program ("SEMP") and must not be
dated. Guarantees by a notary public are not acceptable.
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement).
---------------------------------------
Signature
B-4
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase,
as the case may be, must conform to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment
or the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Agreement) and such Assignment or Election
to Purchase will not be honored.
B-5
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE SERIES B SHARES
Introduction
On August 14, 2006, the Board of Directors of our Company, Capital Gold
Corporation, a Delaware corporation, declared a dividend of one Series B common
purchase right (a "Right") for each outstanding share of common stock, par value
$0.0001 per share. The dividend is payable to the stockholders of record on
August 14, 2006.
In general terms, the Rights Agreement imposes a significant penalty upon
any person or group that acquires 20% or more of our outstanding common stock
without the approval of our Board. The Rights Agreement should not interfere
with any merger or other business combination approved by our Board.
For those interested in the specific terms of the Rights Agreement as made
between our Company and American Stock Transfer & Trust Company, as the Rights
Agent, on August 15, 2006, we provide the following summary description. Please
note, however, that this description is only a summary, and is not complete, and
should be read together with the entire Rights Agreement, which has been filed
with the Securities and Exchange Commission as an exhibit to a Registration
Statement on Form 8-A dated August 16, 2006. A copy of the agreement is
available free of charge from our Company.
The Rights. Our Board authorized the issuance of a Right with respect to
each outstanding share of common stock on August 14, 2006. The Rights will
initially trade with, and will be inseparable from, the common stock. The Rights
are evidenced only by certificates that represent shares of common stock. New
Rights will accompany any new shares of common stock we issue until the
Distribution Date described below.
Exercise Price. Each Right will allow its holder to purchase from our
Company one one-thousandth of a share of Series B Common Stock ("Series B
Share") for $3.00, once the Rights become exercisable. This portion of a Series
B Share will give the stockholder dividend and liquidation rights that are
senior, but generally similar to, those carried by one share of common stock,
and one one-thousandth of the voting rights of one share of common stock. Prior
to exercise, the Right does not give its holder any dividend, voting or
liquidation rights.
Exercisability. The Rights will not be exercisable until
o 10 days after the public announcement that a person or group has
become an "Acquiring Person" by obtaining beneficial ownership of
20% or more of our existing outstanding common stock, or, if
earlier,
o 10 business days (or a later date determined by our Board before any
person or group becomes an Acquiring Person) after a person or group
begins a tender or exchange offer which, if completed, would result
in that person or group becoming an Acquiring Person.
C-1
We refer to the date when the Rights become exercisable as the
"Distribution Date." Until that date, the common stock certificates will also
evidence the Rights, and any transfer of shares of common stock will constitute
a transfer of Rights. After that date, the Rights will separate from the common
stock and be evidenced by book-entry credits or by Rights certificates that we
will mail to all eligible holders of common stock. Any Rights held by an
Acquiring Person are void and may not be exercised.
Consequences Of A Person Or Group Becoming An Acquiring Person.
o Flip In. If a person or group becomes an Acquiring Person, all
holders of Rights except the Acquiring Person may, for $3.00,
purchase shares of our common stock with a market value of $6.00,
based on the market price of the common stock prior to such
acquisition.
o Flip Over. If our Company is later acquired in a merger or similar
transaction after the Distribution Date, all holders of Rights
except the Acquiring Person may, for $3.00, purchase shares of the
acquiring corporation with a market value of $6.00, based on the
market price of the acquiring corporation's stock, prior to such
merger.
Series B Share Provisions.
Each one one-thousandth of a Series B Share, if issued:
o will not be redeemable.
o will entitle holders to quarterly dividend payments of $0.001 per
share, or an amount equal to the dividend paid on one share of our
existing common stock, whichever is greater.
o will entitle holders upon liquidation either to receive $1 per share
or an amount equal to the payment made on one share of our existing
common stock, whichever is greater.
o will have one one-thousandth of the voting power of one share of
common stock.
o if shares of our common stock are exchanged via merger,
consolidation, or a similar transaction, will entitle holders to a
per share payment equal to the payment made on one share of common
stock.
The value of one one-thousandth interest in a Series B Share should be
roughly approximate to the value of one share of common stock.
Expiration. The Rights will expire on August 15, 2016.
Redemption. Our Board may redeem the Rights for $0.001 per Right at any
time before any person or group becomes an Acquiring Person. If our Board
redeems any Rights, it must redeem all of the Rights. Once the Rights are
redeemed, the only right of the holders of Rights will be to receive the
redemption price of $0.001 per Right. The redemption price will be adjusted if
we have a stock split or stock dividends of our common stock.
C-2
Exchange. After a person or group becomes an Acquiring Person, but before
an Acquiring Person owns 50% or more of our outstanding common stock, our Board
may extinguish the Rights by exchanging one share of our existing common stock
or an equivalent security for each Right, other than Rights held by the
Acquiring Person.
Anti-Dilution Provisions. Our Board may adjust the purchase price of the
Series B Shares, the number of Series B Shares issuable and the number of
outstanding Rights to prevent dilution that may occur from a stock dividend, a
stock split, a reclassification of the Series B Shares or common stock. No
adjustments to the Exercise Price of less than 1% will be made.
Amendments. The terms of the Rights Agreement may be amended by our Board
without the consent of the holders of the Rights. After a person or group
becomes an Acquiring Person, our Board may not amend the agreement in a way that
adversely affects holders of the Rights.
Stockholder Approval. The Rights Agreement is effective immediately, but
will be terminated if not approved by a majority of our stockholders, and any
other applicable stockholder ratification requirements of the Toronto Stock
Exchange are satisfied, at a meeting held on or prior to February 4, 2007.
C-3
