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Exhibit 4
AMERICAN PRECISION INDUSTRIES INC.
AND
AMERICAN SECURITIES TRANSFER & TRUST, INC.
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF July 24, 1998
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July 24, 1998 (the "Agreement"), between
American Precision Industries Inc., a Delaware corporation (the "Company"), and
American Securities Transfer & Trust, Inc., a Colorado corporation (the "Rights
Agent").
W I T N E S S E T H
WHEREAS, on July 24, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared (i) a dividend
distribution of one Right for each share of common stock, par value $.66-2/3 per
share, of the Company (the "Common Stock") outstanding at the close of business
on August 14, 1998 (the "Record Date"), and (ii) a dividend distribution of one
and a quarter (1.25) Rights for each share of the Company's Series B Seven
Percent (7%) Cumulative Convertible Preferred Stock, $1.00 par value, ("Series B
Preferred Stock") outstanding on the Record Date, and has authorized the
issuance of one Right (as such number may hereinafter be adjusted pursuant to
the provisions of Section 11(p) hereof) for each share of Common Stock of the
Company issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the earlier of the Distribution Date or the
Expiration Date, each whole Right initially representing the right to purchase
one two-thousandth (1/2000) of a share of Series A Junior Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights of the
Company attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "Rights").
TERMS OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan, (iv) InterScan Holding Ltd. ("InterScan") or any of
its Affiliates or Associates, but only to the extent of their beneficial
ownership of Series B Preferred Stock and any shares of Common Stock which may
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issued upon the conversion of Series B Preferred Stock which were issued and
outstanding on the Record Date, or (v) any Person who becomes an Acquiring
Person solely as a result of a reduction in the number of shares of Common Stock
outstanding due to the repurchase of shares of Common Stock by the Company,
unless and until such Person shall purchase or otherwise become (as a result of
actions taken by such Person or its Affiliates or Associates) the Beneficial
Owner of additional shares of Common Stock constituting 1% or more of the then
outstanding shares of Common Stock; provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Common Stock of the Company
then outstanding by reason of share repurchases by the Company and shall, after
such share repurchases by the Company, become the Beneficial Owner of any
additional Common Stock of the Company, then such Person shall be deemed to be
an "Acquiring Person," unless upon the consummation of the acquisition of such
additional shares of Common Stock such Person does not beneficially own 15% or
more of the shares of Common Stock then outstanding. 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, has become such inadvertently
(including, without limitation, because (i) such Person was unaware that it
beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an Acquiring Person, or (ii) such Person was aware of the extent of
its Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement) and without any
intention of changing or influencing control of the Company, and such Person
divests as promptly as practicable a sufficient number of shares of Common Stock
so that such Person would no longer be an Acquiring Person as defined pursuant
to the foregoing provisions of this paragraph, then such Person shall not be
deemed to be or to have become an Acquiring Person for any purposes of this
Agreement.
For purposes of the foregoing and all other provisions of this
Agreement, in computing the percentage of the shares of Common Stock outstanding
at any time which are beneficially owned by a Person and its Affiliates and
Associates, the shares of Common Stock then outstanding shall be deemed to
include all shares of Common Stock beneficially owned by such Person and its
Affiliates and Associates but not actually then outstanding, including the
shares of Common Stock, if any, then issuable to such Person and its Affiliates
and Associates upon the exercise of conversion rights, exchange rights, rights,
warrants or options.
(b) "Adverse Person" shall mean any Person declared to be an Adverse
Person by the Board of Directors of the Company, upon a determination by the
Continuing Directors who are not officers of the Company that the criteria set
forth in Section 11(a)(ii)(B) apply to such Person; provided, however, that
InterScan's ownership of Series B Preferred Stock, or the exercise by InterScan
of its right to convert Series B Preferred Stock into shares of the Company's
Common Stock, or its ownership of such shares of Common Stock issued on such
conversion shall not be considered by the Continuing Directors in determining
whether InterScan is a Beneficial Owner of at least 10% of the shares of Common
Stock then outstanding.
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(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(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, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at any time prior
to the occurrence of a Triggering Event, or (C) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event which
Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or Section
22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial owner" of, or to
"beneficially own," any security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D or Schedule 13G under the Exchange Act (or any comparable or
successor reports); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in the
proviso to subparagraph (ii) of this paragraph (d)) or disposing of any voting
securities of the Company; provided, however, that nothing in this paragraph (d)
shall cause a Person engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own," any securities acquired
through such
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Person's participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean the common stock, par value $.66-2/3
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while such individual is a member of such Board, who
is not an Acquiring Person or Adverse Person, or an Affiliate or Associate of an
Acquiring Person or Adverse Person, or a representative of an Acquiring Person,
Adverse Person or any such Affiliate or Associate, and was a member of such
Board prior to the date of this Agreement, or (ii) any individual who
subsequently becomes a member of the Board of Directors of the Company, while
such individual is a member of such Board, who is not an Acquiring Person or an
Adverse Person, or an Affiliate or Associate of an Acquiring Person or Adverse
Person, or a representative of an Acquiring Person or Adverse Person or any such
Affiliate or Associate, if such individual's nomination for election or election
to such Board is recommended or approved by a majority of the Continuing
Directors.
(i) "Person" shall mean any individual, firm, corporation,
partnership, trust, limited liability partnership, limited liability
corporation, or other entity.
(j) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $50.00 per share, of the Company, and,
to the extent that there are not a sufficient number of shares of Series A
Junior Participating Preferred Stock authorized to permit the full exercise of
the Rights, any other class or series of preferred stock of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Junior Participating Preferred Stock.
(k) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A) or (B) hereof.
(l) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
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(m) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) or Section 13(g) under the
Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has
become such.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(o) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event; provided, however, that a "Triggering Event" shall not
include the ownership by InterScan of the Company's Series B Preferred Stock, or
the exercise by InterScan of its right to convert the Series B Preferred Stock
into shares of the Company's Common Stock or its ownership of such shares of
Common Stock.
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.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the earliest of (i) the close of business on the tenth
day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), (ii) the close of business on the tenth Business Day (or such
later date as the Board of Directors of the Company shall determine) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding and (iii) the close of business on the day that
the Board of Directors of the Company determines, upon determination of the
Continuing Directors, pursuant to the criteria set forth in Section 11(a)(ii)(B)
hereof that a Person is an Adverse Person (the earliest of (i), (ii) and (iii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock and the Series B Preferred Stock registered in
the names of the holders of the Common Stock and Series B Preferred Stock,
respectively, (which certificates shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock and Series B Preferred Stock, respectively, (including a transfer
to, or redemption by, the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first-class,
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insured, postage prepaid mail, to each record holder of the Common Stock and
Series B Preferred Stock, respectively, as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more right certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for each share of
Common Stock so held and 1.25 Rights for each share of Series B Preferred Stock
so held, subject in each case to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock and per
share of Series B Preferred Stock has been made pursuant to Section 11(p)
hereof, at the time of distribution of the Right Certificates, the Company shall
make the necessary and appropriate rounding adjustments (in accordance with
Section 14(a) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights. As of and after the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights") to each record holder of
the Common Stock and Series B Preferred Stock 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 the Common Stock and Series B Preferred Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates and the registered holders of the Common Stock
and Series B Preferred Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date (as such term is defined in Section 7 hereof), the transfer of any
certificates representing shares of Common Stock or Series B Preferred Stock in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock and Series B Preferred
Stock.
(c) Unless otherwise specifically decided by a majority of the
Company's Board of Directors, Rights shall be issued in respect of all shares of
Common Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date; provided, however, that any shares of Series B
Preferred Stock that are converted into Common Stock prior to the Distribution
Date shall forfeit all Rights related to those shares converted in exchange for
Rights with respect to the Common Stock issued on such conversion; no Rights
shall be issued on any Common Stock issued upon the conversion of Series B
Preferred Stock after the Distribution Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates for Rights, and
shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between American
Precision Industries Inc. (the "Company") and American Securities
Transfer & Trust, Inc. dated as of July 24, 1998 (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
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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. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person, an
Adverse Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and
void."
With respect to such certificates containing the foregoing legend, and with
respect to certificates for shares of Common Stock and Series B Preferred Stock
which were issued and outstanding on the Record Date, until the earlier of (i)
the Distribution Date or (ii) the Expiration Date or redemption date, the Rights
associated with the Common Stock and Series B Preferred Stock represented by
such certificates shall be evidenced by such certificates alone and registered
holders of Common Stock and Series B Preferred Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock and Series B Preferred Stock represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one two-thousandth of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one two-thousandth of a share is referred to as the "Purchase Price"), but
the amount and type of securities purchasable upon the exercise of each Right
and the Purchase Price thereof shall be subject to adjustment as provided
herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person, an Adverse Person or any Associate or Affiliate of an Acquiring Person
or Adverse Person, (ii) a transferee of an Acquiring Person or an Adverse Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person or Adverse Person becomes such, or (iii) a transferee of an
Acquiring Person or an Adverse Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person or
Adverse Person becoming such and receives such Rights pursuant to either (A) a
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transfer (whether or not for consideration) from the Acquiring Person or Adverse
Person to holders of equity interests in such Acquiring Person or Adverse Person
or to any Person with whom such Acquiring Person or Adverse Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Continuing Directors of the Company have
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6, Section 11 or Section 22 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an [Acquiring
Person][Adverse Person] or an Affiliate or Associate of an [Acquiring
Person][Adverse Person] (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances
specified in Section 7(e) of such Agreement."
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the Person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
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Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one two-thousandths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with
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payment of the aggregate Purchase Price with respect to the total number of one
two-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, and an amount equal to any applicable transfer tax, at or prior to
the earlier of (i) the close of business on July 24, 2008 (the "Final Expiration
Date"), or (ii) the time at which the Rights are redeemed as provided in Section
23 hereof (the earlier of (i) and (ii) being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one two-thousandths of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $80.00,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one two-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates for the
total number of one two-thousandths of a share of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one two-thousandths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made in cash, or by certified
check or official bank check payable to the order of the Company. In the event
that the Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash and/or distribute other property pursuant to Section
11(a) hereof, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate. The Company reserves the right to
require prior to the occurrence of a Triggering Event that, upon any exercise of
Rights, a number of Rights be exercised so that only whole shares of Preferred
Stock would be issued.
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(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Adverse Person or an
Associate or Affiliate of an Acquiring Person or an Adverse Person, (ii) a
transferee of an Acquiring Person or an Adverse Person (or of any such Associate
or Affiliate) who becomes a transferee after the Acquiring Person or an Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person or an Adverse
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person or an Adverse Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person or an Adverse Person to holders of
equity interests in such Acquiring Person or an Adverse Person or to any Person
with whom the Acquiring Person or an Adverse Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Continuing Directors of the Company have determined is part
of a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 7(e), shall become null and void without any
further action and no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or an Adverse Person or any of its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver
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13
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) If and so long as the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Securities Act of
1933 (the "Act"), with respect to the securities purchasable upon exercise of
the Rights on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the date
of the expiration of the Rights. The Company will also take such action as may
be appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that a registration statement is required
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights until such time
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14
as a registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained, the exercise thereof shall not be permitted under
applicable law or a registration statement shall not have been declared
effective.
(d) The Company will take all such action as may be necessary
to ensure that all one two-thousandths of a share of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) delivered upon exercise of Rights shall, at the time of delivery of
the certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company will pay when due and payable any and all
federal and state transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Rights Certificates and of any certificates for
a number of one two-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of a number of one
two-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of one
two-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for a number of one two-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a shareholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights,
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and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, that holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan or InterScan or any
of its Affiliates or Associates [but only to the extent of
their beneficial ownership of Series B Preferred Stock and any
shares of Common Stock which may be issued upon the conversion
of Series B Preferred Stock which were issued and outstanding
on the Record Date]), alone or together with its Affiliates
and Associates, shall, at any time after the Rights Dividend
Declaration Date, become the Beneficial owner of 15% or more
of the shares of Common Stock then outstanding, unless the
event causing the 15% threshold to be crossed is a transaction
set forth in Section 13(a) hereof, or is an acquisition of
shares of Common Stock pursuant to a tender offer or an
exchange offer for all outstanding shares of Common Stock at a
price and on terms determined by at least a majority of the
Continuing Directors of the Company and who are not
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16
representatives, nominees, Affiliates or Associates of the
Person making such tender or exchange offer, after receiving
advice from one or more investment banking firms selected by
the Continuing Directors, to be (a) at a price which is fair
to shareholders (taking into account all factors which
Continuing Directors of the Company deem relevant including,
without limitation, prices which could reasonably be achieved
if the Company or its assets were sold on an orderly basis
designed to realize maximum value) and (b) otherwise in the
best interests of the Company and its shareholders, or
(B) the Board of Directors of the Company
shall declare any Person to be an Adverse Person, upon a
determination that such Person, alone or together with its
Affiliates and Associates, had, at any time after this
Agreement has been filed with the Securities and Exchange
Commission as an exhibit to a filing under the Exchange Act,
become the Beneficial Owner of at least 10% of the shares of
Common Stock then outstanding, and a determination by at least
a majority of the Continuing Directors who are not officers of
the Company, after reasonable inquiry and investigation,
including consultation which such Persons as such Continuing
Directors shall deem appropriate, that (a) such Beneficial
Ownership by such Person is intended to cause the Company to
repurchase the Common Stock beneficially owned by such Person
or to cause pressure on the Company to take action or enter
into a transaction or series of transactions intended to
provide such Person with short-term financial gain under
circumstances where such Continuing Directors determine that
the best long-term interests of the Company and its
shareholders would not be served by taking such action or
entering into such transactions or series of transactions at
that time or (b) such Beneficial Ownership is causing or
reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships
with customers, impairment of the Company's ability to
maintain its competitive position or impairment of the
Company's business reputation or ability to deal with
governmental agencies) on the business or prospects of the
Company to the detriment of the Company's shareholders,
then, promptly following the occurrence of any such event described in
(11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one two-thousandths of a share of Preferred Stock, such number of
shares of Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
two-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
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(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's certificate of incorporation but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights is
not sufficient to permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of this Section 11(a), the Company shall (A)
determine the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the Adjustment
Shares, upon the exercise of a Right and payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares,
or units of shares, of preferred stock, such as the Preferred Stock, which the
Board of Directors of the Company has deemed to have essentially the same value
or economic rights as shares of Common Stock (such shares of preferred stock
being referred to as "Common Stock Equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value (less the amount of any reduction in
the Purchase Price), where such aggregate value has been determined by the Board
of Directors of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the Company;
provided, however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company's right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread. For
purposes of the preceding sentence, the term "Spread" shall mean the excess of
(i) the Current Value over (ii) the Purchase Price. If the Board of Directors of
the Company determines in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek shareholder
approval for the authorization of such additional shares (such period, as
extended, is herein called the "Substitution Period"). To the extent that action
is to be taken pursuant to the first and/or third sentences of this Section
11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all outstanding Rights, and (2) may suspend
the exercisability of the Rights until the expiration of the Substitution Period
in order to seek such shareholder approval for such authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of each Adjustment Share shall be the
Current Market Price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the per share or per unit value of any Common Stock
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Equivalent shall be deemed to equal the Current Market Price per share of the
Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the Current Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock and/or equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement
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filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price per share of Preferred Stock (as determined pursuant
to Section 11(d)(ii) hereof). Such adjustments shall be made successively
whenever such a record date is fixed, and in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days immediately prior to such date, and for
purposes of computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common Stock for
the ten (10) consecutive Trading Days immediately following such date; provided,
however, that in the event that the Current Market Price per share of the Common
Stock is determined during a period following the announcement by the issuer of
such Common Stock of (A) a dividend or distribution on such Common Stock payable
in shares of such Common Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, then, and in each such case, the Current Market Price shall be properly
adjusted to take into account ex-dividend trading. The closing price for each
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company. If on any such date no market
maker is making a market in the Common Stock, the fair value of such shares on
such date as determined in good faith by the Board of Directors of the Company
shall be used. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the shares of
Common Stock are not listed or admitted to
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trading on any national securities exchange, a Business Day. If the Common Stock
is not publicly held or not so listed or traded, Current Market Price per share
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "Current
Market Price" per share of Preferred Stock shall be determined in the same
manner as set forth above for the Common Stock in clause (i) of this Section
11(d) (other than the last sentence thereof). If the Current Market Price per
share of Preferred Stock cannot be determined in the manner provided above or if
the Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the Current Market Price per
share of Preferred Stock shall be conclusively deemed to be an amount equal to
2,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded, Current Market Price
per share of the Preferred Stock shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one-millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one two-thousandths of a
share of Preferred Stock
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purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one two-thousandths of
a share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one two-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 (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one two-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one two-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) calendar days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one two-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express
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22
the Purchase Price per one two-thousandth of a share and the number of one
two-thousandth of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
two-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one two-thousandths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one two-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one two-thousandths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such shareholders.
(n) The Company will not, at any time after the Distribution Date, (i)
consolidate with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), (ii) merge with or into
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of related
transactions, assets, cash flow or earning power aggregating more than 50% of
the assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits
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23
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) After the Distribution Date, the Company will not, except
as permitted by Section 23 or Section 26 hereof, take (or permit any Subsidiary
to take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights then outstanding, or issued or delivered thereafter but prior
to the Distribution Date, shall be proportionately adjusted so that the number
of Rights outstanding following any such event shall equal the result obtained
by multiplying the number of Rights outstanding immediately prior to such event
by a fraction the denominator of which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the event and
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(q) The failure by the Board of Directors of the Company to
declare a Person to be an Adverse Person following such Person becoming the
Beneficial Owner of 10% or more of the outstanding Common Stock shall not imply
that such Person is not an Adverse Person or limit the right at any time in the
future of the Board of Directors of the Company to declare such Person to be an
Adverse Person.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock, the Common Stock and the Series B Preferred Stock, a copy of
such certificate, and (c) mail a brief summary thereof to each holder of a
Rights Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock and the Series B Preferred
Stock) 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.
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Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS, CASH
FLOW OR EARNING POWER.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o) hereof), then, and in each such case
(except as may be contemplated by Section 13(d) hereof), proper provision shall
be made so that: (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one two-thousandths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one two-thousandths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the Current Market Price
(determined pursuant to Section 11(d)(i) hereof) per share of the Common Stock
of such Principal Party on the date of consummation of such Section 13 Event;
(ii) such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; (iv) such Principal Party
shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon
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25
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets, cash flow or earning power transferred pursuant
to such transaction or transactions; provided, however, that in any such case,
(1) if the Common Stock of such Person is not at such time and has not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets, cash flow or earnings power mentioned
in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Expiration Date; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event
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26
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a tender offer or
exchange offer for all outstanding shares of Common Stock which complies with
the provisions of Section 11(a)(ii) hereof (or a wholly owned subsidiary of any
such Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such
tender offer or exchange offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) Except for the Rights granted to InterScan as a result of
its ownership of shares of Series B Preferred Stock as of the Record Date, the
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to distribute Rights
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
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27
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
two-thousandths of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one two-thousandths of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one two-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one two-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one two-thousandth of a share of Preferred Stock shall be one two-thousandth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock and Series B Preferred Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Stock and
Series B Preferred Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock and Series B Preferred Stock), may, in his own behalf and for
his own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
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Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock and Series B
Preferred Stock, as the case may be;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock or Series B Preferred Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Rights Certificates or the associated Common
Stock or Series B Preferred Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one
two-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
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Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or Series B Preferred Stock or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not
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have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of
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Common Stock or Preferred Stock to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30)
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32
days' notice in writing mailed to the Company, and to each transfer agent of the
Common Stock, the Series B Preferred Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or of the State of New York or of any other
state of the United States, in good standing, which is authorized under such
laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock, the Series B Preferred Stock and
the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by 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 Rights Certificates
made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded as of the Distribution Date, or upon the
exercise, conversion or exchange of securities issued by the Company prior to
the Distribution Date, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale;
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33
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
to the extent that any adjustments in the Company's securities have been made as
a result of the issuance of Rights Certificates (including, without limitation,
adjustments to conversion ratios or other adjustments resulting from the
operation of anti-dilution provisions in convertible securities, stock options
or similar securities), the number of Rights, or fractions thereof, issuable
shall equal, and not exceed, the number necessary to enable the holder to
receive, upon such conversion, exchange or exercise of such security and after
exercise of such Rights, the number of shares of Common Stock such holder would
have received if it had converted, exchanged or exercised such security
immediately prior to the Distribution Date and had subsequently exercised the
Rights issuable in respect of such shares.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the close of business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price");
provided, however, if the Board of Directors of the Company authorizes
redemption of the Rights in either of the circumstances set forth in clauses (x)
and (y) below, then there must be Continuing Directors then in office and such
authorization shall require the concurrence of a majority of such Continuing
Directors: (x) such authorization occurs on or after the time a Person becomes
an Acquiring Person, or (y) such authorization occurs on or after the date of a
change (resulting from a proxy or consent solicitation) in a majority of the
directors in office at the commencement of such solicitation if any Person who
is a participant in such solicitation has stated (or, if upon the commencement
of such solicitation, a majority of the Board of Directors of the Company has
determined in good faith) that such Person (or any of its Affiliates or
Associates) intends to take, or may consider taking, any action which would
result in such Person becoming an Acquiring Person or which would cause the
occurrence of a Triggering Event unless, concurrent with such solicitation, such
Person (or one or more of its Affiliates or Associates) is making a cash tender
offer pursuant to a Schedule 14D-1 (or any successor form) filed with the
Securities and Exchange Commission for all outstanding shares of Common Stock
not beneficially owned by such Person (or by its Affiliates or Associates).
Notwithstanding the foregoing, the Board of Directors of the Company may not
redeem any Rights following a determination made pursuant to section
11(a)(ii)(B) that any person is an Adverse Person. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock
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34
(based on the "current market price", as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors of the Company.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors of the
Company ordering the redemption of the Rights, the Company shall give notice of
such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent for the Common
Stock and the Series B Preferred Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
Section 24. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets, cash flow or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the
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35
date of the taking of such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock whichever shall be the earlier.
(b) In case any event set forth in Section 11(a)(ii) hereof
shall occur, then, in such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to the extent feasible
and in accordance with Section 25 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph to Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights 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:
American Precision Industries Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Securities Transfer & Trust, Inc.
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock and Series B Preferred Stock) shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed to such holder
at the address of such holder as shown on the registry books of the Company.
Section 26. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any term,
definition or other provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock or Series B
Preferred Stock; provided, however, that no such supplement or amendment shall
diminish any rights granted to holders of Common Stock or Series B Preferred
Stock in the Company's Certificate of Incorporation or in any contract or
agreement between the Company and InterScan; and provided, further that any
supplement or
- 34 -
36
amendment of this Agreement after the Stock Acquisition Date must be approved by
a majority of the Continuing Directors. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Adverse
Person or an Affiliate or Associate of such Acquiring Person or Adverse Person);
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable,
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one two-thousandths of a share of Preferred Stock for which a
Right is exercisable; provided, however, that any time prior to (i) the
existence of an Acquiring Person or (ii) the date that a tender or exchange
offer by any person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
the Board may amend this Agreement to increase the Purchase Price or extend the
Final Expiration Date. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock and Series B Preferred Stock, as the case may be.
Section 27. 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 28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors of the Company (with, where
specifically provided for herein, the concurrence of the Continuing Directors)
shall have the exclusive power and authority to administer this
- 35 -
37
Agreement and to exercise all rights and powers specifically granted to such
Board (with, where specifically provided for herein, the concurrence of the
Continuing Directors) or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors of
the Company (with, where specifically provided for herein, the concurrence of
the Continuing Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board of Directors of the Company or the
Continuing Directors to any liability to the holders of the Rights.
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 Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock and Series B Preferred
Stock) any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock and Series B
Preferred Stock).
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;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors of
the Company.
Section 31. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 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.
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38
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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: AMERICAN PRECISION INDUSTRIES INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxx Xxxxxxxxxxx
-------------------------- --------------------------------
Xxxxx X. Xxxxxx, Secretary Xxxx Xxxxxxxxxxx, President and
Chief Executive Officer
Attest: AMERICAN SECURITIES TRANSFER
& TRUST, INC.
By: /s/ Xxxxxx Xxxxx By: /s/ Xxxxx Xxxxxxxx
-------------------------- --------------------------------
Xxxxxx Xxxxx, Senior Vice-President Xxxxx Xxxxxxxx, Vice-President
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39
Exhibit A
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
OF
AMERICAN PRECISION INDUSTRIES INC.
Pursuant to Section 151 of the General Corporation Law
of the
State of Delaware
We, _______________________, President and Chief Executive Officer, and
____________, Secretary, of American Precision Industries Inc., a corporation
organized and existing under the General Corporation Law of the State of
Delaware (the "Corporation"), in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of the Corporation, the Board of
Directors on ,__________ _____, adopted the following resolution creating a
series of _________ shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that as required by Section 151(g) of the Delaware General
Corporation Law and as authorized by Article IV of the Corporation's Restated
Certificate of Incorporation, this Board of Directors hereby designates ______
shares, $50.00 par value per share, of the 20,000 shares of preferred stock
authorized in Article IV of the Corporation's Restated Certificate of
Incorporation as "Series A Junior Participating Preferred Stock, $50.00 par
value" (hereinafter referred to as the "Series A Junior Participating Preferred
Stock"); and this Board of Directors hereby fixes the number of shares in that
Series at__________, and the dividend rate per annum, and the other rights,
preferences and limitations pertaining to those shares as set forth in this
Certificate of Designation; and the officers of the Corporation are hereby
authorized and directed to file this Certificate of Designation with the
Secretary of State of Delaware.
The terms of the Series A Junior Participating Preferred Stock are as
follows:
Section 1. NUMBER AND DESIGNATION. There is hereby authorized for
issuance as a series of the Corporation's preferred stock, par value $50.00 per
share, _________ thousand (_______) shares to be designated as "Series A Junior
Participating Preferred Stock".
Section 2. DIVIDENDS, DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of
shares of any other class of capital stock not by its terms ranking on a parity
with, or junior
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40
to, the Series A Junior Participating Preferred Stock with respect to dividends,
the holders of Series A Junior Participating Preferred Stock shall be entitled
to receive when and as declared by the Board of Directors, out of the assets of
the Corporation legally available therefor, quarterly dividends payable in cash
in an amount per whole share of Series A Junior Participating Preferred Stock
equal to the greater of (1) 25% of the Purchase Price (the "Purchase Price"), as
adjusted, per unit of one two-thousandth (1/2000) of a share of Series A Junior
Participating Preferred Stock set forth in the Rights Agreement (the "Rights
Agreement") between the Corporation and American Securities Transfer & Trust,
Inc., as Rights Agent, dated as of July 24, 1998 (so that, for example, if the
Purchase Price, as adjusted, were $80.00, the quarterly dividend amount per
whole share of Series A Junior Participating Preferred Stock would be $20.00
which would equal a quarterly dividend of $0.01 per unit of one two-thousandth
(1/2000) of a share of Series A Junior Participating Preferred Stock), and (2)
dividends payable in cash on the payment date for each cash dividend (if any)
declared on the Corporation's Common Stock in an amount per whole share (rounded
to the nearest cent) equal to the Formula Number then in effect times the cash
dividends then to be paid on each outstanding share of Common Stock, payable on
the date declared by the Board of Directors for the payment of quarterly
dividends on each of the outstanding shares of Common Stock, but in no event
later than the fifteenth 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 a fraction of a share of Series A Junior Participating
Preferred 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 A Junior Participating
Preferred Stock. In addition, if the Corporation shall pay any dividend or make
any distribution on its Common Stock payable in assets, securities or other
forms of noncash consideration (other than dividends or distributions payable
solely in Common Stock), then, in each such case, the Corporation shall
simultaneously pay or make on each outstanding share of Series A Junior
Participating Preferred Stock a dividend or distribution in like kind, of the
Formula Number then in effect times such dividend or distribution on each of the
shares of Common Stock. As used herein, the "Formula Number" shall be 2,000;
provided, however, that if at any time after July 24, 1998, the Corporation
shall (i) declare or pay any dividend on its Common Stock payable in Common
Stock or make any distribution on its Common Stock payable in Common Stock, (ii)
subdivide (by a stock split or otherwise) the outstanding Common Stock into a
larger number of shares of Common Stock or (iii) combine (by a reverse stock
split or otherwise) the outstanding Common Stock into a smaller number of shares
of Common Stock, then in each such event the Formula Number shall be adjusted to
a number determined by multiplying the Formula Number in effect immediately
prior to such event by a fraction, the numerator of which is the number of
shares of Common Stock that are outstanding immediately after such event and the
denominator of which is the number of shares that are outstanding immediately
prior to such event (and rounding the result to the nearest whole number); and
provided further that if at any time after July 24, 1998, the Corporation shall
issue any shares of its capital stock in a reclassification or change of the
outstanding Common Stock (including any such reclassification or change in
connection with
- 2 -
41
a merger in which the Corporation is the surviving corporation), then in such
event the Formula Number shall be appropriately adjusted to reflect such
reclassification or change.
(b) The Board of Directors shall declare a dividend or
distribution on the Series A Junior Participating Preferred Stock as provided in
Section 2(a) above immediately prior to or at the same time it declares a
dividend or distribution on the Common Stock (other than a dividend or
distribution payable solely in Common Stock). The Board of Directors may fix a
record date for the determination of holders of Series A Junior Participating
Preferred Stock entitled to receive a dividend or distribution declared thereon,
which record date shall be the same as the record date for any corresponding
dividend or distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Junior Participating Preferred Stock from and
after the Quarterly Dividend Payment Date next preceding the date of original
issue of such Series A Junior Participating Preferred Stock; provided, however,
that dividends on such shares which are originally issued after the record date
for the determination of holders of Series A Junior Participating Preferred
Stock entitled to receive a quarterly dividend and on or prior to the next
succeeding Quarterly Dividend Payment Date shall begin to accrue and be
cumulative from and after such Quarterly Dividend Payment Date. Notwithstanding
the foregoing, dividends on shares of Series A Junior Participating Preferred
Stock which are originally issued prior to the record date for the first
Quarterly Dividend Payment, shall be calculated as if cumulative from and after
the date (if any) declared by the Board of Directors for the payment of the
quarterly dividend on the outstanding Common Stock, but in no event later than
the fifteenth day of March, June, September and December, as the case may be,
next preceding the date of original issuance of such shares. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Series A Junior
Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time outstanding.
(d) So long as any shares of Series A Junior Participating
Preferred Stock are outstanding, no dividends or other distributions shall be
declared, paid or distributed, or set aside for payment or distribution, on the
Common Stock unless, in each case, the dividend required by this Section 2 to be
declared on the shares of Series A Junior Participating Preferred Stock shall
have been declared and paid or distributed.
(e) The holders of shares of Series A Junior Participating
Preferred Stock shall not be entitled to receive any dividends or other
distributions except as provided herein.
Section 3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
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42
(a) Each holder of a whole share of Series A Junior Participating
Preferred Stock shall be entitled to a number of votes equal to the Formula
Number then in effect for each share of Series A Junior Participating Preferred
Stock held of record on all matters on which holders of the Common Stock or
shareholders generally are entitled to vote. Each holder of a fraction of a
whole share of Series A Junior Participating Preferred Stock shall be entitled
to a number of votes equal to the numerator of the fraction of a whole share so
owned (so that, for example, if the Formula Number is 2000 and a person holds 5
units of one two-thousandths of a share, that person would be entitled to cast 5
votes).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Junior Participating Preferred Stock and the
holders of Common Stock and any other class or series of voting stock shall vote
together as one class for the election of directors of the Corporation and on
all other matters submitted to a vote of shareholders of the Corporation.
(c) Except as provided herein, in Section 10 below or by
applicable law, holders of shares of Series A Junior Participating Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock and any other class or series of voting stock as set forth herein) for
authorizing or taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating Preferred Stock as
provided in Section 2 above are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of Series
A Junior Participating Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:
(1) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(2) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except dividends paid ratably on the Series A Junior
Participating Preferred Stock and all such parity shares 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;
(3) redeem or purchase or otherwise acquire for
consideration any shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire any of such
- 4 -
43
parity shares in exchange for any shares of the Corporation ranking junior (as
to dividends and upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock; or
(4) purchase or otherwise acquire for consideration any
Series A Junior Participating Preferred Stock, or any shares ranking on a parity
with the Series A Junior Participating Preferred 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 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. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, no distribution
shall be made (a) to the holders of shares ranking junior (either as to
dividends or upon liquidation, dissolution, or winding up) to the Series A
Junior Participating Preferred Stock unless, prior thereto, the holders of
shares of Series A Junior Participating Preferred Stock shall have received an
amount equal to the accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, plus an amount equal to
the greater of (1) 50% of the Purchase Price, as adjusted, per unit of one
two-thousandth of a share of Series A Junior Participating Preferred Stock set
forth in the Rights Agreement (so that if, for example, the Purchase Price is
$80.00, the liquidation amount would be $40.00 per whole share), or (2) an
aggregate amount per share equal to the Formula Number then in effect times the
aggregate amount to be distributed per share to holders of Common Stock, or (b)
to the holders of shares ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Participating
Preferred Stock, except distributions made ratably on the Series A Junior
Participating Preferred Stock and all other such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 6. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
its Common Stock is exchanged for or changed into other stock or securities,
cash or any other property, then in any such case the then outstanding shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Formula
Number then in effect times the aggregate amount of stock, securities, cash or
any other property (payable in kind), as the case may be, into which or for
which each of the shares of Common Stock is exchanged or changed.
- 5 -
44
Section 7. NO REDEMPTION; NO SINKING FUND.
(a) The shares of Series A Junior Participating Preferred Stock
shall not be subject to redemption by the Corporation or at the option of any
holder of Series A Junior Participating Preferred Stock; provided, however, that
the Corporation may purchase or otherwise acquire outstanding shares of Series A
Junior Participating Preferred Stock in the open market or by offer to any
holder or holders of shares of Series A Junior Participating Preferred Stock.
(b) The Series A Junior Participating Preferred Stock shall not be
subject to or entitled to the operation of a retirement or sinking fund.
Section 8. FRACTIONAL SHARES. The Series A Junior Participating Preferred
Stock shall be issuable upon exercise of the Rights issued pursuant to the
Rights Agreement in whole shares or in any fraction of a share that is one
two-thousandth (1/2000th) of a share or any integral multiple of such fraction.
At the election of the Corporation prior to the first issuance of a share or a
fraction of a share of Series A Junior Participating Preferred Stock, either (1)
certificates may be issued to evidence any such authorized fraction of a share
of Series A Junior Participating Preferred Stock, or (2) any such authorized
fraction of a share of Series A Junior Participating Preferred Stock may be
evidenced by depositary receipts pursuant to an appropriate agreement between
the Corporation and a depositary selected by the Corporation 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 shares of Series A Junior Participating Preferred Stock.
Section 9. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred 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 Preferred Shares, without designation as to series until such shares
are once more designated as part of a particular series by the Board of
Directors pursuant to the provisions of the Restated Certificate of
Incorporation.
Section 10. AMENDMENT. None of the relative rights, preferences and
limitations of the Series A Junior Participating Preferred Stock as provided in
Sections 1 through 9 above and in this Section 10 or elsewhere in this Restated
Certificate of Incorporation shall be amended in any manner which would alter or
change the relative rights, preferences and limitations of the holders of shares
of Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of Series A Junior Participating Preferred Stock, voting as
though such series were a separate class."
- 6 -
45
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this _____ day of ___________________ .
_____________________________________________
Name:
Title: President and Chief Executive Officer
(Corporate Seal)
ATTEST:
________________________________________
Name:
Title: Xxxxxxxxx
- 0 -
00
Xxxxxxx X
[Form of Rights Certificate]
Certificate No. R- Rights
NOT EXERCISABLE AFTER JULY 24, 2008 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING OR AN ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED
BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON
WHO WAS OR BECAME AN ACQUIRING OR AN ADVERSE PERSON OR AN AFFILIATE OR
ASSOCIATE OF SUCH PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT].1
Rights Certificate
AMERICAN PRECISION INDUSTRIES INC.
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 Rights Agreement, dated as of July 24, 1998
(the "Rights Agreement"), between American Precision Industries Inc., a Delaware
corporation (the "Company"), and American Securities Transfer & Trust, Inc. (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M.
(New York City time) on July 24, 2008 at the office or offices of the Rights
Agent designated for such purpose, or its successors as Rights Agent, one
two-thousandth (1/2000) of a fully paid, non-assessable share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") of the Company, at a
purchase price (the "Purchase Price") of $80.00 per unit of one two-thousandth
of a share, upon presentation and surrender of this Rights
--------
1 The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
47
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares of Preferred Stock which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of August 14, 1998, based on the Preferred
Stock as constituted at such date. The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement), (ii) a transferee of any such Acquiring Person, Adverse
Person, Associate or Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a Person who, after such transfer,
became an Acquiring Person, an Adverse Person or an Affiliate or Associate of
any such Person, such Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Rights Certificate are subject
to modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the shareholder services office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing rights entitling the
holder to purchase a like aggregate number of one two-thousandths of a share of
Preferred Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
- 2 -
48
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right at any time prior to the earlier of the close of
business on (a) the tenth day following the Stock Acquisition Date (as such time
period may be extended pursuant to the Rights Agreement), and (b) the Final
Expiration Date. Under certain circumstances set forth in the Rights Agreement,
the decision to redeem shall require the concurrence of a majority of the
Continuing Directors (as such term is defined in the Rights Agreement).
No fractional shares of Preferred Stock will be issued upon the
exercise of any right or rights evidenced hereby (other than fractions which are
integral multiples of one two-thousandths of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights 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: AMERICAN PRECISION INDUSTRIES INC.
________________________ By:____________________________________
Secretary Title:
Countersigned:
By:______________________
Authorized Signature
- 3 -
49
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
___________________________________________________________________________
hereby sells, assigns and transfers unto
__________________________________________________________________________
__________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: __________________________, _____
________________________________________
Signature
Signature Guaranteed:
- 4 -
50
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or
Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person, an Adverse
Person or an Affiliate or Associate of such Person.
Dated: ___________________, _____
________________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
- 5 -
51
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: AMERICAN PRECISION INDUSTRIES INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other Person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to: Please insert social security or other identifying number
______________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to: Please insert social
security or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
______________________________________________________________________________
Dated: _________________, _____
____________________________________________
Signature
Signature Guaranteed:
- 6 -
52
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
an Adverse Person or an Affiliate or Associate of any such Person (as such terms
are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person, an Adverse Person or an
Affiliate or Associate of such Person.
Dated: _________________, _____
__________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
- 7 -
53
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On July 24, 1998, the Board of Directors of American Precision Industries
Inc. (the "Company") declared (i) a dividend of one Right for each outstanding
share of the Company's Common Stock, par value $.66 2/3 per share (the "Common
Stock"), to shareholders of record at the close of business on August 14, 1998
(the "Record Date") and (ii) a dividend of one and a quarter (1.25) Rights for
each share of the Company's Series B Seven Percent (7%) Cumulative Convertible
Preferred Stock, $1.00 par value, ("Series B Preferred Stock") outstanding on
the Record Date. Each Right entitles the registered holder to purchase from the
Company a unit consisting of one two-thousandth (1/2000) of a share of Series A
Junior Participating Preferred Stock, par value $50.00 per share (the "Preferred
Stock"), at a Purchase Price of $80.00 per unit of one two-thousandth of a
share, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and
American Securities Transfer & Trust, Inc., as Rights Agent.
Initially, the Rights will be attached to all Common Stock and Series B
Preferred Stock certificates representing shares then outstanding, and no
separate Rights Certificates will be distributed. A Distribution Date will occur
and the Rights will separate from the Common Stock and Series B Preferred Stock
upon the earliest of (i) ten days following a public announcement that a Person
or group of affiliated or associated Persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the shares of Common Stock then outstanding(1) (the "Stock Acquisition
Date"), (ii) ten business days following the commencement of a tender offer or
exchange offer that would result in a Person or group beneficially owning 15% or
more of such outstanding shares of Common Stock (unless such tender offer or
exchange offer is an offer for all outstanding shares of Common Stock which a
majority of the unaffiliated Directors who are not officers of the Company
determine to be fair to and otherwise in the best interests of the Company and
its shareholders) or (iii) the date the Board of Directors declares a person to
be an "Adverse Person", upon a determination by the Board that such Person,
together with his affiliates or associates, is or has become the beneficial
owner of 10% or more of the shares of Common Stock outstanding, and upon a
determination by at least a majority of the Continuing Directors (as defined
below) who are not officers of the Company, after reasonable inquiry and
investigation, including consultation with such persons as such Directors shall
deem appropriate, that (a) such beneficial ownership by such person is intended
to cause the Company to repurchase the Common Stock beneficially owned by such
person or to cause pressure on the Company to take action or enter into a
transaction or series of transactions intended to provide such person with
short-term financial gain under circumstances where such Continuing Directors
determine that the best long-term interests of the Company and its shareholders
would not be served by taking such action or entering into such transactions or
series of transactions at that time, or (b) such beneficial ownership is causing
or reasonably likely to cause a material adverse impact (including, but not
limited to, impairment of relationships with customers, impairment of the
Company's ability to maintain its competitive position or impairment of the
Company's business reputation or ability to deal with governmental agencies) on
the business or prospects of the Company.
Under the Rights Agreement, InterScan Holding Ltd. ("InterScan") and its
Affiliates and Associates, as defined in the Rights Agreement, shall not be
deemed to be either an Acquiring Person or an Adverse Person solely as a result
of their ownership of Series B Preferred Stock as of the Record Date or their
ownership of any shares of Common Stock which they may acquire upon conversion
of such Series B Preferred Stock.
Until the Distribution Date, (i) the Rights will be evidenced by the Common
Stock and Series B Preferred Stock certificates and will be transferred with and
only with such Common Stock and Series B Preferred Stock certificates, (ii) new
Common Stock certificates issued after August 14, 1998 will contain a notation
incorporating the Rights Agreement by reference, and (iii) the surrender for
transfer of any certificates for Common Stock
---------------
1 Under the Rights Agreement, for purposes of calculating percentages of
Common Stock outstanding, shares of Common Stock outstanding shall include all
shares of Common Stock deemed to be beneficially owned by a person and its
affiliates and associates, even if not actually then outstanding.
54
or Series B Preferred Stock outstanding will also constitute the transfer of the
Rights associated with the Common Stock or Series B Preferred Stock represented
by such certificate.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on July 24, 2008, unless earlier redeemed by the
Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock and Series B Preferred
Stock as of the close of business on the Distribution Date and, thereafter, the
separate Rights Certificates alone will represent the Rights. Except (i) with
respect to certain shares of Common Stock issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of certain securities of the Company, or (ii)
as otherwise determined by the Board of Directors, only shares of Common Stock
issued prior to the Distribution Date will be issued with Rights. The Rights
associated with any share of Series B Preferred Stock that is converted into
Common Stock prior to the Distribution Date shall be forfeited in exchange for
Rights issued as a result of the shares of Common Stock issued upon conversion
of such Series B Preferred Stock. No Rights will be issued on any Common Stock
issued upon the conversion of Series B Preferred Stock after the Distribution
Date.
In the event that (i) a Person becomes the beneficial owner of 15% or more
of the then outstanding shares of Common Stock (except pursuant to an offer for
all outstanding shares of Common Stock which a majority of the Directors who are
not officers of the Company and who are not affiliates or associates of such
Person determine to be fair to and otherwise in the best interests of the
Company and its shareholders), or (ii) the Board of Directors declares, upon the
determination by at least a majority of the Continuing Directors who are not
officers of the Company, that a person is an Adverse Person (each such event, a
"Flip-in Event"), each holder of a Right will thereafter have the right to
receive, upon payment of the Purchase Price, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
(based on a formula set forth in the Rights Agreement) equal to two times the
Purchase Price of the Right. Notwithstanding any of the foregoing, following the
occurrence of the Flip-in Event, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by an
Acquiring Person or an Adverse Person (or by certain related parties) will be
null and void. However, Rights are not exercisable following the occurrence of
the Flip-in Event until such time as the Rights are no longer redeemable by the
Company as set forth below.
For example, at a Purchase Price of $80.00 per Right, each Right not owned
by an Acquiring or an Adverse Person (or by certain related parties) following a
Flip-in Event would entitle its holder to purchase $160.00 worth of Common Stock
(or other consideration, as noted above) determined pursuant to a formula set
forth in the Rights Agreement, for $80.00. Assuming that the Common Stock had a
per share value of $20.00 at such time (as determined pursuant to such formula),
the holder of each valid Right would be entitled to purchase eight (8) shares of
Common Stock for $80.00.
In the event that, at any time following the Stock Acquisition Date or the
date on which a Person is determined to be an Adverse Person, (i) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation or in which it is the surviving
corporation but its Common Stock is changed or exchanged (other than a merger
meeting certain conditions which follows an offer for all outstanding shares of
Common Stock which a majority of the unaffiliated Directors who are not officers
of the Company determine to be fair to and otherwise in the best interests of
the Company and its shareholders), or (ii) 50% or more of the Company's assets,
earning power or cash flow is sold or transferred ("Flip-over Event"), each
holder of a Right (except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon payment of the Purchase
Price, common stock of the acquiring company having a value equal to two times
the exercise price of the Right. The Flip-over Events set forth in this
paragraph and the Flip-in Events described in the second preceding paragraph are
referred to as the "Triggering Events"; provided, however, that a Triggering
Event shall not include the ownership by InterScan of Series B Preferred Stock
or the exercise by InterScan of its right to convert the Series B Preferred
Stock into shares of Common Stock or its ownership of shares of Common Stock
issued upon such conversion.
The Purchase Price payable, and the number of units of one two-thousandths
of a share of Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the
2
55
Preferred Stock, (ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or convertible securities at
less than the current market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Preferred Stock (other than fractions of one
two-thousandth of a share, or integral multiples thereof) will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market price of
the Preferred Stock on the last trading date prior to the date of exercise.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right (payable in cash, Common Stock or other consideration deemed appropriate
by the Board of Directors). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of a majority of
the Continuing Directors who are not officers of the Company. The Company may
not redeem the Rights if the Board of Directors has previously declared a Person
to be an Adverse Person. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, with, where required, the concurrence of such
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.01 redemption price.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement, and any Person who is subsequently elected to the Board if such
Person is recommended or approved by a majority of the Continuing Directors, but
shall not include an Acquiring Person, an Adverse Person or an affiliate or
associate of any such Person, or any representative of any of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above, or are redeemed as
provided in the second preceding paragraph.
Other than certain provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, with the concurrence of the Continuing
Directors) in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (other than an Acquiring
Person, an Adverse Person or an affiliate or associate thereof), or to shorten
or lengthen any time period under the Rights Agreement; provided, however, that
no amendment to adjust the time period governing redemption shall be made at
such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects. Exercise of the Rights will
cause substantial dilution to a Person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The existence
of Rights, however, should not affect an offer at a fair price and otherwise in
the best interests of the Company and its shareholders as determined by the
Board of Directors. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors since the Board of
Directors may, at its option, at any time until ten days following the Stock
Acquisition Date or until a Person has been determined to be an Adverse Person
redeem all but not less than all of the then outstanding Rights at the $0.01
redemption price.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
3
