SENSORY SCIENCE CORPORATION
AND
AMERICAN SECURITIES TRANSFER, INC.
(Rights Agent)
SHAREHOLDER RIGHTS AGREEMENT
DATED AS OF APRIL 13, 2000
TABLE OF CONTENTS
Page
----
SECTION 1. CERTAIN DEFINITIONS............................................. 1
SECTION 2. APPOINTMENT OF RIGHTS AGENT..................................... 5
SECTION 3. ISSUE OF RIGHTS CERTIFICATES.................................... 5
SECTION 4. FORM OF RIGHT CERTIFICATES...................................... 7
SECTION 5. COUNTERSIGNATURE AND REGISTRATION............................... 7
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN
RIGHT CERTIFICATES.............................................. 8
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS... 9
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.............. 10
SECTION 9. AVAILABILITY OF COMMON SHARES................................... 10
SECTION 10. RECORD HOLDERS OF COMMON SHARES ISSUED UPON
EXERCISE OF RIGHTS.............................................. 10
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF
COMMON SHARES OR NUMBER OF RIGHTS............................... 11
SECTION 12. CERTIFICATE OF ADJUSTMENT....................................... 17
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER......................................... 17
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES......................... 20
SECTION 15. RIGHTS OF ACTION................................................ 21
SECTION 16. AGREEMENT OF RIGHT HOLDERS...................................... 21
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER............... 22
SECTION 18. CONCERNING THE RIGHTS AGENT..................................... 22
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT....... 23
SECTION 20. DUTIES OF RIGHTS AGENT.......................................... 23
SECTION 21. CHANGE OF RIGHTS AGENT.......................................... 25
SECTION 22. ISSUANCE OF NEW RIGHT CERTIFICATES.............................. 26
SECTION 23. REDEMPTION...................................................... 00
-x-
XXXXXXX 00. EXCHANGE........................................................ 27
SECTION 25. NOTICE OF CERTAIN EVENTS........................................ 28
SECTION 26. NOTICES......................................................... 28
SECTION 27. SUPPLEMENTS AND AMENDMENTS...................................... 29
SECTION 28. SUCCESSORS...................................................... 30
SECTION 29. DETERMINATIONS BY THE BOARD OF DIRECTORS........................ 30
SECTION 30. BENEFITS OF THIS RIGHTS AGREEMENT............................... 30
SECTION 31. SEVERABILITY.................................................... 31
SECTION 32. GOVERNING LAW................................................... 31
SECTION 33. COUNTERPARTS.................................................... 31
SECTION 34. DESCRIPTIVE HEADINGS............................................ 31
-ii-
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Rights Agreement (the "Rights Agreement"), effective as of
April 13, 2000, between Sensory Science Corporation, a Delaware corporation (the
"Company"), and American Securities Transfer, Inc. (the "Rights Agent").
WITNESSETH
WHEREAS, on April 13, 2000, the Board of Directors of the Company
authorized and declared a dividend of one common share purchase Right (as
hereinafter defined) for each share of the Company's Common Shares outstanding
at the close of business on April 23, 2000, (the "Record Date"), each such right
initially representing the right to purchase one share of the Company's common
stock upon the terms and subject to the conditions therein set forth. At that
time the Board further authorized and directed the issuance of one common share
purchase Right (subject to adjustment as provided herein) with respect to each
share of the Company's Common Shares that became outstanding between the Record
Date and the Distribution Date (as hereinafter defined);
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1.
CERTAIN DEFINITIONS
For purposes of this Rights 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 become, at any time after
the date of this Rights Agreement (whether or not such status continues for any
period), the Beneficial Owner of Common Shares representing 15% or more of the
Common Shares then outstanding, other than as a result of a Permitted Offer.
Notwithstanding the foregoing, (A) the term "Acquiring Person" shall not include
the Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any Subsidiary of the Company, or any entity holding Common Shares
for or pursuant to the terms of any such plan, (B) no Person shall be deemed to
be an "Acquiring Person" either (X) as a result of the acquisition of Common
Shares by the Company that, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by such Person
together with all Affiliates and Associates of such Person; except that if (i) a
Person would become an Acquiring Person (but for the operation of this subclause
(X)) as a result of the acquisition of Common Shares by the Company, and (ii)
after such share acquisition by the Company, such Person, or an Affiliate or
Associate of such Person, becomes the Beneficial Owner of any additional Common
Shares, then such Person shall be deemed an Acquiring Person, or (Y) if (i) such
Person, or an Affiliate or Associate of such Person, inadvertently becomes the
Beneficial Owner of 15% or more of the outstanding Common Shares, (ii) within
eight (8) days thereafter such Person notifies the Board of Directors that such
Person did so inadvertently and (iii) within two (2) days after such
-1-
notification, such Person is the Beneficial Owner of less than 15% of the
outstanding Common Shares, and (C) a Person engaged in business as an
underwriter of securities shall not be deemed to be an Acquiring Person as a
result of such Person participating in good faith in a firm commitment
underwriting unless such Person is the Beneficial Owner of such securities upon
the expiration of forty (40) days after the commencement of such underwriting.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations (or any
comparable or successor rule or regulation) under the Exchange Act.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to have acquired "beneficial ownership" of, or to "beneficially own", any
securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, as
determined pursuant to Rule 13d-3 of the General Rules and
Regulations (or any comparable or successor rule or regulation)
under the Exchange Act as of the date hereof;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering
of securities), or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not
be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made
by or on behalf of such Person or any of such Person's Affiliates
or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that
a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or
understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii)Which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona
fide public offering of securities) for the acquiring, holding,
-2-
voting (except to the extent contemplated by the proviso to
Section l(c)(ii)(B)) or disposing of any securities of the
Company. Notwithstanding anything in this definition of
"Beneficial Owner" to the contrary, the phrase "then
outstanding," when used with reference to a Person's beneficial
ownership of securities of the Company, shall mean the number of
such securities then issued and outstanding together with the
number of such securities not then actually issued and
outstanding which such Person would be deemed to own beneficially
hereunder.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in Phoenix, Arizona, are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., Phoenix,
Arizona time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Phoenix, Arizona time, on the next
succeeding Business Day.
(f) "Common Shares" when used with reference to the Company shall mean
shares of the Company's common stock, par value $.001 per share, and any other
class or classes or series of common stock of the Company resulting from any
subdivision, combination, recapitalization or reclassification of shares of such
common stock. "Common Shares" when used with reference to any Person other than
the Company shall mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is a Subsidiary of
another Person, the Person or Persons that ultimately control such first
mentioned Person.
(g) "Company" shall have the meaning set forth in the recitals to this
Rights Agreement.
(h) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, (or any comparable or successor law or act) as in effect on the date of
this Rights Agreement.
(j) "Exchange Ratio" shall have the meaning set forth in Section 24 hereof.
(k) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(l) "NASDAQ" shall have the meaning set forth in Section 11(d) hereof.
(m) "Permitted Offer" shall mean a tender or exchange offer that is for all
outstanding Common Shares at a price and on terms determined, prior to the
announcement or commencement of such tender or exchange offer, by at least a
majority of the members of the Board of Directors who are not officers of the
Company and who are not (or would not be, if the offer were consummated)
Acquiring Persons or Affiliates, Associates, nominees, or representatives of an
Acquiring Person, to be adequate and otherwise in the best interests of the
-3-
Company and its stockholders (other than the Person or any Affiliate or
Associate thereof on whose basis the offer is being made). In determining
whether an offer is adequate or in the best interests of the Company and its
shareholders, the Board may take into account all factors that it deems relevant
including, without limitation, (1) the consideration being offered in the
proposal in relation to the Board's estimate of: (i) the current value of the
Company in a freely negotiated sale of either the Company by merger,
consolidation or otherwise, or all or substantially all of the Company's assets,
(ii) the current value of the Company if orderly liquidated, and (iii) the
future value of the Company over a period of years as an independent entity
discounted to current value; (2) then existing political, economic, and other
factors bearing on security prices generally or the current market value of the
Company's securities in particular; (3) whether the proposal might violate
federal, state, or local laws; (4) social, legal, and economic effects on
employees, suppliers, customers, and others having similar relationships with
the Company, and the communities in which the Company conducts its businesses;
5) the financial condition and earnings prospects of the Person making the
proposal including the Person's ability to service its debt and other existing
or likely financial obligations; and (7) the competence, experience, and
integrity of the Person making the acquisition proposal.
(n) "Person" shall mean any individual, firm, partnership, corporation,
trust, association, joint venture or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(o) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(p) "Purchase Price" shall have the meaning set forth in Section 7(a)
hereof.
(q) "Record Date" shall have the meaning set forth in the recitals to this
Rights Agreement.
(r) "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
(s) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
(t) "Rights" shall mean the rights to purchase Common Shares authorized by
the Board of Directors of the Company after the Record Date.
(u) "Rights Agent" shall have the meaning set forth in the recitals to this
Rights Agreement.
(v) "Rights Agreement" shall have the meaning set forth in the recitals to
this Rights Agreement.
(w) "Rights Certificates" shall have the meaning set forth in Section 3(a)
hereof.
(x) "Securities Act" shall mean the Securities Act of 1933, as amended, (or
any comparable or successor law or act) as in effect from time to time during
the term of this Rights Agreement.
-4-
(y) "Shares Acquisition Date" shall mean the first date of a public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) (or any comparable or
successor section or provision) under the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such; provided, that, if
such Person is determined not to have become an Acquiring Person pursuant to
Section l (a) hereof, then no Shares Acquisition Date shall be deemed to have
occurred.
(z) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
(aa) "Summary of Rights" shall have the meaning set forth in Section 3(b)
hereof.
(bb) "Trading Day" shall have the meaning set forth in Section 11(d)
hereof.
(cc) "Voting Securities" shall have the meaning set forth in Section 13(a)
hereof.
SECTION 2.
APPOINTMENT OF RIGHTS AGENT
The Company hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the Common Shares)
in accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents as it may deem necessary or desirable.
SECTION 3.
ISSUE OF RIGHTS CERTIFICATES
(a) Until the earlier of (i) the close of business on the tenth day after
the Shares Acquisition Date or (ii) the close of business on the tenth business
day (or such later date as may be determined by action of the Board of Directors
of the Company prior to such time as any Person becomes an Acquiring Person)
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 entity holding Common Shares for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2 of the General Rules and Regulations (or any
comparable or successor rule or regulation) 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 earlier of such dates being
herein referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for the
Common Shares registered in the names of the holders thereof (which certificates
shall also be deemed to be certificates for Rights) and not by separate
certificates, and (y) the Rights (and the right to receive separate certificates
("Right Certificates")) will be transferable only in connection with the
transfer of the underlying Common Shares (including a transfer to the Company)
as more fully set out below. As soon as practicable after the Distribution Date,
-5-
the Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate, which
shall be in substantially the form of Exhibit A hereto (the "Right
Certificate"), evidencing one Right for each Common Share so held. As of and
after the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) As promptly as practicable following the Record Date, the Company will
send a copy of a Summary of Rights to Purchase Common Shares, in substantially
the form of Exhibit B hereto (the "Summary of Rights"), by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Record Date, at the address of such holder shown on the records
of the Company. Until the Distribution Date (or the earlier of the Redemption
Date or the Final Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding, with or without a copy of the Summary
of Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Shares.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired shares which are subsequently disposed of by the
Company) after the Record Date but prior to the earliest of the Distribution
Date, the Redemption Date or the Final Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
"This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Shareholder Rights Agreement, as it may from time
to time be supplemented or amended, between Sensory Science Corporation and
American Securities Transfer, Inc., (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of Sensory Science Corporation.
Under certain circumstances, as set forth in the Rights Agreement, such
rights may be redeemed or exchanged, may expire, or may be evidenced by
separate certificates and no longer be evidenced by this certificate.
Sensory Science Corporation will mail to the holder of this certificate a
copy of the Rights Agreement without charge within five days after receipt
of a written request therefor. Under certain circumstances, rights issued
to or held by Acquiring Persons or their Affiliates or Associates (as
defined in the Rights Agreement) and any subsequent holder of such rights
may become null and void."
With respect to such certificates containing the foregoing legend, until
the Distribution Date, the Rights associated with the Common Shares represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated therewith. In the event that the Company
purchases or acquires any Common Shares prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
unless and until such Common Shares are subsequently issued by the Company so
that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.
-6-
SECTION 4.
FORM OF RIGHT CERTIFICATES
(a) The Right Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall be substantially the same
as provided for in Section 3(a) hereof 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 Rights 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 22 hereof,
the Right Certificates shall entitle the holders thereof to purchase such number
and kind of Common Shares as shall be set forth therein at the price per share
set forth therein, but the number and kind of such Common Shares and the price
per share shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section
11(a)(ii) of this Rights Agreement and any Right Certificate issued pursuant to
Section 6, Section 11 or Section 22 hereof upon transfer, exchange, replacement
or adjustment of any other Right Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
"The Rights represented by this Right Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Right Certificate and the Rights represented
hereby are null and void."
Notwithstanding the above provision, failure to place such legend on any
Rights Certificate representing Rights which are otherwise null and void
pursuant to the terms of this Rights Agreement, shall not affect the null and
void status of such Rights.
SECTION 5.
COUNTERSIGNATURE AND REGISTRATION
The Right Certificates shall be executed on behalf of the Company by its
Chairman of the Board, its Chief Executive Officer, its President, any of its
Vice Presidents, or its Treasurer, either manually or by facsimile signature,
shall have affixed thereto the Company's seal or a facsimile thereof, and shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Right Certificates had not ceased to be such officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any person who,
-7-
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office or offices designated as the appropriate place for
surrender of such Right Certificate or transfer, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of he Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
SECTION 6.
TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES
Subject to the provisions of Section 14 hereof, at any time after the Close
of Business on the Distribution Date, and at or prior to the Close of Business
on the earlier of the Redemption Date or the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
respectively, entitling the registered holder to purchase a like number and kind
of Common Shares as the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Right Certificate or Right Certificates to be transferred, split up,
combined or exchanged at the principal office or offices of the Rights Agent
designated for such purpose. Thereupon, the Rights Agent shall countersign and
deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates. Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
-8-
SECTION 7.
EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS
(a) Subject to Section 11(a)(ii) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the principal
office or offices of the Rights Agent designated for such purpose, together with
payment of the price per share (rounded to the nearest cent) provided for in
paragraph (b) below (the "Purchase Price") for each Common Share as to which the
Rights are exercised, at or prior to the earliest of (i) the close of business
on April 13, 2010 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"), or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
(b) The Purchase Price for each Common Share pursuant to the exercise of a
Right shall initially be $15.00, subject to adjustment from time to time as
provided in Sections 11 and 13 hereof, and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the Common Shares to be purchased and an amount equal to
any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) requisition from any transfer agent of the Common Shares
certificates for the number and kind of Common Shares to be purchased (or
depository receipts when appropriate) and the Company hereby irrevocably
authorizes its transfer agents to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates, cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when appropriate,
after receipt, deliver such cash to or upon the order of the registered holder
of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) So long as the Common Shares issuable upon the exercise of Rights may
be listed on any national securities exchange, the Company shall use its best
efforts to cause all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
-9-
SECTION 8.
CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES
All Right Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9.
AVAILABILITY OF COMMON SHARES
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Common Shares or any Common
Shares held in its treasury, the number and kind of Common Shares that will be
sufficient to permit the exercise in full of all outstanding Rights in
accordance with this Rights Agreement.
(b) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Common Shares 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 Common Shares.
(c) The Company covenants and agrees that it 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 Right Certificates or of any Common
Shares 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 Right Certificates to a person other than, or the issuance or
delivery of certificates or depository receipts for the Common Shares in a name
other than that of, the registered holder of the Right Certificate evidencing
Rights surrendered for exercise or to issue or to deliver any certificates for
Common Shares upon the exercise of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
SECTION 10.
RECORD HOLDERS OF COMMON SHARES ISSUED UPON EXERCISE OF RIGHTS
Each person in whose name any certificate for Common Shares is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Common Shares represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
-10-
such Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Company's transfer books for the
Common Shares are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which such transfer books are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Common Shares for which the
Rights evidenced thereby shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
SECTION 11.
ADJUSTMENT OF PURCHASE PRICE, NUMBER AND
KIND OF COMMON SHARES OR NUMBER OF RIGHTS
(a) The Purchase Price, the number of Common Shares or other securities
covered by each Right, and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(i) In the event the Company shall at any time after the Record
Date (A) declare a dividend on the Common Shares payable in
Common Shares, (B) subdivide the outstanding Common Shares
into a greater number of such shares, (C) combine the
outstanding Common Shares into a smaller number of such
shares, or (D) issue any shares of its capital stock in a
reclassification of Common Shares (including any such
reclassification in connection with a consolidation or merger
in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section
11(a), the Purchase Price in effect for Rights at the time of
the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such
date, shall be proportionately adjusted so that the holder of
any Right exercised after such time shall, upon payment of the
Purchase Price then in effect, be entitled to receive the
aggregate number and kind of shares of capital stock which, if
such Right had been exercised immediately prior to such date
and at a time when the Common Shares transfer books of the
Company were open, he would have owned upon such exercise and
been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid
upon the exercise of one such Right be less than the per share
par value of the Common Shares. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to Section 11(a)(ii).
-11-
(ii) Subject to Section 24 of this Rights Agreement, in the event
any Person becomes an Acquiring Person, then the Purchase
Price for each Common Share issuable upon exercise of Rights
shall be reduced to an amount equal to 50% of the current
market price per share of such Common Share (determined
pursuant to Section 11(d)) on the Shares Acquisition Date.
Notwithstanding the above, if the transaction that would
otherwise give rise to the foregoing adjustment is also
subject to the provisions of Section 13 hereof, then only the
provisions of Section 13 hereof shall apply and no adjustment
shall be made pursuant to this Section 11 (a)(ii).
From and after the occurrence of the event described above,
any Rights that are or were acquired or beneficially owned by
any Acquiring Person (or any Associate or Affiliate of such
Acquiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under
any provision of this Rights Agreement. No Right Certificate
shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or
Affiliate thereof; no Right Certificate shall be issued at any
time upon the transfer of any Rights to or from an Acquiring
Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof or to or from
any nominee of such Acquiring Person, Associate or Affiliate;
and any Right Certificate delivered to the Rights Agent for
transfer to or from an Acquiring Person (or any Associate,
Affiliate or nominee of such Acquiring Person) whose Rights
would be void pursuant to the preceding sentence shall be
canceled.
(iii) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii), the Company shall, to the
extent permitted by applicable law, take all such action as
may be necessary to authorize additional Common Shares for
issuance upon exercise of the Rights, including the calling of
a meeting of shareholders; provided, however, if the Company
is unable to cause the authorization of additional Common
Shares then the Company, to the extent necessary and permitted
by applicable law and any agreements or instruments in effect
on the date hereof to which it is a party, shall, at its
option (A) pay cash equal to twice the applicable Purchase
Price (as adjusted pursuant to this Section 11) in lieu of
issuing any such Common Shares and requiring payment therefor,
or (B) issue equity securities having a value equal to the
market price of Common Shares which otherwise would have been
issuable pursuant to the foregoing subparagraph (ii), which
value shall be determined by the Board of Directors of the
Company, whose determination shall be described in a statement
filed with the Rights Agent, or (C) distribute a combination
-12-
of Common Shares, cash and/or other equity securities having a
value equal to the market price of the shares of the Common
Shares which are otherwise issuable pursuant to the foregoing
subparagraph (ii), determined in accordance with the preceding
clause (B), upon exercise of the related Rights.
(b) In case the Company shall fix a record date for the issuance of rights
(other than the Rights), options or warrants to all holders of Common Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Common Shares, or securities convertible into
Common Shares at a price per share (or having a conversion price per share, if a
security convertible into Common Shares) less than the then current per share
market price (as defined in Section 11(d)) of the Common Shares on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of Common
Shares outstanding on such record date plus the number of Common Shares which
the aggregate offering price of the total number of shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price and the denominator
of which shall he the number of Common Shares outstanding on such record date
plus the number of additional Common Shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the per
share par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Common Shares owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed; and in the event that such rights, options or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Common Shares (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), of evidences of indebtedness or assets
(other than a regular quarterly cash dividend, a dividend payable in Common
Shares or other distribution referred to in Section 11(a) hereof) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the then current per share
market price of the Common Shares on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent) of the portion of such assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to one Common Share and the denominator of which shall be
-13-
such current per share market price of the Common Shares; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the per share par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
(d) For the purpose of any computation hereunder, the "current per share
market price" of a Common Share on any date shall be deemed to be the average of
the daily closing prices per share of a Common Share for the 30 consecutive
Trading Days immediately prior to such date; provided, however, that in the
event that the current per share market price of a Common Share is determined
during a period following the announcement by the Company of (A) a dividend or
distribution on the Common Shares, payable in Common Shares or securities
convertible into Common Shares, or (B) any subdivision, combination or
reclassification of the Common Shares, and prior to the expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share of a Common Share. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") then in use, or, if on any
such date Common Shares are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in Common Shares, selected by the Board of Directors of the
Company. If on any such date no market-maker is making a market in Common
Shares, the fair value of Common Shares on such date as determined in good faith
by the Board of Directors of the Company shall be used, whose determination
shall be described in a statement filed with the Rights Agent. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which Common Shares are listed or admitted to trading is open for the
transaction of business or, if Common Shares are not listed or admitted to
trading on any national securities exchange, a Business Day. If Common Shares
are not publicly held or so listed or traded, "current per share market price"
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
-14-
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one ten-thousandth of a share as the case may be.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Common Shares, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Shares
contained in Section 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Common Shares shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made hereunder to the Purchase Price applicable thereto shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
Common Shares or other capital stock purchasable from time to time hereunder
upon exercise of such 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 related Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, the number of Common Shares
(calculated to the nearest one ten-thousandth of a share) obtained by (i)
multiplying (x) the number of shares covered by such Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such
Purchase Price adjustment and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such Purchase Price adjustment.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights in substitution for any adjustment
in the number of Common Shares purchasable upon the exercise of a Right. Each of
such Rights outstanding after such adjustment of the number of such Rights shall
be exercisable for the number of Common Shares for which such Right was
exercisable immediately prior to such adjustment. Each such Right held of record
prior to such adjustment of the number of Rights shall become that number of
such Rights (calculated to the nearest one ten-thousandth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of such Purchase
Price by the Purchase Price in effect immediately after such adjustment. The
Company shall make a public announcement of its election to adjust the number of
Rights indicating the record date for the adjustment, and, if known at the time,
the amount of the adjustment to be made. This record date may be the date on
which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right Certificates have been issued, upon each
adjustment of the number of such Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of such Right Certificates on such record date 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 such Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
-15-
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of Common Shares issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price and the number of Common Shares which were expressed in such
Right Certificates theretofore issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the Common Shares issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Common Shares 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
issuing to the holder of any related Right exercised after such record date of
the Common Shares and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the Common Shares and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Common Shares, (ii)
issuance wholly for cash of any Common Shares at less than the current market
price, (iii) issuance wholly for cash of Common Shares or securities which by
their terms are convertible into or exchangeable for Common Shares, (iv)
dividends on Common Shares payable in Common Shares or (v) issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of Common Shares, shall not be taxable to such
stockholders.
(n) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Sections 23 or 27 hereof, take (or permit any
Subsidiary to take) any action the purpose of which is to, or if at the time
such action is taken it is reasonably foreseeable that the effect of such action
is to, materially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.
-16-
SECTION 12.
CERTIFICATE OF ADJUSTMENT
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Shares a copy of
such certificate and, (c) include a brief summary thereof in the next quarterly
or current report filed pursuant to the Exchange Act by the Company, and,
following the Distribution Date, mail such summary to each holder of a Right
Certificate in accordance with Section 25 hereof.
SECTION 13.
CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER
(a) In the event that, on or following the Distribution 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 that does
not violate Section 11(n) hereof, (y) the Company shall consolidate with, or
merge with, any other Person other than a subsidiary of the Company in a
transaction that does not violate Section 11(n) hereof, and the Company shall be
the continuing or surviving corporation of such consolidation or merger (other
than, in a case of any transaction described in (x) or (y), a merger or
consolidation which would result in all of the securities generally entitled to
vote in the election of directors ("voting securities") of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of the surviving
entity) all of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or consolidation),
or (z) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or any Subsidiary of the Company in one or
more transactions each of which does not violate Section 11(n) hereof), then,
and in each such case (except as provided in Section 13(d) hereof), proper
provision shall be made so that (i) each holder of a Right, except as provided
in Section 11(a) hereof, shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price (without
giving effect to any adjustment to such Purchase Price pursuant to Section
11(a(ii)) multiplied by the number of Common Shares for which such Right is then
-17-
exercisable, in accordance with the terms of this Rights Agreement, such number
of freely tradable Common Shares of the Principal Party, not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
equal the result obtained by (A) multiplying the then current Purchase Price
(without giving effect to any adjustment to such Purchase Price pursuant to
Section 11(a(ii)) by the number of Common Shares for which such Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares of such Principal Party (determined pursuant
to Section 11(d) hereof) on the date of consummation of such consolidation,
merger, sale or transfer; (ii) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such consolidation, merger, sale or
transfer, all the obligations and duties of the Company pursuant to this Rights
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 an event described in this Section 13; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the Common Shares thereafter deliverable upon the exercise of
the Rights.
(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 Common Shares of the
Company are converted in such merger or consolidation, and if
no securities are so issued, the Person that is the other
party to such merger or consolidation (including, if
applicable, the Company if it is the surviving corporation);
and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earnings power
transferred pursuant to such transaction or transactions;
provided, however, that in any of the foregoing cases, (1) if
the Common Shares of such Person are not at such time and have
not been continuously over the preceding twelve (12) month
period registered under Section 12 (or any comparable or
successor section or provision) of the Exchange Act, and such
Person is a direct or indirect Subsidiary of another Person
the Common Shares of which are and have been so registered,
"Principal Party" shall refer to such other Person; (2) in
case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of two or more of
which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common
Shares having the greatest aggregate market value; and (3) in
case such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains
of ownership having an interest in such joint ventures as if
such party were a "Subsidiary" of both or all of such joint
ventures and the Principal Parties in each such chain shall
bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person
bear to the total of such interests.
-18-
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of its
authorized Common Shares which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the 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, sale or transfer mentioned in paragraph (a) of this Section 13, the
Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Securities
Act of 1933, as amended, 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 such Act)
until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the
blue sky laws of such jurisdictions as may be necessary or
appropriate; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party which comply in all
respects with the requirements for registration on Form 10
under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that the
events described in this Section 13 shall occur at any time after the occurrence
of the events described in Section 11(a)(ii), 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 Common Shares pursuant to a Permitted Offer (or a wholly owned
subsidiary of any such Person or Persons), (ii) the price per share of the
Common Shares offered in such transaction is not less than the price per share
of Common Shares 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 Shares 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.
-19-
SECTION 14.
FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of such Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the,
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 such 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 such 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 such Rights on such date 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, shall be used.
(b) The Company shall not be required to issue fractions of Common Shares
upon (i) exercise of the Rights or exchange of the Rights for Common Shares
pursuant to Section 24 of this Rights Agreement, or to distribute certificates
which evidence fractional shares of such securities. Fractions of Common Shares
may, at the election of the Company, be evidenced by depository receipts,
pursuant to an appropriate agreement between the Company and a depositary
selected by it; provided that such agreement shall provide that the holders of
such depositary receipts shall have the rights, privileges and preferences to
which they are entitled as beneficial owners of the Common Shares represented by
such depositary receipts. In lieu of fractional Common Shares or depositary
receipts, the Company may pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Common Share. For the
purposes of this Section 14(b), the current market value of a Common Share shall
be the closing price of a Common Share (as determined pursuant to the second
sentence of Section 11(d) hereof) for the Trading Day immediately prior to the
date of such exercise.
(c) The holder of a Right by the acceptance of such Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
-20-
SECTION 15.
RIGHTS OF ACTION
All rights of action in respect of this Rights Agreement, excepting the
rights of action given to the Rights Agent under Section 18 hereof, are vested
in the respective registered holders of the Right Certificates (and, prior to
the Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
Common Shares), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights 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 Rights Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Rights Agreement.
SECTION 16.
AGREEMENT OF RIGHT HOLDERS
Every holder of a Right, by accepting the same, consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
certificates for Common Shares) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates the associated certificates for Common Shares
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Rights Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or a beneficial interest in a Right or other Person as a result of
its inability to perform any of its obligations under this Rights 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
-21-
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
SECTION 17.
RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER
No holder, as such, of any Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the Common Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18.
CONCERNING THE RIGHTS AGENT
The Company agrees to pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Rights 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 Rights
Agreement, including the costs and expenses of defending against any claim of
liability in the indemnity provided for herein shall survive the expiration of
the Rights and the termination of this Rights Agreement.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of any action taken, suffered or omitted by it in connection with, its
administration of this Rights Agreement in reliance upon any Right Certificate
or certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
-22-
SECTION 19.
MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the stock
transfer or all or substantially all of the corporate trust business of the
Rights Agent or any successor Rights Agent, shall be the successor to the Rights
Agent under this Rights Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Rights Agreement any of the
Right Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time the
Certificates shall not have been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its changed name; and in
all such cases such Right Certificates shall have the full force provided in the
Right Certificates and in this Rights Agreement.
SECTION 20.
DUTIES OF RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed by this
Rights Agreement upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company or its own in-house counsel), 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 Rights Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
-23-
Chief Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Rights Agreement in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Rights Agreement or in the
Right Certificates (except its countersignature on such Rights Certificates) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Rights Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any change in the exercisability of
the Rights (including the Rights becoming void pursuant to Section 11(a)(ii)
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Sections 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice that such change or adjustment is required);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Common Shares to be
issued pursuant to this Rights Agreement or any Right Certificate or as to
whether any Common Shares will, when issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Secretary or the Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, 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
Rights Agreement. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.
-24-
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
SECTION 21.
CHANGE OF RIGHTS AGENT
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Rights Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common Shares by
registered or certified mail, and to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares by registered or certified mail, and to the holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) corporation or other entity organized and doing business under the
laws of the United States or of any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or examination by federal or
state authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $25 million, or (b) an affiliate of a
corporation or other entity described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and mail a
notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
-25-
SECTION 22.
ISSUANCE OF NEW RIGHT CERTIFICATES
Notwithstanding any of the provisions of this Rights Agreement or of the
Right Certificate to the contrary, the Company may, at its option, issue new
Right Certificates evidencing Rights in such form as may be approved by its
Board of Directors to reflect any adjustment or change in the Purchase Price and
the number or kind or class of shares or other securities or property
purchasable under the Right Certificates made in accordance with the provisions
of this Rights Agreement.
In addition, in connection with the issuance or sale of Common Shares
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Company (a) shall with respect to Common
Shares so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) the
Company shall not be obligated to issue any such Right Certificates if, and to
the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Right Certificate would be issued, and (ii)
no Right Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
SECTION 23.
REDEMPTION
(a) The Board of Directors of the Company may, at its option, at any time
prior to such time as any Person becomes an Acquiring Person, redeem all but not
less than all of the then outstanding Rights at an initial redemption price of
$.01 per Right ("Redemption Price"). The Redemption Price shall be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof. The redemption of the Rights by the Board of
Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (b) of this Section
23 and without any further action and without any notice, the right to exercise
the Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after such action of the Board of Directors ordering the
redemption of the Rights, the Company shall mail a notice of redemption to all
the holders of the then outstanding Rights at their last addresses as they
appear upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the transfer agent for the Common Shares. Any
notice which is mailed in the manner herein provided shall be deemed given,
-26-
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares prior to the Distribution
Date.
SECTION 24.
EXCHANGE
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof) for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan or any trust agreement
entered into by the Company to secure benefits payable under any employee
benefit plan of the Company or any Subsidiary of the Company), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of Common
Shares representing 50% or more of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company shall promptly mail a notice of any such exchange
to all such holders at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Shares for Rights will be effected and, in the event of any partial
exchange, the number and kind of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights being
exchanged (other than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of such Rights.
(c) In the event that there shall not be sufficient Common Shares issued
but not outstanding or authorized but unissued to permit any exchange of Rights
as contemplated in accordance with this Section 24, the Company shall take all
such action as may be necessary to authorize additional Common Shares for
issuance upon exchange of the Rights.
-27-
SECTION 25.
NOTICE OF CERTAIN EVENTS
(a) In case the Company, following the Distribution Date, shall propose (i)
to pay any dividend payable in stock of any class or series to holders of Common
Shares or to make any other distribution to holders of Common Shares (other than
a regular quarterly cash dividend), (ii) to offer to holders of Common Shares
rights or warrants to subscribe for or to purchase any additional Common Shares
or any other securities, rights or options, (iii) to effect any reclassification
of Common Shares (other than a reclassification involving only the subdivision
of outstanding Common Shares), (iv) to effect any consolidation or merger into
or with, or to effect any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person (other than the Company
and/or any of its Subsidiaries in one or more transactions each of which does
not violate Section 1l(n) hereof), or (v) to effect the liquidation, dissolution
or winding up of the Company, then, in each such case, the Company shall give to
each holder of a Right Certificate, in accordance with Section 26 hereof, a
notice of such proposed action to the extent feasible, which shall specify the
record date for the purposes of such stock dividend, or distribution of rights
or warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by holders of Common Shares if any such date is to
be fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 10 days prior to the record date for
determining holders of Common Shares for purposes of such action, and in the
case of any such other action, at least 10 days prior to the date of the taking
of such proposed action or the date of participation therein by holders of
Common Shares, whichever shall be the earlier. The failure to give notice
required by this Section 25 or any defect therein shall not affect the legality
or validity of the action taken by the Company or the vote upon any such action.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
SECTION 26.
NOTICES
Notices or demands authorized by this Rights Agreement to be given or made
by the Rights Agent or by the holder of any Right Certificate to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
-28-
Sensory Science Corporation
0000 Xxxx XxXxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Financial Officer
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Rights Agreement to be given or made by the Company or by the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
American Securities Transfer, Inc.
X.X. Xxx 0000
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Services Officer
Notices or demands authorized by this Rights Agreement to be given or made
by the Company or the Rights Agent to the holder of any Right Certificate shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27.
SUPPLEMENTS AND AMENDMENTS
Prior to the Distribution Date, the Company and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Rights
Agreement without the approval of any holders of certificates representing
Common Shares. From and after the Distribution Date, the Company and the Rights
Agent shall, if the Company so directs, supplement or amend this Rights
Agreement without the approval of any holders of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to 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 Right Certificates (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person); provided, however, that this Rights Agreement
may not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Without limiting the
foregoing, the Company may at any time prior to such time as any Person becomes
an Acquiring Person amend this Rights Agreement to lower the thresholds set
forth in Sections l(a) and 3(a) hereof from 15% to not less than the greater of
(i) any percentage greater than the largest percentage of the then outstanding
Common Shares then known by the Company to be beneficially owned 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 entity holding
-29-
Common Shares for or pursuant to the terms of any such plan) together with all
Affiliates or Associates of such Person, or (ii) 10%. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment, provided that
such supplement or amendment does not adversely affect the rights or obligations
of the Rights Agent under Section 18 or Section 20 of this Rights Agreement.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares.
SECTION 28.
SUCCESSORS
All the covenants and provisions of this Rights Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
SECTION 29.
DETERMINATIONS BY THE BOARD OF DIRECTORS
For all purposes of this Rights Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares 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 (or any
comparable or successor rule or regulation) under the Exchange Act. The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Rights Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Rights Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this Rights
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Rights Agreement (including a determination to redeem
or not redeem the Rights or to amend the Rights Agreement or a determination
that an adjustment to the Redemption Price or Exchange Ratio is or is not
appropriate). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with resect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board to any liability
to the holders of the Rights.
SECTION 30.
BENEFITS OF THIS RIGHTS AGREEMENT
Nothing in this Rights Agreement shall be construed to give to any person
or corporation other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares) any legal or equitable right, remedy or claim under this Rights
Agreement; but this Rights Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the Common Shares).
-30-
SECTION 31.
SEVERABILITY
If any term, provision, covenant or restriction of this Rights 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 Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
SECTION 32.
GOVERNING LAW
This Rights Agreement and each Right Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Delaware and for all
purposes shall be governed by and construed in accordance with the laws of such
State applicable to contracts to be made and performed entirely within such
State.
SECTION 33.
COUNTERPARTS
This Rights Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
SECTION 34.
DESCRIPTIVE HEADINGS
Descriptive headings of the several Sections of this Rights Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
-31-
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to
be duly executed and attested, all as of the day and year first above written.
SENSORY SCIENCE CORPORATION
By: /s/ Xxx Xxxxxx
-------------------------------------
Chief Financial Officer
-------------------------------------
AMERICAN SECURITIES
TRANSFER, INC.
By: /s/ Xxxxx Xxxxxxxx
-------------------------------------
Vice President
-------------------------------------
AMERICAN SECURITIES
TRANSFER, INC.
By: /s/ Xxxxxx Xxxxx
-------------------------------------
Vice President/Trust Officer
-------------------------------------
-32-
EXHIBIT A
FORM OF RIGHT CERTIFICATE
Certificate No. R- ___________ ________ Rights
NOT EXERCISABLE AFTER ______ __, 2010 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
SENSORY SCIENCE CORPORATION
This certifies that _______________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of __________ __, 2000 (the "Rights Agreement"), between
Sensory Science Corporation, a Delaware corporation (the "Company") and
____________________ (the "Rights Agent"), to purchase from the Company at any
time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., Phoenix, Arizona time, on ___________ __,
2010, at the principal office of the Rights Agent, or at the office of its
successor as Rights Agent, one fully paid non-assessable share of Company Common
Stock, par value $.001 per share (the "Stock"), at a purchase price of $___ per
share (the "Purchase Price"), upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of shares of Stock
which may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of ________ __,
2000, (the "Record Date") based on the shares of Stock of the Company as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of shares of Stock which may be purchased upon the exercise
of the Rights evidenced by this Right Certificate are subject to modification
and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the holders of the Right Certificates. Copies of the Rights
Agreement are on file at the principal executive offices of the Company and the
above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate number of shares of
-33-
Stock as the Rights evidenced by the Right Certificate or Certificates
surrendered shall have entitled such holder to purchase. If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Certificates for the number
of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate (i) may be redeemed by the Company at its option at a
redemption price of $.01 per Right or (ii) may be exchanged in whole or in part
for shares of Stock. No fractional shares of Stock will be issued upon the
exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the shares of 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
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
Witness the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of _________ __, ____.
ATTEST: SENSORY SCIENCE CORPORATION
By:
-------------------------------------
Countersigned:
-----------------------
By:
----------------------------------
[Authorized Signature]
-34-
EXHIBIT A - FORM OF REVERSE SIDE OF RIGHT CERTIFICATE
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Right Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns end
transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint , Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.
Dated: , 19__ ----------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
------------------------------------------------------
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
----------------------------------------
Signature
-35-
EXHIBIT B
SUMMARY OF RIGHTS TO
PURCHASE COMMON SHARES
Effective as of April 13, 2000, the Board of Directors of Sensory Science
Corporation (the "Company") adopted a Shareholder Rights Agreement (the "Rights
Agreement") and authorized and declared a dividend of one common share purchase
right (a "Right") for each outstanding share of common stock, par value $.001
per share of the Company (the "Common Shares"). The dividend is payable on April
23, 2000, to the shareholders of record on that date (the "Record Date"), and
with respect to Common Shares issued thereafter until the Distribution Date (as
hereinafter defined) or the expiration or earlier redemption or exchange of the
Rights. Except as set forth below, each Right entitles the registered holder to
purchase from the Company, at any time after the Distribution Date one Common
Share at an initial price per share of $15.00, subject to adjustment (the
"Purchase Price"). The description and terms of the Rights are as set forth in
the Rights Agreement.
Initially the Rights will be attached to all certificates representing
Common Shares then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares upon the earlier to
occur of (i) 10 days after the public announcement of a person's or group of
affiliated or associated persons' having acquired beneficial ownership of 15% or
more of the outstanding Common Shares (such person or group being hereinafter
referred to as an "Acquiring Person"); or (ii) 10 days (or such later date as
the Board may determine) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation of which
would result in a person or group's becoming an Acquiring Person (the earlier of
such dates being called the "Distribution Date").
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with, and only with, the Common Shares. Until the
Distribution Date (or earlier redemption or expiration), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such notation or a copy of this
Summary of Rights being attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares represented by such certificate. As
soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Shares as of the close of business on the Distribution Date (and
to each initial record holder of certain Common Shares issued after the
Distribution Date), and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on April 13, 2010 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
-36-
In the event that any person becomes an Acquiring Person (except pursuant
to a tender or exchange offer that is for all outstanding Common Shares at a
price and on terms that a majority of certain members of the Board of Directors
determines to be adequate and in the best interests of the Company, its
stockholders, and other relevant constituencies, other than such Acquiring
Person, its affiliates and associates (a "Permitted Offer")), each holder of a
Right will thereafter have the right (the "Flip-In Right") to acquire a Common
Share for a purchase price equal to 50% of the then current market price.
Notwithstanding the foregoing, all Rights that are, or were, beneficially owned
by any Acquiring Person or any affiliate or associate thereof will be null and
void and not exercisable.
In the event that, at any time following the Distribution Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the holders of all of the outstanding Common Shares immediately prior to
the consummation of the transaction are not the holders of all of the surviving
corporation's voting power, or (ii) more than 50% of the Company's assets or
earning power is sold or transferred, then each holder of a Right (except Rights
which have previously been voided as set forth above) shall thereafter have the
right (the "Flip-Over Right") to receive, upon exercise and payment of the
Purchase Price, common shares of the acquiring company having a value equal to
two times the Purchase Price. If a transaction would otherwise result in a
holder's having a Flip-In as well as a Flip-Over Right, then only the Flip-Over
Right will be exercisable; if a transaction results in a holder's having a
subsequent to a transaction resulting in a holder's having a Flip-In Right, a
holder will have Flip-Over Rights only to the extent such holder's Flip-In
Rights have not been exercised.
The Purchase Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of 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 Common Shares,
(ii) upon the grant to holders of Common Shares of certain rights or warrants to
subscribe for or purchase Common Shares at a price, or securities convertible
into Common Shares with a conversion price, less than the then current market
price of Common Shares, or (iii) upon the distribution to holders of Common
Shares of evidences of indebtedness or assets (excluding regular periodic cash
dividends paid out of earnings or retained earnings or dividends payable in
Common Shares) or of subscription rights or warrants (other than those referred
to above). However, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1%.
No fractional Common Shares will be issued and in lieu thereof, an
adjustment in cash will be made based on the market price of Common Shares on
the last trading day prior to the date of exercise.
At any time prior to the time a person becomes an Acquiring Person, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time on such basis and with such
-37-
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person or group of Common Shares representing 50% or more of
the then outstanding Common Shares, the Board of Directors of the Company may
exchange the Rights (other than Rights which have become null and void), in
whole or in part, at an exchange ratio of one Common Share per Right (subject to
adjustment).
All of the provisions of the Rights Agreement may be amended prior to the
Distribution Date by the Board of Directors of the Company for any reason it
deems appropriate. Prior to the Distribution Date, the Board is also authorized,
as it deems appropriate, to lower the thresholds for distribution and Flip-In
Rights to not less than the greater of (i) any percentage greater than the
largest percentage then held by any shareholder, or (ii) 10%. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
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 of the Company, shareholders may, depending upon the
circumstances, recognize taxable income should the Rights become exercisable or
upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
-38-
