EXHIBIT 1.1
RIGHTS AGREEMENT
Agreement, dated as of November 1, 2002, between SCOLR, Inc.,
a Delaware corporation (the "Company"), and OTR, Inc. (the "Rights Agent").
The Board of Directors of the Company has authorized and declared
a dividend of one preferred share purchase right (a "Right") for each share of
Common Stock, par value $0.001 per share, of the Company (a "Common Share")
outstanding on the Close of Business on November 12, 2002 (the "Record Date")
and has authorized the issuance of one Right with respect to each additional
Common Share that shall become outstanding between the Record Date and the
earliest of the Close of Business on the Distribution Date, the Redemption Date
and the Close of Business on the Final Expiration Date, and certain additional
shares of Common Stock that shall become outstanding after the Distribution Date
as provided in Section 22 of this Agreement, each Right representing the right
to purchase one one-thousandth of a Preferred Share (as hereinafter defined), or
such different amount and/or kind of securities as shall be hereinafter
provided.
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 Agreement, the following terms have the
meanings indicated:
"Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the Common Shares of the Company then outstanding but shall
not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any
employee benefit plan of the Company or any Subsidiary of the Company, or (iv)
any entity holding Common Shares for or pursuant to the terms of any such
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employee benefit plan. Notwithstanding the foregoing, (1) no Person shall become
an "Acquiring Person" as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% (or such
other percentage as would otherwise result in such person becoming an Acquiring
Person) or more of the Common Shares of the Company then outstanding; provided,
however, that if a Person shall so become the Beneficial Owner of 15% (or such
other percentage) or more of the Common Shares of the Company then outstanding
by reason of an acquisition of Common Shares by the Company and shall, after
such share purchases by the Company, become the Beneficial Owner of an
additional 1% of the outstanding Common Shares of the Company, then such Person
shall be deemed to be an "Acquiring Person"; and (2) if the Board of Directors
of the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph, has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph, then such Person shall not be deemed to have become an
"Acquiring Person" for any purposes of this Agreement.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
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(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), written or otherwise, 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 to
be the Beneficial Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made pursuant to, and in accordance with, the
applicable rules and regulations promulgated under the Exchange Act 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
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underwriters and selling group members with respect to a bona fide public
offering of securities), written or otherwise, for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to section (B)
of the immediately preceding paragraph (ii)) or disposing of any securities of
the Company.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, the phrase "then outstanding," when used with
reference to a Person's Beneficial Ownership of securities of the Company, shall
mean the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
"Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the state of New York are authorized
or obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 P.M.,
eastern time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., eastern time, on the next succeeding
Business Day.
"Common Shares" when used with reference to the Company shall
mean the shares of Common Stock, par value $.001 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock (or equity interest) with the greatest voting power
of such other Person or, if such other Person is a Subsidiary of another Person,
the Person or Persons which ultimately control such first-mentioned Person.
"common stock equivalents" shall have the meaning set forth in
Section 11(a)(iii)(B)(3) hereof.
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"Current Value" shall have the meaning set forth in Section
11(a)(iii)(A)(1) hereof.
"Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
"equivalent preferred shares" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Ratio" shall have the meaning set forth in Section
24(a) hereof.
"Final Expiration Date" shall mean November 1, 2012.
"Person" shall mean any individual, firm, corporation,
partnership, limited partnership, limited liability partnership, business trust,
limited liability company, unincorporated association or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Purchase Price" shall have the meaning set forth in Section 7(b)
hereof.
"Preferred Shares" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company having
such rights and preferences as are set forth in the form of Certificate of
Designation set forth as Exhibit A hereto, as the same may be amended from time
to time.
"Redemption Date" shall have the meaning set forth in Section 23
hereof.
"Right Certificate" shall mean a certificate evidencing a Right
in substantially the form of Exhibit B hereto.
"Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.
"Shares Acquisition Date" shall mean the earlier of the date of
(i) the public announcement by the Company or an Acquiring Person that an
Acquiring Person has become
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such or (ii) the public disclosure of facts by the Company or an Acquiring
Person indicating that an Acquiring Person has become such.
"Spread" shall have the meaning set forth in Section
11(a)(iii)(A) hereof.
"Subsidiary" of any Person shall mean any Person of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Summary of Rights" shall mean the Summary of Rights to Purchase
Preferred Shares in substantially the form of Exhibit C hereto.
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 Right Certificates.
(a) Until the earlier of (i) the tenth day after the Shares
Acquisition Date or (ii) the tenth Business Day (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any entity holding
Common Shares for or pursuant to the terms of any such plan) of, or of the first
public announcement of the intention of any Person (other than any of the
Persons referred to in the
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preceding parenthetical) to commence, a tender or exchange offer the
consummation of which would result in any Person becoming the Beneficial Owner
of Common Shares aggregating 15% or more of the then outstanding Common Shares
(such date being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with the transfer of Common Shares. As
soon as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or cause
to be sent (and the Rights Agent will, if requested, at the expense of the
Company, send) by first-class, insured, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate evidencing one Right for each Common Share so held. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company. With respect to certificates for Common Shares outstanding as of
the Record Date, until the Close of Business on the Distribution Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof together with a copy of the Summary of Rights attached thereto.
Until the Close of Business on the Distribution Date (or the earlier of the
Redemption Date or the Close of Business on the Final Expiration Date), the
surrender for transfer of any certificate for Common Shares outstanding on
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the Record Date, with or without a copy of the Summary of Rights attached
thereto, shall also constitute the transfer of the Rights associated with the
Common Shares evidenced thereby.
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Record Date but prior to the earliest
of the Close of Business on the Distribution Date, the Redemption Date or the
Close of Business on 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 Rights
Agreement between SCOLR, Inc. and OTR, Inc., as Rights
Agent, dated as of November 1, 2002, as it may from time
to time be amended or supplemented pursuant to its terms
(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 SCOLR, Inc.
Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. SCOLR, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under
certain circumstances, Rights that are or were acquired
or beneficially owned by Acquiring Persons (as defined in
the Rights Agreement) may become null and void.
With respect to such certificates containing the foregoing legend, until the
Close of Business on the Distribution Date, the Rights associated with the
Common Shares represented by certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificate shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Close of Business on the
Distribution Date, any Rights associated with such Common Shares shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Shares which are no longer outstanding.
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Section 4. Form of Right Certificates.
The Right Certificates (and the forms of election to purchase
Preferred Shares and of assignment to be printed on the reverse thereof) shall
be substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the other provisions of this
Agreement, the Right Certificates shall entitle the holders thereof to purchase
such number of one one-thousandths of a Preferred Share as shall be set forth
therein at the Purchase Price, but the number of one one-thousandths of a
Preferred Share and the Purchase Price shall be subject to adjustment as
provided herein.
Section 5. Countersignature and Registration.
The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its 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 any Assistant Secretary of the
Company, either manually or by facsimile signature. The Right Certificates shall
be countersigned by the Rights Agent and shall not be valid for any purpose
unless so countersigned, either manually or by facsimile. 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
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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, 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, books for registration of the
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates.
Subject to the provisions of Section 14 hereof, at any time after
the Close of Business on the Distribution Date, and prior to the earlier of the
Redemption Date or the Close of Business on the Final Expiration Date, any Right
Certificate or Right Certificates (other than Right Certificates representing
Rights that have become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-thousandths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall
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surrender the Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the principal office of the Rights Agent. Thereupon
the Rights Agent shall countersign and deliver to the person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient for 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.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) The registered holder of any Right Certificate (other than a
holder whose Rights have become void pursuant to Section 11(a)(ii) hereof or
have been exchanged pursuant to Section 24 hereof) may exercise the Rights
evidenced thereby 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 its principal
office, together with payment of the Purchase Price for each one one-thousandth
of a Preferred Share as to which the Rights are exercised, prior to the earliest
of (i) the Close of Business on the Final Expiration Date, (ii) the time at
which the right to exercise the Rights terminates pursuant to
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Section 23 hereof, or (iii) the time at which the right to exercise the Rights
terminates pursuant to Section 24 hereof.
(b) The purchase price for each one one-thousandth of a Preferred
Share to be purchased upon the exercise of a Right shall initially be Fifteen
Dollars ($15.00) (the "Purchase Price"), shall be 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 and certificate duly executed,
accompanied by payment of the Purchase Price for the number of one
one-thousandths of a Preferred Share 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 cash, certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Shares certificates for the number of one one-thousandths of a
Preferred Share to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) requisition from any
depositary agent for the Preferred Shares depositary receipts representing such
number of one one-thousandths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company hereby directs any such depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional Preferred Shares in accordance with
Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the
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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) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate following the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of 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
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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. Status and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and non-assessable shares.
(b) The Company further 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 Preferred 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 depositary receipts for the
Preferred Shares in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise, or to issue or to
deliver any certificates or depositary receipts for Preferred Shares upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's reasonable satisfaction that
no such tax is due.
(c) The Company covenants and agrees that it will cause to be
reserved and kept available, out of its authorized and unissued Preferred Shares
or any Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
in accordance with Section 7 hereof.
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Section 10. Preferred Shares Record Date.
Each person in whose name any certificate for Preferred Shares is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a), the Purchase Price in effect
at the time of the record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been
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exercised immediately prior to such date, 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 Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.
(ii) Subject to the following paragraph of this
subparagraph (ii) and to Section 24 of this Agreement, in the event any Person
shall become an Acquiring Person, each holder of a Right shall thereafter have a
right to receive, upon exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-thousandths of a Preferred
Share for which a Right is then exercisable, in accordance with the terms of
this Agreement and in lieu of Preferred Shares, such number of Common Shares of
the Company as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of one one-thousandths of a Preferred Share
for which a Right is then exercisable and dividing that product by (y) 50% of
the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date such Person became an
Acquiring Person. In the event that any Person shall become an Acquiring Person
and the Rights shall then be outstanding, the Company shall not take any action
that would eliminate or diminish the benefits intended to be afforded by the
Rights.
From and after the occurrence of such an event, any Rights that
are or were acquired or beneficially owned by such Acquiring Person (or any
Associate or Affiliate of such Acquiring Person) on or after the earlier of (x)
the date of such event and (y) the Distribution Date shall be void and any
holder of such Rights shall thereafter have no right to exercise such Rights
under any provision of this Agreement. No Right Certificate shall be issued
pursuant to
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Section 3 that represents Rights beneficially owned by an Acquiring
Person whose Rights would be void pursuant to the preceding sentence or any
Associate or Affiliate thereof; no Right Certificate shall be issued at any time
upon the transfer of any Rights to an Acquiring Person whose Rights would be
void pursuant to the preceding sentence or any Associate or Affiliate thereof or
to any nominee of such Acquiring Person, Associate or Affiliate; and any Right
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be void pursuant to the preceding sentence or any Associate
or Affiliate thereof shall be canceled.
(iii) In the event that the number of Common Shares
which are authorized by the Company's certificate of incorporation and not
outstanding or subscribed for, or reserved or otherwise committed for issuance
for purposes other than upon exercise of the Rights, are not sufficient to
permit the holder of each Right to purchase the number of Common Shares to which
he would be entitled upon the exercise in full of the Rights in accordance with
the foregoing subparagraph (ii) of paragraph (a) of this Section 11, or should
the Board of Directors so elect, the Company shall: (A) determine the excess of
(1) the value of the Common Shares issuable upon the exercise of a Right
(calculated as provided in the last sentence of this subparagraph (iii))
pursuant to Section 11(a)(ii) hereof (the "Current Value") over (2) the Purchase
Price (such excess, the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for such Common Shares, upon payment of the
applicable Purchase Price, any one or more of the following having an aggregate
value determined by the Board of Directors to be equal to the Current Value: (1)
cash, (2) a reduction in the Purchase Price, (3) Common Shares or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock which the Board of Directors of the Company has
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determined to have the same value as Common Shares (such shares of preferred
stock, "common stock equivalents")), (4) debt securities of the Company, or (5)
other assets; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the first occurrence of an event triggering the rights to purchase
Common Shares described in Section 11(a)(ii) (the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, Common
Shares (to the extent available) and then, if necessary, cash, which shares and
cash have an aggregate value equal to the Spread. If the Board of Directors of
the Company shall determine in good faith that it is likely that sufficient
additional Common Shares could be authorized for issuance upon exercise in full
of the Rights, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof and the last paragraph of Section 11(a)(ii) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall make a public announcement, and shall deliver to the Rights Agent a
statement, stating that the exercisability of the Rights has been temporarily
suspended. At such time as the suspension is no longer in effect,
18
the Company shall make another public announcement, and deliver to the Rights
Agent a statement, so stating. For purposes of this Section 11(a)(iii), the
value of the Common Shares shall be the current per share market price (as
determined pursuant to Section 11(d)(i) hereof) of the Common Shares on the
Section 11(a)(ii) Trigger Date and the value of any common stock equivalent
shall be deemed to have the same value as the Common Shares on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
then current per share market price of the Preferred Shares (as defined in
Section 11(d)) on such record date, the Purchase Price to be in effect after
such record date shall be adjusted by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Preferred Shares outstanding on such record date plus the
number of Preferred Shares which the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price and the denominator
of which shall be the number of Preferred Shares outstanding on such record date
plus the number of additional Preferred Shares and/or equivalent preferred
shares to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible); provided, however, that
in no event shall the consideration to be
19
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred 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) of the portion of the assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Share and the denominator of which shall be such
current per share market price of the Preferred Shares;
20
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of such Security and
prior to the expiration of 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the current per share market
price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, 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 Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting
21
system with respect to securities listed on the principal national securities
exchange on which the Security is listed or admitted to trading or, if the
Security is not listed or admitted to trading on any national securities
exchange, the last quoted price 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") or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to trading
on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i). If the Preferred
Shares are not publicly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the current per share market
price of the Common Shares as determined pursuant to Section 11(d)(i)
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by 1000. If neither the
Common Shares nor the Preferred Shares are publicly held or so listed or traded,
"current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent.
22
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one ten-millionth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than three years from the
date of the transaction which requires such adjustment.
(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 Preferred
Shares, the number of such other shares so receivable upon exercise of any Right
shall thereafter be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Section 11(a) through (c), inclusive, and the
provisions of Sections 7, 9, 10 and 13 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections
23
11(b) and (c), each Right outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of one one-thousandths of a Preferred Share
(calculated to the nearest one ten-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one one-thousandths of a share covered by a
Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights in substitution for any
adjustment in the number of one one-thousandths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one hundred-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been distributed, shall be at least 10 days later
than the date of the public announcement. If Right Certificates have been
distributed, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such
24
record date Right Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after such adjustment.
Right Certificates to be so 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 one one-thousandths of a Preferred Share issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one
one-thousandths of a Preferred Share which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-thousandth of the then par value of
the Preferred Shares issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
non-assessable Preferred 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 Right exercised after such record date of
the Preferred Shares and other capital stock or securities of the
25
Company, if any, issuable upon such exercise over and above the Preferred Shares
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) combination or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
dividends on Preferred Shares payable in Preferred Shares or (v) issuance of any
rights, options or warrants referred to hereinabove in Section 11(b), hereafter
made by the Company to holders of its Preferred Shares shall not be taxable to
such stockholders.
(n) In the event that at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise other than by payment of dividends in Common
Shares) into a greater or lesser number of Common Shares, then in any such case
(i) the number of one one-thousandths of a Preferred Share purchasable after
such event upon proper exercise of each Right shall be determined by multiplying
the number of one one-thousandths of a Preferred Share so purchasable
immediately prior to such event by a fraction,
26
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (ii) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjustment.
Whenever an adjustment is made as provided in Sections 11 and 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 or the Preferred Shares a copy of such certificate and (c) if such
adjustment occurs following a Distribution Date, mail a brief summary thereof to
each holder of a Right Certificate in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be obligated or responsible for
calculating any adjustment nor shall it be deemed to have knowledge of such an
adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.
In the event that, at any time after a Person becomes an
Acquiring Person, directly or indirectly, (i) the Company shall consolidate
with, or merge with and into, any other Person, (ii) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection
27
with such merger, all or part of the Common Shares shall be changed into or
exchanged for stock or other securities of any other Person (or the Company) or
cash or any other property, or (iii) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one or more transactions, assets or earning power aggregating 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person other than the Company or one or more of its
wholly-owned Subsidiaries, then, and in each such case, proper provision shall
be made so that (A) each holder of a Right (except as otherwise provided herein)
shall thereafter have the right to receive, upon the exercise thereof at a price
equal to the then current Purchase Price multiplied by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable, in
accordance with the terms of this Agreement and in lieu of Preferred Shares,
such number of Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the number of one
one-thousandths of a Preferred Share for which a Right is then exercisable and
dividing that product by (y) 50% of the then current per share market price of
the Common Shares of such other Person (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (B) the issuer of such Common Shares shall thereafter be liable for,
and shall assume, by virtue of such consolidation, merger, sale or transfer, all
the obligations and duties of the Company pursuant to this Agreement; (C) the
term "Company" shall thereafter be deemed to refer to such issuer; and (D) such
issuer shall take such steps (including, but not limited to, the reservation of
a sufficient number of its Common Shares in accordance with Section 9 hereof) in
connection with such consummation as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in
28
relation to the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company covenants and agrees that it shall not consummate any
such consolidation, merger, sale or transfer unless prior thereto the Company
and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement so providing. The Company shall not enter into any
transaction of the kind referred to in this Section 13 if at the time of such
transaction there are any rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights. The provisions of this Section
13 shall similarly apply to successive mergers or consolidations or sales or
other transfers. For purposes hereof, the "earning power" of the Company and its
Subsidiaries shall be determined in good faith by the Company's Board of
Directors on the basis of the operating earnings of each business operated by
the Company and its Subsidiaries during the three fiscal years preceding the
date of such determination (or, in the case of any business not operated by the
Company or any Subsidiary during three full fiscal years preceding such date,
during the period such business was operated by the Company or any Subsidiary).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price
29
for any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading or, if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by NASDAQ or such other system then in use or, if on any such date
the Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share). Fractions of Preferred Shares in integral multiples of one
one-thousandth of a Preferred Share may, at the election of the Company, be
evidenced by depositary receipts, pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
30
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Shares represented by such depositary receipts. In lieu of
fractional Preferred Shares that are not integral multiples of one
one-thousandth of a Preferred Share, the Company shall pay to each registered
holder 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 Preferred Share as the fraction of one Preferred Share that such
holder would otherwise receive upon the exercise of the aggregate number of
rights exercised by such holder. For the purposes of this Section 14(b), the
current market value of a Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right
expressly waives any right to receive fractional Rights or fractional shares
upon exercise of a Right (except as provided above).
Section 15. Rights of Action.
All rights of action in respect of this Agreement, excepting the
rights of action given to the Rights Agent under Section 18 hereof, are vested
in the respective registered holders of the Right Certificates (and, prior to
the Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares) may, 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), on 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
31
and in this Agreement. Without limiting the foregoing or any remedies available
to the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders.
Every holder of a Right, by accepting the same, consents and
agrees with the Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books maintained by the Rights Agent if
surrendered at the principal office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer with a completed form of
certification; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
32
Section 17. Right Certificate Holder Not Deemed a Stockholder.
No holder, as such, of any Right Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the Preferred
Shares or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby nor shall anything contained
herein or in any Right Certificate be construed to confer upon the holder of any
Right Certificate, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in 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
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim or
liability in connection therewith. The indemnification provided for hereunder
shall survive the expiration of the Rights and the termination of this
Agreement.
33
The costs and expenses of enforcing this right of indemnification shall also be
paid by the Company.
The Rights Agent may conclusively rely upon and shall be
protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration of this
Agreement in reliance upon any Right Certificate or certificate for Preferred
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. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Rights Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Rights Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
the action.
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 corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Right Certificates shall have been
34
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations expressly
set forth in this Agreement and no implied duties or obligations shall be read
into this Agreement against the Rights Agent. The Rights Agent shall perform
those duties and obligations 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) Before the Rights Agent acts or refrains from acting, it may
consult with legal counsel (who may be legal counsel for the Company), and the
opinion of such counsel shall be
35
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, a 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 Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Right Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Sections 11 or 13 hereof or
36
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after actual notice of any such adjustment); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Shares to be issued pursuant to this
Agreement or any Right Certificate or as to whether any Preferred Shares will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President, a
Vice President, the Secretary or the Treasurer of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer. Any application by
the Rights Agent for written instructions from the Company may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than ten Business
Days after the date any officer of the Company actually receives such
37
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received, in response to
such application, written instructions with respect to the proposed action or
omission specifying a different action to be taken or omitted.
(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 Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, any dates or events
38
defined in this Agreement or the designation of any Person as an Acquiring
Person, Affiliate or Associate) under this Agreement unless and until the Rights
Agent shall be specifically notified in writing by the Company of such fact,
event or determination.
Section 21. Change of Rights Agent.
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30 days' notice in writing
mailed to the Company and to each transfer agent of the Common Shares and the
Preferred Shares by registered or certified 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 and the Preferred Shares by registered
or certified 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 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 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 $10
million. After appointment, the successor Rights Agent shall be vested with the
39
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 the Preferred Shares. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by 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
Agreement. In addition, in connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the earlier of the Redemption Date
and the Close of Business on the Final Expiration Date, the Company may with
respect to shares of Common Stock so issued or sold pursuant to (i) the exercise
of stock options, (ii) under any employment plan or arrangement, (iii) upon the
exercise, conversion or exchange of securities, notes or debentures issued by
the Company or (iv) a contractual obligation of the Company, in each case
existing prior to the Distribution Date, issue Right Certificates representing
the appropriate number of Rights in connection with such issuance or sale.
40
Section 23. Redemption.
(a) The Board of Directors of the Company may, at its option, at
any time prior to such time as any Person becomes an Acquiring Person, redeem
all but not less than all the then outstanding Rights at a redemption price of
$0.001 per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"). The redemption
of the Rights by the Board of Directors may be made effective at such time, on
such basis and subject to such conditions as the Board of Directors in its sole
discretion may establish.
(b) Immediately upon the time of the effectiveness of the
redemption of the Rights pursuant to paragraph (a) of this Section 23 or such
earlier time as may be determined by the Board of Directors of the Company in
the action ordering such redemption (although not earlier than the time of such
action) (such time the "Redemption Date"), and without any further action and
without any notice, the right to exercise the Rights shall 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 pursuant to paragraph (a), the Company shall mail a notice of redemption
to all the holders of the then outstanding Rights at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. If the payment of the
Redemption Price is not included with such notice, each such notice shall state
the method by which the payment of the Redemption Price will be made. Neither
the Company nor any of its Affiliates or Associates
41
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, 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 (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),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of a majority 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 promptly shall mail a notice
of any such exchange to all of the holders of such
42
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute Preferred Shares or common stock equivalents for
Common Shares exchangeable for Rights, at the initial rate of one one-thousandth
of a Preferred Share (or an appropriate number of common stock equivalents) for
each Common Share, as appropriately adjusted to reflect adjustments in the
voting rights of the Preferred Shares pursuant to the terms thereof, so that the
fraction of a Preferred Share delivered in lieu of each Common Share shall have
the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common
Shares, Preferred Shares or common stock equivalents authorized by the Company's
certificate of incorporation and not outstanding or subscribed for, or reserved
or otherwise committed for issuance for purposes other than upon exercise of
Rights, 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, Preferred Shares or common stock equivalents
for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional
43
Common Shares, the Company shall pay to the registered holders of the Right
Certificates with regard to which such fractional Common Shares would otherwise
be issuable an amount in cash equal to the same fraction of the current per
share market value of a whole Common Share. For the purposes of this paragraph
(e), the current per share market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall after the Distribution Date propose
(i) to pay any dividend payable in stock of any class to the holders of its
Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regular quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants to subscribe for or to
purchase any additional Preferred Shares or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) to effect any consolidation or merger
into or with, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 50% or more of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a
44
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, or distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of the Preferred Shares for
purposes of such action, and in the case of any such other action, at least 10
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.
(b) In case any event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
Section 26. Notices.
Notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any Right Certificate to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
SCOLR, Inc.
0000 000xx Xxxxxx XX
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Secretary
45
Copy to:
Xxxxxx Xxxxxxxx Xxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by registered or certified mail and shall be deemed given upon receipt
and, addressed (until another address is filed in writing with the Company) as
follows:
OTR, Inc.
0000 XX Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxx
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments.
The Company may from time to time, and the Rights Agent shall, if
the Company so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order to cure any ambiguity, to correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any change to or
delete any provision hereof or to adopt any other provisions with respect to the
46
Rights which the Company may deem necessary or desirable; provided, however,
that from and after such time as any Person becomes an Acquiring Person, this
Agreement shall not be amended or supplemented in any manner which would
adversely affect the interests of the holders of Rights (other than an Acquiring
Person and its Affiliates and Associates). Any supplement or amendment
authorized by this Section 27 will be evidenced by a writing signed by the
Company and the Rights Agent. Notwithstanding anything in this Agreement to the
contrary, no supplement or amendment that changes the rights and duties of the
Rights Agent under this Agreement will be effective against the Rights Agent
without the execution of such supplement or amendment by the Rights Agent.
Section 28. Successors.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any
person or entity other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Shares).
47
Section 30. Severability.
If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 31. Governing Law.
This Agreement and each Right Certificate issued hereunder shall
be deemed to be a contract made under the laws of the State of Delaware and for
all purposes shall be governed by and construed in accordance with the laws of
such State applicable to contracts to be made and performed entirely within such
State.
Section 32. Counterparts.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
Section 33. Descriptive Headings.
Descriptive headings of the several Sections of this Agreement
are inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 34. Administration.
The Board of Directors of the Company shall have the exclusive
power and authority to administer and interpret the provisions of this Agreement
and to exercise all rights and powers specifically granted to the Board of
Directors or the Company or as may be
48
necessary or advisable in the administration of this Agreement. All such
actions, calculations, determinations and interpretations which are done or made
by the Board of Directors in good faith shall be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties and shall not subject the Board of Directors to any liability to the
holders of the Rights.
49
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunder affixed and attested, all as of the day and year first above written.
Attest: SCOLR, INC.
/s/ XXXXX XXXXX By: /s/ XXXXX X. XXXXXX
------------------------------ -------------------------------
Name: Xxxxx Xxxxx Name: Xxxxx X. Xxxxxx
Title: Chief Financial Officer Title: President, Chief
Executive Officer
Attest: OTR, INC.,
as Rights Agent
/s/ XXXXXXX XXXXXXXX By: /s/ XXXXXX X. XXXXX
----------------------------- -------------------------------
Name: Xxxxxxx Xxxxxxxx Name: Xxxxxx X. Xxxxx
Title: Marketing Director Title: Vice President
50
-----------------------------------------------------------------------------
SCOLR, INC.
and
OTR, INC.
Rights Agent
Rights Agreement
Dated as of November 1, 2002
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions...........................................................1
Section 2. Appointment of Rights Agent...................................................6
Section 3. Issue of Right Certificates...................................................6
Section 4. Form of Right Certificates....................................................9
Section 5. Countersignature and Registration.............................................9
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates......................10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................11
Section 8. Cancellation and Destruction of Right Certificates...........................13
Section 9. Status and Availability of Preferred Shares..................................14
Section 10. Preferred Shares Record Date.................................................15
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights...........15
Section 12. Certificate of Adjustment....................................................27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.........27
Section 14. Fractional Rights and Fractional Shares......................................29
Section 15. Rights of Action.............................................................31
Section 16. Agreement of Right Holders...................................................32
Section 17. Right Certificate Holder Not Deemed a Stockholder............................33
Section 18. Concerning the Rights Agent..................................................33
Section 19. Merger or Consolidation or Change of Name of Rights Agent....................34
Section 20. Duties of Rights Agent.......................................................35
Section 21. Change of Rights Agent.......................................................39
Section 22. Issuance of New Right Certificates...........................................40
Section 23. Redemption...................................................................41
Section 24. Exchange.....................................................................42
Section 25. Notice of Certain Events.....................................................44
Section 26. Notices......................................................................45
Section 27. Supplements and Amendments...................................................46
Section 28. Successors...................................................................47
Section 29. Benefits of this Agreement...................................................47
Section 30. Severability.................................................................48
Section 31. Governing Law................................................................48
Section 32. Counterparts.................................................................48
Section 33. Descriptive Headings.........................................................48
Section 34. Administration...............................................................48
-i-
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
SCOLR, INC.
____________________________________________________
(Pursuant to Section 151 of the Delaware General Corporation Law)
____________________________________________________
SCOLR, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on November 1, 2002:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation of the Corporation (the "Certificate of Incorporation"), the
Board of Directors hereby creates a series of Preferred Stock, par value $0.01
per share (the "Preferred Stock"), of the Corporation and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
and limitations thereof as follows:
Section 1. Designation and Amount. The shares of this series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Series A Preferred Stock") and the number of shares constituting the Series A
Preferred Stock shall be 30,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for
A-1
issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of
any series of Preferred Stock (or any other stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount (if any) per share (rounded to the
nearest cent), subject to the provision for adjustment hereinafter set forth,
equal to 1000 times the aggregate per share amount of all cash dividends, and
1000 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock, par value $0.001 per share (the "Common Stock"), of the
Corporation or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock).
(C) Dividends due pursuant to paragraph (A) of this
Section shall begin to accrue and be cumulative on outstanding shares of Series
A Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid
A-2
on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 1000 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided in the Certificate of
Incorporation, including any other Certificate of Designations creating a series
of Preferred Stock or any similar stock, or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, or as otherwise required
by law, holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock as set forth herein) for taking any
corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
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Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled; or
(iii) redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set forth
herein or in the Certificate of Incorporation, including any Certificate of
Designations creating a series of Preferred Stock or any similar stock, or as
otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation the holders of shares
of Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1000 times the aggregate amount to be distributed per share to holders of shares
of Common Stock plus an amount equal to any accrued and unpaid dividends. In the
event the Corporation shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, Etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time declare
A-4
or pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision or combination or consolidation of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 8. Amendment. The Certificate of Incorporation shall not
be amended in any manner, including in a merger or consolidation, which would
alter, change, or repeal the powers, preferences or special rights of the Series
A Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and upon liquidation, dissolution and
winding up, junior to all series of Preferred Stock.
IN WITNESS WHEREOF, this Certificate of Designation is executed
on behalf of the Corporation by its duly authorized officer this 1st day of
November, 2002.
SCOLR, INC.
By: _______________________________
Name: Xxxxx X. Xxxxxx
Title: President,
Chief Executive Officer
A-5
EXHIBIT B
Form of Right Certificate
Certificate No. R-_______ _____ Rights
NOT EXERCISABLE AFTER NOVEMBER 1, 2012 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER
RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS THAT ARE OR WERE ACQUIRED OR
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY ASSOCIATES OR
AFFILIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
SCOLR, INC.
This certifies that ___________________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of November 1, 2002 (the "Rights Agreement"), between SCOLR,
Inc., a Delaware corporation (the "Company"), and OTR, Inc. (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.,
eastern time, on November 1, 2012, at the principal office of the Rights Agent,
or at the office of its successor as Rights Agent, one one-thousandth of a fully
paid non-assessable share of Series A Junior Participating Preferred Stock, par
value $0.01 per share (the "Preferred Shares"), of the Company, at a purchase
price of $15.00 per one one-thousandth of a Preferred Share (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the
certification and the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a Preferred Share which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of November 12, 2002, based on the Preferred Shares as
constituted at such date. As provided in the Rights Agreement, the Purchase
Price and the number of one one-thousandths of a Preferred Share which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events.
From and after the occurrence of an event described in Section
11(a)(ii) of the Rights Agreement, if the Rights evidenced by this Right
Certificate are or were at any time on or after the earlier of (x) the date of
such event and (y) the Distribution Date (as such term is defined in the Rights
Agreement) acquired or beneficially owned by an Acquiring Person or an
B-1
Associate or Affiliate of an Acquiring Person (as such terms are defined in the
Rights Agreement), such Rights shall become void, and any holder of such Rights
shall thereafter have no right to exercise such Rights.
This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates,
upon surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, at the
Company's option, the Rights evidenced by this Certificate (i) may be redeemed
by the Company at a redemption price of $0.001 per Right or (ii) may be
exchanged in whole or in part for shares of the Company's Common Stock, par
value $0.001 per share, or Preferred Shares.
No fractional Preferred Shares will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting 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 ____________, _____.
B-2
Attest: SCOLR, INC.
________________________________ By: _____________________________
Countersigned:
OTR, Inc.,
Rights Agent
By: __________________________
Authorized Signature
B-3
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer the Right Certificate.)
FOR VALUE RECEIVED ___________________________________ hereby
sells, assigns and transfers unto ___________________________________________
__________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _______________________________,
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.
Date: ______________ __, _______
__________________________________
Signature
Signature Guaranteed:
Signatures should be guaranteed by an eligible guarantor
institution (bank, stock broker or savings and loan association with membership
in an approved signature medallion program).
_________________________________________________
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
_________________________________________________
B-4
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Right Certificate.)
To: SCOLR, INC.:
The undersigned hereby irrevocably elects to exercise
_______________ Rights represented by this Right Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
_______________________________________________________________________________
(Please print name and address)
_______________________________________________________________________________
Dated: _____________ __, ______
________________________________
Signature
Signature Guaranteed:
Signatures should be guaranteed by an eligible guarantor
institution (bank, stock broker or savings and loan association with membership
in an approved signature medallion program).
B-5
Form of Reverse Side of Right Certificate -- continued
_______________________________
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
________________________________
NOTICE
The signature in the foregoing Forms of Assignment and Election
must conform to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-6
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On November 1, 2002, the Board of Directors of SCOLR, Inc.
(the "Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of Common Stock, par value $0.001 per share
(the "Common Shares") outstanding on November 12, 2002 (the "Record Date")
to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock, par value $0.01 per share (the "Preferred
Shares"), of the Company, at a price of $15.00 per one one-thousandth of a
Preferred Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and OTR, Inc., as Rights Agent (the "Rights
Agent").
Until the earlier to occur of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired beneficial ownership of 15% or more of the
outstanding Common Shares or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 15% or more of
the outstanding Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Share certificates outstanding as of the Record Date, by such Common
Share certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date,
the Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Share certificates issued after the Record Date or 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 such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on November 1, 2012 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed by the Company, in each case, as described below.
C-1
The Purchase Price payable, and the number of Preferred Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares, (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then current market price of the Preferred Shares or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one
one-thousandths of a Preferred Share issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares or
a stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a quarterly dividend
payment of 1000 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to an
aggregate payment of 1000 times the aggregate payment made per Common Share.
Each Preferred Share will have 1000 votes, voting together with the Common
Shares. In the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
1000 times the amount received per Common Share. These rights are protected by
customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
Preferred Share purchasable upon exercise of each Right should approximate the
value of one Common Share.
From and after the time any Person becomes an Acquiring Person,
if the Rights evidenced by this Right Certificate are or were at any time on or
after the earlier of (x) the date of such event and (y) the Distribution Date
(as such term is defined in the Rights Agreement) acquired or beneficially owned
by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as
such terms are defined in the Rights Agreement), such Rights shall become void,
and any holder of such Rights shall thereafter have no right to exercise such
Rights.
In the event that, at any time after a Person becomes an
Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold, proper provision will be made so that each holder of a Right
will thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that any person
becomes an Acquiring Person, proper provision shall be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person and its
Affiliates and Associates (which will thereafter be void), will thereafter have
the right to receive upon exercise that number of Common Shares having a market
value of
C-2
two times the exercise price of the Right. If the Company does not have
sufficient Common Shares to satisfy such obligation to issue Common Shares, or
if the Board of Directors so elects, the Company shall deliver upon payment of
the exercise price of a Right an amount of cash or securities equivalent in
value to the Common Shares issuable upon exercise of a Right; provided that, if
the Company fails to meet such obligation within 30 days following the date a
Person becomes an Acquiring Person, the Company must deliver, upon exercise of a
Right but without requiring payment of the exercise price then in effect, Common
Shares (to the extent available) and cash equal in value to the difference
between the value of the Common Shares otherwise issuable upon the exercise of a
Right and the exercise price then in effect. The Board of Directors may extend
the 30-day period described above for up to an additional 60 days to permit the
taking of action that may be necessary to authorize sufficient additional Common
Shares to permit the issuance of Common Shares upon the exercise in full of the
Rights.
At any time after any Person becomes an Acquiring Person and
prior to the acquisition by any person or group of a majority of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one Common Share per Right (subject to
adjustment).
With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the date
of exercise.
At any time prior to the time any 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 $0.001 per Right (the "Redemption Price"). The
redemption of the Rights 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. 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.
The terms of the Rights may be amended by the Board of Directors
of the Company without the consent of the holders of the Rights, except that
from and after such time as any person becomes an Acquiring Person no such
amendment may adversely affect the interests of the holders of the Rights (other
than the Acquiring Person and its Affiliates and Associates).
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated November 6, 2002. A copy of the Rights Agreement is available free of
charge from the Company. This summary
C-3
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.
C-4
