Exhibit 4.1
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CNS, INC.
and
XXXXX FARGO BANK MINNESOTA, N.A.
Rights Agent
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AMENDED AND RESTATED RIGHTS AGREEMENT
Dated as of December 20, 2002
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TABLE OF CONTENTS
Section Page
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Section 1. Certain Definitions................................................6
Section 2. Appointment of the Rights Agent...................................13
Section 3. Issue of Rights Certificates......................................13
Section 4. Form of Rights Certificates.......................................15
Section 5. Countersignature and Registration.................................17
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen
Rights Certificates...............................................18
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights............................................................21
Section 8. Cancellation and Destruction of Rights Certificates...............25
Section 9. Reservation and Availability of Capital Stock.....................26
Section 10. Preferred Stock Record Date......................................28
Section 11. Adjustment of Purchase Price, Number and Kind of
Stock or Number of Rights........................................29
Section 12. Certificate of Adjusted Purchase Price or Number of
Stock............................................................42
Section 13. Consolidation, Merger, Statutory Share Exchange or
Sale or Transfer of Assets, Cash Flow or Earning
Power............................................................42
Section 14. Fractional Rights and Fractional Stock...........................46
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Section 15. Rights of Action.................................................49
Section 16. Agreement of Rights Holders......................................50
Section 17. Rights Certificate Holder Not Deemed a Shareholder...............51
Section 18. Concerning the Rights Agent......................................51
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.....................................................52
Section 20. Duties of Rights Agent...........................................53
Section 21. Change of Rights Agent...........................................56
Section 22. Issuance of New Rights Certificates..............................58
Section 23. Redemption and Termination.......................................58
Section 24. Exchange.........................................................60
Section 25. Notice of Certain Events.........................................62
Section 26. Notices..........................................................64
Section 27. Supplements and Amendments.......................................64
Section 28. Successors.......................................................65
Section 29. Benefits of this Agreement.......................................65
Section 30. Administration of Agreement......................................66
Section 31. Severability.....................................................66
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Section 32. Governing Law....................................................66
Section 33. Counterparts.....................................................67
Section 34. Descriptive Headings.............................................67
[Form of Rights Certificate].................................................74
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, amended and restated as of December 20, 2002 (the
"Agreement"), between CNS, Inc., a Delaware corporation (the "Company"), and
Xxxxx Fargo Bank Minnesota, N.A., a Minnesota corporation (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on July 20, 1995, the Board of Directors of the Company (the
"Board") authorized and declared a dividend distribution of one Right (as such
term is hereinafter defined) for each outstanding share of the Company's Common
Stock, par value $.01 per share (the "Common Stock") outstanding at the close of
business on August 3, 1995 (the "Record Date"), each Right representing the
right to purchase one one-hundredth of a share of Series A Junior Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock attached hereto as Exhibit A, upon
the terms and subject to the conditions hereinafter set forth (the "Rights"),
and further authorized the issuance of one Right with respect to each share of
Common Stock that would become outstanding after the close of business on the
Record Date in accordance with the terms and subject to the conditions
hereinafter set forth;
WHEREAS, the Company and the Rights Agent entered into a Rights
Agreement on July 20, 1995, which permitted the amendment thereof;
WHEREAS, the Board of Directors of the Company authorized the amendment
and restatement of the Rights Agreement on January 23, 2002;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
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Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated in the specified sections of this
Agreement:
(a) "Act" shall have the meaning set forth in Section 9(c)
hereof.
(b) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as
such term is hereinafter defined) and Associates (as such term is
hereinafter defined) of such Person, without the prior approval of a
majority of the members of the Board of Directors of the Company, shall
be the Beneficial Owner (as such term is hereinafter defined) of voting
securities having seventeen percent (17%) or more of the then voting
power of the Company, but shall not include (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the
Company or of any Subsidiary of the Company, or (iv) any entity
organized, appointed or established by the Company for or pursuant to
the terms of any such plan; provided, however, that if a Person is the
Beneficial Owner at the close of business on the date of this Agreement
of seventeen percent (17%) or more of the voting power of the Company,
such Person shall not be deemed an Acquiring Person unless and until
such Person acquires any additional Common Stock in any manner other
than pursuant to a stock dividend, stock split, recapitalization or
similar transaction that does not affect the percentage of outstanding
Common Stock beneficially owned by such Person. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result
of an acquisition of Common Stock by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to seventeen percent (17%) or
more of the then voting power of the Company then outstanding;
provided, however, that if a Person shall become the
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Beneficial Owner of seventeen percent (17%) or more of the then voting
power of the Company then outstanding by reason of shares purchased by
the Company and shall, after such share purchases by the Company,
become the Beneficial Owner of any additional Common Stock of the
Company, then such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if the majority of the members of the
Board of Directors of the Company then in office determines in good
faith that a Person who would otherwise be an "Acquiring Person", as
defined pursuant to the foregoing provisions of this paragraph (a), has
become such inadvertently, without any intention of changing or
influencing control of the Company, and such Person divests as promptly
as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an Acquiring Person, as defined pursuant
to the foregoing provisions of this paragraph (a), then such Person
shall not be deemed to be an "Acquiring Person" for any purposes of
this Agreement.
(c) "Acquisition Event" shall mean the Flip-In Event or any
event described in Section 13(a) hereof.
(d) "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.
(e) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or
indirectly, including without limitation securities
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with respect to which such Person or any such Person's
Affiliates or Associates has "beneficial ownership" pursuant
to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Agreement;
(ii) which such Person or any of such Person's
Affiliates or Associates has (A) the right or obligation to
acquire (whether such right or obligation is exercisable or
effective immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding
(whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights (other than the Rights at any
time prior to the occurrence of an Acquisition Event, but
thereafter including the Rights acquired from and after the
Distribution Date (as defined in Section 3(a) below) other
than pursuant to Section 3(a) below), warrants or options, or
otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own,"
securities tendered pursuant to a tender or exchange offer
made by 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 (whether or not in
writing); provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," any
security under this clause (B) if the agreement, arrangement
or understanding to vote such security: (1) arises solely from
a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act, and
(2) is not also then reportable by such
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Person 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 (or any Affiliate or Associate
thereof) with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (whether or not in writing and other than
customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of
securities), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in clause
(B) of subparagraph (ii) of this paragraph (d)) or disposing
of any voting securities of the Company.
Notwithstanding the foregoing, a Person shall not be
deemed to be the "Beneficial Owner" of or to "beneficially
own" any securities that are issued, or proposed to be issued,
to such Person pursuant to any stock option plan or other
employee compensation plan or arrangement of the Company or
any of its Subsidiaries or any securities for which such
Person serves as trustee pursuant to an employee stock
ownership or similar plan of the Company or any of its
Subsidiaries. Furthermore, directors and officers of the
Company shall not be deemed to beneficially own each others
Common Stock solely due to their status as a director or
officer 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
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securities not then actually issued and outstanding which such
Person would be deemed to own beneficially hereunder.
(f) "Board" shall have meaning set forth in the preamble.
(g) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the States of
Minnesota or New York are authorized or obligated by law or executive
order to close.
(h) "Close of business" on any given date shall mean 5:00
P.M., Minneapolis, Minnesota time, on such date; provided, however,
that if such date is not a Business Day it shall mean 5:00 P.M.,
Minneapolis, Minnesota time, on the next succeeding Business Day.
(i) "Common Stock" shall mean the Common Stock, par value $.01
per share, of the Company (as such term is defined in the introductory
paragraphs above) or any other shares of capital stock of the Company
into which the Common Stock shall be reclassified or changed, except
that "Common Stock" when used with reference to any Person other than
the Company shall mean the shares of capital stock of such Person (if
such Person is a corporation) of any class or series, or units of
equity interests in such Person (if such Person is not a corporation)
of any class or series, the terms of which do not limit (as a fixed
amount and not merely in proportional terms) the amount of dividends or
income payable or distributable on such class or series or the amount
of assets distributable on such class or series upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person and
do not provide that such class or series is subject to redemption at
the option of such Person, or any shares of capital stock or units of
equity interests into which the foregoing shall be reclassified or
changed; provided,
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however, that if at any time there shall be more than one such class or
series of capital stock or equity interests of such Person, "Common
Stock" of such Person shall include all such classes and series
substantially in the proportion of the total number of shares or other
units of each class or series outstanding at such time.
(j) "common stock equivalent" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(k) "Company" shall have the meaning set forth in the
preamble.
(l) "current market price" shall have the meaning set forth in
Section 11(d) hereof.
(m) "Distribution Date" shall have the meaning set forth in
Section 3 hereof.
(n) "equivalent preferred stock" shall have the meaning set
forth in Section 11(b) hereof.
(o) "Exchange Act" shall have the meaning set forth in Section
1(c) hereof.
(p) "Exchange Ratio" shall have the meaning set forth in
Section 24(a) hereof.
(q) "Expiration Date" and "Final Expiration Date" shall have
the meanings set forth in Section 7 hereof.
(r) "Flip-In Event" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(s) "Nasdaq" shall have the meaning set forth in Section 11(d)
hereof.
(t) "Person" shall mean any individual, firm, corporation,
partnership, limited partnership, business trust, limited liability
company, unincorporated association or other entity and shall include
any successor (by merger or otherwise) of such entity.
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(u) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the
Company.
(v) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(w) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(x) "Record Date" shall have the meaning set forth in the
preamble.
(y) "Redemption Price" shall have the meaning set forth in
Section 23 hereof.
(z) "Rights" shall have the meaning set forth in the preamble.
(aa) "Rights Agent" shall have the meaning set forth in the
preamble.
(bb) "Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(cc) "Stock Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such.
(dd) "Subsidiary" shall mean, with reference to any other
Person, any corporation of which a majority of any class of equity
security is beneficially owned, directly or indirectly, by such other
Person.
(ee) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(ff) "Trading Day" shall have the meaning set forth in Section
11(d) hereof.
(gg) "Voting power of the Company" shall mean the collective
voting power of the Common Stock of the Company.
Any determination required by the definitions contained in this Section
1 shall be made by the Board of Directors of the Company in its good faith
judgment, which determination shall be final and binding on the Rights Agent.
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Section 2. Appointment of the 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 Stock) 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. In the event the Company appoints one or more Co-Rights
Agents, the respective duties of the Rights Agent and any Co-Rights Agent shall
be as the Company shall determine.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of business on the
tenth (10th) Business Day after the Stock Acquisition Date, or (ii) the
close of business on the tenth (10th) Business Day (or such later date
as may be determined by action of the majority of the members of the
Board of Directors of the Company prior to such time as any Person
becomes an Acquiring Person) after the date of the commencement of, or
first public announcement of the intent of any Person (other than the
Company, any Subsidiary of the Company or any employee benefit plan of
the Company or of any Subsidiary of the Company or any entity
organized, appointed or established by the Company for or pursuant to
the terms of any such plan), to commence, a tender or exchange offer
which would result in such person becoming an Acquiring Person
(including any such date which is after the date of this Agreement and
prior to the issuance of the Rights) (the earliest of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for Common Stock registered in the names
of the holders of the Common Stock (which certificates for
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Common Stock shall be deemed also to be certificates for Rights) and
not by separate certificates, and (y) the Rights (and the right to
receive certificates therefor) will be transferable only in connection
with the transfer of the underlying shares of Common Stock (including a
transfer to the Company). As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, postage prepaid mail,
to each record holder of the Common Stock as of the close of business
on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in
substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held. As of and
after the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.
(b) On the Record Date, or as soon as practicable thereafter,
the Company will send a copy of a Summary of the Shareholders' Rights
Plan, in substantially the form attached hereto as Exhibit C (the
"Summary of Rights"), by first-class, postage prepaid mail, to each
record holder of the Common Stock as of the close of business on the
Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Stock outstanding
as of the Record Date, until the Distribution Date, the Rights will be
evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7 hereof), the
surrender for transfer of any of the certificates for the Common Stock
outstanding on the Record Date shall also constitute the transfer of
the Rights associated with the Common Stock represented by such
certificate.
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(c) Certificates for the Common Stock issued after the Record
Date but prior to the earlier of the Distribution Date or the
Expiration Date, shall be deemed also to be certificates for Rights,
and shall bear the following legend:
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between
CNS, Inc. and Xxxxx Fargo Bank Minnesota, N.A. as amended and
restated as of December 20, 2002, as such may subsequently be
amended (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is
on file at the principal offices of CNS, 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. CNS, Inc. will mail
to the holder of this certificate a copy of the Rights
Agreement without charge promptly after receipt of a written
request therefor. Under certain circumstances, Rights issued
to, or held by, an Acquiring Person, or an Affiliate or
Associate thereof (as such terms are defined in the Rights
Agreement) and any subsequent holder of such Rights may become
null and void.
With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the Expiration
Date, the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone and the
registered holders of Common Stock shall also be the registered holders
of the associated Rights, and the surrender for transfer of any of such
certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. In
the event the Company purchases or acquires any Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated
with such Common Stock shall be deemed canceled and retired so that the
Company shall not be entitled to exercise any Rights associated with
the Common Stock which is no longer outstanding.
Section 4. Form of Rights Certificates.
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(a) The Rights Certificates (and the forms of election to
exercise and of assignment to be printed on the reverse thereof) shall
each be substantially in the form attached hereto as Exhibit B and may
have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of shares of
Preferred Stock (or Common Stock, as the case may be) as shall be set
forth therein at the price per share set forth therein (the "Purchase
Price"), but the number of such shares and the Purchase Price shall be
subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes
such, except a transferee purchasing from or through a nationally
recognized broker-dealer where such transferee and such transferee's
Associates and Affiliates do not collectively acquire, and will not
have acquired during the preceding twenty (20) calendar days, in
combination with the proposed transfer, an amount of Common Stock equal
to more than one percent (1%) of the outstanding shares of Common
Stock, and
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(iii) a transferee of an Acquiring Person (or any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the
Acquiring Person to or on behalf of holders of equity interests in such
Acquiring Person or to any Person with whom the Acquiring Person has
any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the majority of the members
of the Board of Directors of the Company otherwise conclude in good
faith is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible and reasonably identifiable as such) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of such Agreement.
The provisions of Section 7(e) of the Rights Agreement shall be
operative whether or not the foregoing legend is contained on any such Rights
Certificate.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its President, its Chief
Financial Officer or any Vice President either manually or by facsimile
signature, which shall be attested by the Secretary or any
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Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed
any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the
Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the
Company; and any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its offices in South St. Xxxx, Minnesota
or New York, New York, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names
and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 14 hereof, at any
time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates (other than Rights Certificates
18
representing rights that have become null and 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
Rights Certificate or Certificates, entitling the registered holder to
purchase a like number of shares of Preferred Stock as the Rights
Certificate or Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine
or exchange any Rights Certificate shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up,
combined or exchanged at the office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate or Certificates
until the registered holder shall have completed and signed the
certificate in the form of assignment on the reverse side of such
Rights Certificate or Certificates and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e), Section 14 and Section 24, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Rights Certificate,
19
and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new
Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the
Rights Certificate so lost, stolen, destroyed or mutilated.
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Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) The registered holder of any Rights Certificate may
exercise the Rights evidenced thereby (except as otherwise provided
herein including without limitation, the restrictions on exercisability
set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof)
in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to
exercise on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such
purpose, together with payment of the Purchase Price for each one
one-hundredth of a share of Preferred Stock (or, if applicable, such
other number of shares or other securities) as to which the Rights are
exercised, at or prior to the earlier of (i) the close of business on
July 20, 2005 (the "Final Expiration Date"), or (ii) the time at which
the Rights are redeemed as provided in Section 23 hereof (such earlier
time being herein referred to as the "Expiration Date"). Any Person who
prior to the Distribution Date becomes a record holder of shares of
Common Stock may exercise all of the rights of a registered holder of a
Rights Certificate with respect to the Rights associated with such
shares of Common Stock in accordance with and subject to the provisions
of this Agreement, including the provisions of Section 7(e) hereof, as
of the date such Person becomes a record holder of shares of Common
Stock.
(b) The Purchase Price for each one one-hundredth of a share
of Preferred Stock pursuant to the exercise of a Right shall initially
be One Hundred Twenty Dollars ($120), and shall be subject to
adjustment from time to time as provided in Section 11 hereof
21
and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to exercise duly
executed, accompanied by payment of the Purchase Price for the shares
to be purchased and an amount equal to any applicable transfer tax to
be paid by the holder of such Right Certificate in accordance with
Section 9, the Rights Agent shall thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock
(or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the number of shares of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company, in its
sole discretion, shall have elected to deposit the shares of Preferred
Stock issuable upon exercise of the Rights hereunder into a depositary,
requisition from the depositary agent depositary receipts representing
such number of one one-hundredth of a share of Preferred Stock as are
to be purchased (in which case certificates for the shares of Preferred
Stock represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash, if any, to be paid in
lieu of fractional shares in accordance with Section 14 hereof, (iii)
after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate, after receipt
thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. The payment of the
22
Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified check,
cashier's check, bank draft or money order payable to the order of the
Company, except that if so provided by the Board of Directors of the
Company, the payment of the Purchase Price following the Flip-In Event
and until the first occurrence of an event described in Section 13 may
be made wholly or in part by delivery of a certificate or certificates
(with appropriate stock powers executed in blank attached thereto)
evidencing a number of shares of Common Stock of the Company equal to
the then Purchase Price divided by the closing price (as determined
pursuant to Section 11(d) hereof) per share of Common Stock on the
Trading Day immediately preceding the date of such exercise. In the
event that the Company is obligated to issue other securities of the
Company, pay cash and/or distribute other property pursuant to Section
11(a)(iii) hereof, the Company will make all arrangements necessary so
that such other securities, cash, and/or property are available for
distribution by the Rights Agent, if and when appropriate. In addition,
in the case of an exercise of the Rights by a holder pursuant to
Section 11(a)(ii), the Rights Agent shall return such Rights
Certificate to the registered holder thereof after imprinting, stamping
or otherwise indicating thereon that the rights represented by such
Rights Certificate no longer include the rights provided by Section
11(a)(ii) of the Rights Agreement and if less than all the Rights
represented by such Rights Certificate were so exercised, the Rights
Agent shall indicate on the Rights Certificate the number of Rights
represented thereby which continue to include the rights provided by
Section 11(a)(ii).
(d) In case the registered holder of any Rights Certificate
shall exercise (except pursuant to Section 11(a)(ii)) less than all the
Rights evidenced thereby, a new Rights
23
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to the
registered holder of such Rights Certificate or to his duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the occurrence of a Flip-In Event, any Rights
beneficially owned by (a) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (b) except as provided below or in
Section 4(b), a transferee of an Acquiring Person (or any such
Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, and (c) except as provided below, a transferee of
an Acquiring Person (or any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (i) a transfer
(whether or not for consideration) from the Acquiring Person to or on
behalf of holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (ii) a
transfer which the majority of the members of the Board of Directors of
the Company otherwise conclude in good faith is part of a plan,
arrangement or understanding which has as a primary purpose or effect
avoidance of this Section 7(e), shall become null and void without any
further action, and any holder of such Rights shall thereupon have no
right to exercise such Rights under any provision of this Agreement. A
majority of the members of the Board of Directors of the Company may in
appropriate circumstances waive application of this Section 7(e) and
the requirements of Section 4(b) to any transfer by an Acquiring Person
in connection with a transfer or
24
series of transfers which cause an Acquiring Person to become the
Beneficial Owner of voting securities having less than seventeen
percent (17%) of the voting power of the Company. The Company shall use
all reasonable efforts to insure that the provisions of this Section
7(e) hereof are complied with, but shall have no liability to any
holder of Rights for the inability to make any determinations with
respect to an Acquiring Person or any of their respective Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated
to undertake any action with respect to a registered holder of any
Rights Certificate upon the occurrence of any purported exercise as set
forth in this Section 7 unless the certificate contained in the
appropriate form of election to purchase set forth on the reverse side
of the Rights Certificate surrendered for such exercise shall have been
completed and signed by the registered holder thereof and the Company
shall have been provided with such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) of such Rights
Certificate or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights
25
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all canceled Rights
Certificates to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares
of Preferred Stock (and, following the occurrence of an Acquisition
Event, Common Stock and/or other securities) or any authorized and
issued shares of Preferred Stock (and following the occurrence of an
Acquisition Event, Common Stock and/or other securities) held in its
treasury, the number of shares of Preferred Stock (and, following the
occurrence of an Acquisition Event, Common Stock and/or other
securities) that, except as provided in Section 11(a)(iii) and subject
to Section 7(e) hereof, will be sufficient to permit the exercise in
full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of an Acquisition Event, Common Stock and/or other
securities) issuable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the Distribution Date, a registration
statement under the Securities Act of 1933 (the "Act"), with respect to
the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, (ii) cause such registration statement to
become effective as soon as practicable after such filing, and (iii)
cause such registration statement to
26
remain effective (with a prospectus at all times meeting the
requirements of the Act) until the date of the expiration of the
Rights. The Company will also take such action as may be appropriate
under the Blue Sky laws of the various states. The Company may
temporarily suspend, for a period of time not to exceed ninety (90)
calendar days, the exercisability of the Rights in order to prepare and
file any required registration statement. Upon any such suspension, the
Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction unless the
qualification in such jurisdiction shall have been obtained, the
exercise thereof shall be permitted under applicable law and a
registration statement shall have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of Preferred
Stock (and, following the occurrence of an Acquisition Event, Common
Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares or securities.
(e) 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 Rights Certificates and of any certificates for shares of Preferred
Stock (or Common Stock and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights
27
Certificates to a person other than, or the issuance or delivery of the
shares of Preferred Stock (or Common Stock and/or other securities, as
the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for
shares of Preferred Stock (or Common Stock and/or other securities, as
the case may be) in a name other than that of the registered holder
upon the exercise of any Rights until such tax shall have been paid
(any such tax being payable by the holder of such Rights Certificate at
the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for shares of Preferred Stock (or Common Stock, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Preferred Stock (or Common Stock,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or Common Stock, as the case
may be) transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock, as the case may be) transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other
28
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Stock or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and in Section 7(e) hereof,
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open, such
holder would have owned upon such
29
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. If an event
occurs which would require an adjustment under both Section 11(a)(i)
and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to any
adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, at the close of
business on the tenth (10th) Business Day after the Stock Acquisition
Date (the "Flip-In Event"), proper provision shall be made so that each
holder of a Right, except as provided below and in Section 7(e) hereof,
shall thereafter have a right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this
Agreement, in lieu of shares of Preferred Stock, such number of shares
of Common Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then number of
one one-hundredths of a share of Preferred Stock for which a Right is
then exercisable and dividing that product by (y) fifty percent (50%)
of the current market price (determined pursuant to Section 11(d)
hereof) per share of Common Stock on the date on which the first of the
events listed above in this subparagraph (ii) occurs. In the event that
any Person shall become an Acquiring Person and the Rights shall then
be outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the
Rights.
30
(iii) In lieu of issuing shares of Common Stock in accordance
with Section 11(a)(ii) hereof, the Company may, if the majority of the
Board of Directors of the Company then in office determine that such
action is necessary or appropriate and not contrary to the interests of
holders of Rights, elect to issue or pay, upon the exercise of the
Rights, cash, property, shares of Common Stock, other securities or any
combination thereof having an aggregate value equal to the value of the
shares of Common Stock which otherwise would have been issuable
pursuant to Section 11(a)(ii), which value shall be determined by a
nationally recognized investment banking firm selected by a majority of
the members of the Board of Directors of the Company then in office.
For purposes of the preceding sentence, the value of any preferred
stock which a majority of the members of the Board of Directors of the
Company determines to be a "common stock equivalent" shall be deemed to
have the same value as the Common Stock. Any such election by the Board
of Directors of the Company must be made and publicly announced within
sixty (60) calendar days of the Flip-In Event. Following the occurrence
of the Flip-In Event, a majority of the members of the Board of
Directors of the Company then in office may suspend the exercisability
of the Rights for a period of up to sixty (60) calendar days following
the occurrence of such Flip-In Event to the extent that the Board of
Directors of the Company has not determined whether to exercise their
rights of election under this paragraph (a)(iii). In the event of any
such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended.
31
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record date)
Preferred Stock (or shares having the same rights, privileges and
preferences as the shares of Preferred Stock ("equivalent preferred
stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if
a security convertible into Preferred Stock or equivalent preferred
stock) less than the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall
be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares
of Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so
to be offered are initially convertible); provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of capital stock of
the Company issuable upon exercise of one Right. In case such
subscription price may be paid in a consideration part
32
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, whose
determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the
Rights. Shares of Preferred Stock owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are
not so issued, the Purchase Price shall be adjusted to be the Purchase
Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which
the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of
the earnings or retained earnings of the Company), assets (other than a
dividend payable in Preferred Stock, but including any dividend payable
in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to
be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per one one-hundredth of a
share of Preferred Stock on such record date, less the fair market
value (as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent) of the
portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or
33
warrants applicable to a share of Preferred Stock and the denominator
of which shall be such current market price (as determined pursuant to
Section 11(d) hereof) per one one-hundredth of a share of Preferred
Stock; 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 be adjusted to be
the Purchase Price which would have been in effect if such record date
had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that
the current market price per share of the Common Stock is
determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution
on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other
than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the
expiration of the thirty (30) Trading Day period after the
ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or
reclassification, then, and in each such case, the "current
market price" shall be properly adjusted to take into account
ex-dividend
34
trading. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal
national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any
national securities exchange, the last quoted sale price or,
if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq") or such other system then in use,
or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market
maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market
in the Common Stock, the fair value of such shares on such
date as determined in good faith by the majority of the
members of the Board of Directors of the Company then in
office shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which
the shares of Common Stock are listed or
35
admitted to trading is open for the transaction of business
or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, a Business
Day. If the Common Stock is not publicly held or not so listed
or traded, "current market price" per share shall mean the
fair value per share as determined in good faith by the Board
of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall
be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "current market price" per share of Preferred Stock shall
be determined in the same manner as set forth above for the
Common Stock in clause (i) of this Section 11(d) (other than
the last sentence thereof). If the current market price per
share of Preferred Stock cannot be determined in the manner
provided above, the "current market price" per share of
Preferred Stock shall be conclusively deemed to be an amount
equal to one hundred (100) times the current market price per
share of Common Stock, as appropriately adjusted for stock
splits, stock dividends or similar transactions after the date
hereof. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, "current market price"
per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; provided, however, that any
adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations
36
under this Section 11 shall be made to the nearest cent or to the
nearest ten-thousandth of a share of Common Stock or other share or
one-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Right shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in Section 11(a), (b), (c),
(e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7,
9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply
on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the
right to purchase, at the adjusted Purchase Price, the number of shares
of Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price
as a result of the calculations made in Sections 11(b) and (c), each
Right outstanding immediately prior to the making of such adjustment
shall thereafter evidence the right to purchase, at the adjusted
Purchase Price,
37
that number of one one-hundredth of a share of Preferred Stock
(calculated to the nearest one-millionth) obtained by (i) multiplying
(x) the number of one one-hundredth of a share covered by the 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 shares of Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-hundredth of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one ten-thousandth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to
be made. This record date may be the date on which the Purchase Price
is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) calendar days later than the
date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to
be distributed to holders of
38
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such
holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified
in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredth of a share of Preferred Stock
issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase
Price per share and the number of shares which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated or par value, if any,
of the shares of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and non-assessable shares of Preferred Stock,
Common Stock or other securities at such adjusted Purchase Price.
39
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date the shares of Preferred Stock and
other capital stock or securities of the Company, if any, issuable upon
such exercise over and above the shares of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such
holder a due xxxx or other appropriate instrument evidencing such
holder's right to receive such additional shares upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions
in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that in their sole
discretion a majority of the members of the Board of Directors of the
Company then in office shall determine to be advisable in order that
any (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any shares of Preferred Stock at less than
the current market price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into
or exchangeable for shares of Preferred Stock, (iv) stock dividends or
(v) issuance of rights, options or warrants referred to in this Section
11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with, (ii) merge with
or into, or (iii) sell or transfer (or
40
permit any Subsidiary to sell or transfer), in one or more
transactions, assets, cash flow or earning power aggregating more than
fifty percent (50%) of the assets, cash flow or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person if
at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities
outstanding or agreement in effect which would substantially diminish
or otherwise eliminate the benefits intended to be afforded by the
Rights.
(o) The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by Sections 23, 24
or 27 hereof, take (or permit any Subsidiary to take) any action the
purpose or effect of which is to diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after
the date of this Agreement and prior to the Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock,
(iii) combine the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock, the number of Rights
associated with each share of Common Stock shall be proportionately
adjusted so that the number of Rights thereafter associated with each
share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share
of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the
denominator
41
of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(q) The exercise of Rights under Section 11(a)(ii) shall only
result in the loss of rights under Section 11(a)(ii) to the extent so
exercised and shall not otherwise affect the rights represented by the
Rights under this Rights Agreement, including the rights represented by
Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of Stock.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Preferred Stock
and the Common Stock a copy of such certificate, and (c) mail a brief summary
thereof to each holder of a Rights Certificate in accordance with Section 26
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger, Statutory Share Exchange or Sale or
Transfer of Assets, Cash Flow or Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (w) the Company shall effect a statutory share
exchange with the outstanding Common Stock of the Company being
exchanged for stock or other securities of any other Person, money or
other property, (x) the Company shall consolidate with, or merge with
and into, any other Person, and the Company shall not be the continuing
or surviving corporation of
42
such consolidation or merger, (y) any Person shall consolidate with, or
merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger
and, in connection with such consolidation or merger, all or part of
the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or
any other property, or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer),
in one or more transactions, assets, cash flow or earning power
aggregating more than fifty percent (50%) of the assets, cash flow or
earning power of the Company and its Subsidiaries (taken as a whole) to
any Person or Persons (other than the Company or any Subsidiary of the
Company), then, and in each such case, proper provision shall be made
so that: (i) each holder of a Right, shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and freely tradable
shares of Common Stock of the Principal Party (as hereinafter defined),
free and clear of liens, rights of call or first refusal, encumbrances
or other adverse claims, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the then number of
one one-hundredth of a share of Preferred Stock for which a Right is
then exercisable (without giving effect to the occurrence, if any, of
any transaction described in Section 11(a)(ii) hereof) and (2) dividing
that product by fifty percent (50%) of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of
such consolidation, merger, share exchange, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by
virtue of such consolidation, merger, share exchange, sale or transfer,
all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be
43
deemed to refer to such Principal Party, it being specifically intended
that the provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of
its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be
possible, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (w),
(x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger,
share exchange or consolidation, and if no securities are so
issued, the Person that is the other party to such merger,
share exchange or consolidation; and
(ii) in the case of any transaction described in (z)
of the first sentence in Section 13(a), the Person that is the
party receiving the greatest portion of the assets, cash flow
or earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of
such Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of
another Person the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of
44
which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value; and (3) in case such Person is owned,
directly or indirectly, by a joint venture formed by two or more
Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such
party were a "Subsidiary" of both or all of such joint venturers and
the Principal Parties in each such chain shall bear the obligations set
forth in this Section 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of its common stock which have
not been issued or reserved for issuance to permit the exercise in full
of the Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for
the terms set forth in paragraphs (a) and (b) of this Section 13 and
further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of
this Section 13, the Principal Party will:
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after
such filing and (B) remain
45
effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date;
(ii) take all other actions as may be necessary to
enable the Principal Party to issue the securities upon
exercise of the Rights , including but not limited to the
registration or qualification of such securities under all
requisite securities laws of jurisdictions of the various
states and the listing of such securities on such exchanges
and trading markets as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights
historical financial statements for the Principal Party and
each of its Affiliates which comply in all material respects
with the requirements for registration on Form 10 under the
Exchange Act.
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 share exchanges or other transfers. The
rights under this Section 13 shall be in addition to the rights to
exercise Rights and adjustments under Section 11(a)(ii) and shall
survive any exercise thereof.
Section 14. Fractional Rights and Fractional Stock.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section
11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be
paid to the registered holders of the Rights Certificates with regard
to which such
46
fractional Rights would otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole
Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price of the Rights for any
day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the
Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted
to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted sale 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 shall
be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock) upon
exercise of the Rights or to distribute certificates which
47
evidence fractional shares of Preferred Stock (other than fractions
which are integral multiples of one one-hundredth of a share of
Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-hundredth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts,
pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide
that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial
owners of the shares of Preferred Stock represented by such depositary
receipts. In lieu of fractional shares of Preferred Stock that are not
integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at
the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of one
one-hundredth of a share of Preferred Stock. For purposes of this
Section 14(b), the current market value of one one-hundredth of a share
of Preferred Stock shall be one one-hundredth of the closing sale price
of a share of Preferred Stock (as determined pursuant to of Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of an Acquisition Event, the
Company shall not be required to issue fractions of shares of Common
Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current
market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one (1) share of
48
Common Stock shall be the closing sale price of a share of Common Stock
(as determined pursuant to Section 11(d)(i) hereof) for the Trading Day
immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this
Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Holders of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys' fees, incurred by them in any action to enforce
the provisions of this Agreement.
49
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the office or offices of the Rights Agent designated for
such purposes, duly endorsed or accompanied by a proper instrument of
transfer;
(c) the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the
Rights Certificate or the associated Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, prohibiting or otherwise
50
restraining performance of such obligation; provided, however, that the
Company shall use reasonable efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done
or omitted by the Rights Agent in connection with the
51
acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Agreement in reliance
upon any Rights Certificate or certificate for Common Stock or for
other securities of the Company, instrument of assignment or transfer,
power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by
it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons or otherwise
upon the advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent
shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any
of the parties hereto; provided, however, that such corporation would
be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any
of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in
52
case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of
the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates
so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may
countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have
the full force provided in the Rights Certificates and in this
Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected
by it (who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to
the Rights Agent as to any action taken or omitted by it in good faith
and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter (including, without limitation, the identity of any
Acquiring Person and the determination of "current market
53
price") be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate
signed by the Chief Executive Officer, the President, the Chief
Financial Officer or any Vice President, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except
as to its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by
the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except
its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Sections 11 or 13
hereof or responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that would
require any
54
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 Common Stock or Preferred Stock to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any shares of
Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments
and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of
this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chief Executive Officer, the President, the Chief
Financial Officer or any Vice President, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement. Nothing herein
55
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, or omission,
default, neglect or misconduct of any such attorneys or agents or for
any loss to the Company resulting from any such act, or omission,
default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) calendar days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) calendar days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
56
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of thirty (30) calendar days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a corporation organized and
doing business under the laws of the United States or of the States of Minnesota
or New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the States
of Minnesota or New York), in good standing, having a principal office in the
States of Minnesota or New York, 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 $50,000,000 or (b) an Affiliate
controlled by a corporation described in clause (a) of this sentence. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided
57
for in this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, the Company may,
if deemed necessary or appropriate by the Board, issue Rights Certificates in
connection with the sale of shares of Common Stock following the Distribution
Date.
Section 23. Redemption and Termination.
(a) (i) By a decision of a majority of the members of
the Board of Directors of the Company, the Board may, at its
option, at any time prior to the close of business on the
earlier of (i) the Flip-In Event, or (ii) the Final Expiration
Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $.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 may be made
effective at such time, on such basis and with such conditions
as the Board in its sole discretion may establish.
(ii) In addition, the majority of the members of the
Board of Directors of the Company may redeem all but not less
than all of the then outstanding Rights
58
at the Redemption Price following the occurrence of a Stock
Acquisition Date but prior to any event described in Section
13(a) either (x) if each of the following shall have occurred
and remain in effect: (1) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of a number of
shares of Common Stock in a manner satisfactory to the Board
of Directors of the Company such that such Person is
thereafter a Beneficial Owner of voting securities having less
than seventeen percent (17%) of the voting power of the
Company, and (2) there is no other Person, immediately
following the occurrence of the event described in clause (1),
who is an Acquiring Person, or (y) in connection with any
transaction not involving an Acquiring Person or an Affiliate
or Associate of an Acquiring Person.
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall
have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate
and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. In the case of a redemption permitted
only under Section 23(a)(ii), evidence of which shall have been filed
with the Rights Agent, the right to exercise the Rights will terminate
and represent only the right to receive the Redemption Price only after
ten (10) Business Days following the giving of notice of such
redemption to the holders of such Rights. Within ten (10) Business Days
after the action of the Board of Directors of the Company, ordering any
such redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing
59
such notice to the Rights Agent and to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the
method by which the payment of the Redemption Price will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option,
at any time after the occurrence of an Acquisition Event, exchange all
or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become null and void pursuant to the
provisions of Section 11(a)(ii) hereof) for Common Stock at an exchange
ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board 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 Stock for or pursuant to the
terms of any such plan), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of fifty percent (50%) or
more of the voting power of the Company.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph
(a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall
60
terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock equal to the
number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange shall state the
method by which the exchange of the Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have
become null and void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Preferred Stock (or equivalent preferred
stock, as such term is defined in Section 11(b) hereof) for some or all
of the Common Stock exchangeable for Rights, at the initial rate of one
one-hundredth of a share of Preferred Stock (or equivalent preferred
stock) for each share of Common Stock, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred Stock
pursuant to the terms thereof, so that the fraction of a share of
Preferred Stock delivered in lieu of each share of Common Stock shall
have the same voting rights as one share of Common Stock.
61
(d) In the event that there shall not be sufficient shares of
Common Stock or Preferred Stock issued but not outstanding or
authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take
all such action as may be necessary to authorize additional Common
Stock or Preferred Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of such fractional shares of
Common Stock, the Company shall pay to the registered holders of the
Right Certificates with regard to which such fractional shares of
Common Stock would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole share of Common
Stock. For the purposes of this paragraph (e), the current market value
of a whole share of Common Stock shall be the closing price of a share
of Common Stock (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. In case the Company shall
propose, at any time after the Distribution Date, (a) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company), or
(b) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options, or (c) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), or (d) to effect
62
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 more than fifty percent (50%)
of the assets, cash flow or earning power of the Company and its Subsidiaries
(taken as a whole) to, any other Person, or (e) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (a) or (b) above at least twenty (20)
calendar days prior to the record date for determining holders of the shares of
Preferred Stock for purposes of such action, and in the case of any such other
action, at least twenty (20) calendar days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) of this
Agreement shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
63
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 Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
CNS, Inc.
0000 Xxxxxxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Xxxxx Fargo Bank Minnesota, N.A.
000 X. Xxxxxxx Xxxxxxxx
Xxxxx Xx. Xxxx, Xxxxxxxxx 00000
Attention: Account Management
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate 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 Board and the Rights Agent
shall from time to time, if the Board so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) prior to the Distribution Date, to change or supplement any of the
provisions hereunder which the Board may deem necessary or desirable or (iv)
following the
64
Distribution Date, to change or supplement any of the provisions hereunder in
any manner which the Board may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, however, that, following the Distribution Date, this Agreement shall
not be supplemented or amended to lengthen any time period relating to the
Rights, including, without limitation, the time period during which the Rights
may be redeemed, unless such lengthening is for the purpose of protecting,
enhancing or clarifying the rights of and benefits to the holders of the Rights
(excluding in each case Rights held by an Acquiring Person or an Associate or
Affiliate of an Acquiring Person whose Rights have or may become null and void
pursuant to Section 7(e) hereof). Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment unless the Rights Agent shall have
determined in good faith that such supplement or amendment would adversely
affect its interests under this Agreement. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be
65
for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 30. Administration of Agreement. The Board of Directors of the
Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or the Company or as may be necessary or advisable in the
administration of this Agreement, including without limitation the right and
power to interpret the Agreement and to make all determinations deemed necessary
or advisable for the administration of this Agreement. All such acts,
interpretations and determinations done or made by the Board in good faith shall
be final, conclusive and binding on the Company, the Rights Agent and the
holders of the Rights. Accordingly, the Board of Directors of the Company shall
not be liable to the holders of Rights, Rights Certificates or any other party
for any determination made, action taken, or action omitted to be taken pursuant
to the terms of this Agreement, if such determination, action or omitted action
was made or taken in good faith.
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware
66
and for all purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts made and to be performed entirely
within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the day and year first above written.
CNS, INC.
Attest:
By: /s/ Xxxxxxx Xxxxxxx By: /s/ Xxxxx Xxxxxxx
----------------------------- ----------------------------
Its Secretary Its Chief Executive Officer
XXXXX FARGO BANK MINNESOTA, N.A.
Attest:
By: /s/ Xxxxxxxxx X. Xxxxxxx By: /s/ Xxxxx Xxxxx
----------------------------- ----------------------------
Its: Assistant Vice President Its Account Manager/Officer
67
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CNS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Xxxxxx X. Xxxxx, Chief Executive Officer, and Xxxxxxxxx X. Xxxxxx,
Secretary, of CNS, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on July 20, 1995 adopted the following resolution creating a series of
One Million (1,000,000) shares of preferred stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of preferred stock of the Corporation be,
and it hereby is, created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof, are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock," par value $.01
per share, and the number of shares constituting such series shall be One
Million (1,000,000). 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 Junior Participating Preferred Stock to a number
less than that of the shares then outstanding plus the number of shares issuable
upon exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of preferred stock now or hereafter ranking prior and superior to
the shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock, in preference to the holders of shares of Common Stock, par value $.01
per share (the "Common Stock") of the Corporation and any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally
68
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 Junior Participating Preferred Stock, in an
amount per whole share (rounded to the nearest cent), subject to the provision
for adjustment hereinafter set forth, equal to 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock 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 Junior Participating
Preferred Stock. In the event the Corporation shall at any time declare or pay
any dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision (by stock split or otherwise) or combination (by reverse stock split
or otherwise) or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of shares of
Series A Junior Participating Preferred Stock were entitled immediately prior to
such event 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
(and rounding the result to the nearest whole number); and provided further that
if at any time after August 3, 1995, the Corporation shall issue any shares of
its capital stock in a reclassification or change of the outstanding shares of
Common Stock (including any such reclassification or change in connection with a
merger in which the Corporation is the surviving corporation), then in such
event the amount to which holders of Series A Junior Participating Preferred
Stock are entitled shall be appropriately adjusted to reflect such
reclassification or change.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) The holders of shares of Series A Junior Participating Preferred Stock
shall not be entitled to receive any dividends or other distributions except as
provided herein.
Section 3. Voting Rights. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to one hundred (100) votes, subject to adjustment in
the manner set forth in Section 2(A), on all matters on which holders of the
Common Stock or shareholders generally are entitled to vote.
69
(B) Except as otherwise provided herein or by applicable law, the holders
of shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters submitted
to a vote of shareholders of the Corporation.
(C) Except as set forth herein or by applicable law, holders of Series A
Junior Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock 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 Junior Participating 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 Junior
Participating 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 Junior
Participating 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 Junior Participating Preferred Stock, except dividends paid
ratably on the Series A Junior Participating 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;
(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 Junior Participating Preferred Stock, provided that the Corporation
may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Participating
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Junior Participating Preferred Stock, or any
shares of stock ranking on a parity with the Series A Junior
Participating Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
70
(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 Stock. Any shares of Series A Junior
Participating 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 to be created by resolution or resolutions of
the Board of Directors, subject to the conditions and restrictions on issuance
set forth herein or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred Stock
unless, prior thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Liquidation Preference"). Following the
payment of the full amount of the Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Liquidation Preference by
(ii) 100 (as appropriately adjusted as set forth in subparagraph C below to
reflect such events as stock splits, stock dividends and recapitalization with
respect to the Common Stock) (such number in clause (ii) being herein referred
to as the "Adjustment Number"). Following the payment of the full amount of the
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Preferred Stock and Common Stock, respectively,
holders of Series A Junior Participating Preferred Stock and holders of shares
of Common Stock shall proportionately share in the remaining assets in the ratio
of the Adjustment Number (per share of Preferred Stock) to 1 (per share of
Common Stock).
(B) In the event there are not sufficient assets available to permit
payment in full of the Liquidation Preference and the liquidation preferences of
all other series of preferred stock, if any, which rank on a parity with the
Series A Junior Participating Preferred Stock, then such remaining assets shall
be distributed ratably to the holders of such parity shares in proportion to
their respective liquidation preferences. In the event there are not sufficient
assets available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii)
71
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment 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.
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 the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise 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 Junior Participating 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. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the Corporation's preferred stock which
may hereafter be authorized as to the payment of dividends and the distribution
of assets, unless the terms of any such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds (2/3) or more of the outstanding
shares of Series A Junior Participating Preferred Stock, voting separately as a
class.
Section 11. Fractional Stock. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in liquidating distributions and to have the
benefit of all other rights of holders of Series A Junior Participating
Preferred Stock.
72
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this 21st day
of July, 1995.
Attest:
------------------------- -----------------------------
Xxxxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxx,
Secretary Chief Executive Officer
73
Exhibit B
[Form of Rights Certificate]
Certificate No. R-________ _________ Rights
NOT EXERCISABLE AFTER July 20, 2005, OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT REFERRED TO HEREIN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.](1)
Rights Certificate
CNS, INC.
This certifies that _____________________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of July 20, 1995, as amended and restated by that
certain Amended and Restated Rights Agreement dated as of December 20, 2002 (the
"Rights Agreement"), between CNS, Inc., a Delaware corporation (the "Company"),
and _______________________.
(1)The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
74
Xxxxx Fargo Bank Minnesota, N.A. (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. (Minneapolis, Minnesota time) on July
20, 2005 at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one one-hundredth of a fully paid,
non-assessable share of Series A Junior Participating Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of One Hundred Twenty
Dollars ($120) per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Exercise duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of July 20, 1995, based on the Preferred Stock
as constituted at such date.
If the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of any such
Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person or Associate or Affiliate of such
Acquiring Person except as provided in Section 4(b) of the Rights Agreement, or
(iii) under certain circumstances, a transferee of persons who became an
Acquiring Person or Affiliate or Associate of such Acquiring Person following
such transfer, such Rights shall become null and void upon the occurrence of a
Flip-In Event described in Section 11(a)(ii) of the Rights Agreement and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the
75
Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under certain circumstances specified in such Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent or
the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised (other than
pursuant to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall
be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised. If this Rights
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Rights
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.
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Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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WITNESS the facsimile signature of the proper officers of the Company.
Dated: ________________
ATTEST: CNS, INC.
_______________________ By_________________________
Secretary Title:
Countersigned:
XXXXX FARGO BANK MINNESOTA, N.A.
By_____________________
Authorized Signature
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[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby sells,
assigns and transfers unto______________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
________________ Attorney, to transfer the within Rights Certificate on
the books of the within-named Company, with full power of substitution.
The undersigned hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:
(1) this Rights Certificate
[ ] is
or
[ ] is not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such
terms are defined in the Rights Agreement); and
79
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Rights Certificate from any person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _________________
-------------------------------
Signature
Signature Medallion Guaranteed:
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: CNS, INC.:
The undersigned hereby irrevocably elects to exercise ____________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of:
__________________________________
__________________________________
__________________________________
(Please print name and address)
__________________________________
(Please insert social security
or other identifying number)
The Rights Certificate indicating the balance, if any, of such Rights
which may still be exercised pursuant to Section 11(a)(ii) of the Rights
Agreement shall be returned to the undersigned unless such person requests that
the Rights Certificate be registered in the name of and delivered to: (complete
only if Rights Certificate is to be registered in a name other than the
undersigned)
__________________________________
__________________________________
__________________________________
(Please print name and address)
__________________________________
(Please insert social security
or other identifying number)
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The undersigned hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate
[ ] are
or
[ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Rights Certificate from any person who is,
was or subsequently became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _________________
--------------------------------
Signature
Signature Medallion Guaranteed:
82
NOTICE
The signature to the foregoing Election to Exercise must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
EXHIBIT C
SUMMARY OF SHAREHOLDERS' RIGHTS PLAN
On July 20, 1995 the Board of Directors of CNS, Inc. (the "Company")
adopted a shareholder rights plan by declaring a dividend of one Right for each
outstanding share of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), to the Company's shareholders of record at the close of
business on August 3, 1995 (the "Record Date"). Except as set forth below, each
Right entitles the registered holder to purchase from the Company one
one-hundredth (1/100) of a share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Stock"), at a price of $120 per
one one-hundredth of a share (the "Purchase Price"). The terms of the Rights are
set forth in a Rights Agreement (the "Rights Agreement") as amended and restated
as of December 20, 2002 between the Company and Xxxxx Fargo Bank Minnesota,
N.A., as Rights Agent.
Initially, the Rights will be attached implicitly to all Common Stock
certificates representing shares then outstanding, and no separate Right
certificates will be distributed. Until the earlier to occur of ten (10)
Business Days following (i) a public announcement that, without the prior
consent of the Board of Directors, a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of voting securities having 17% or more of the voting power
of the Company (the "Stock Acquisition Date"), or (ii) the commencement of (or a
public announcement of an intention to make) a tender offer or exchange offer
which would result in any person or group and related persons having beneficial
ownership of voting securities having 17% or more of the voting power of the
Company (the earlier of such dates referred to in (i) and (ii) above being
called the "Distribution Date"), the Rights will be evidenced, with respect to
any of the Common Stock certificates outstanding as of the Record Date, by such
Common Stock certificates.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with Common Stock certificates. From as
soon as practicable after the Record Date and until the Distribution Date (or
earlier redemption or expiration of the Rights), new Common Stock certificates
issued after the Record Date upon transfer or new issuance of the Common Stock
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 Stock outstanding as of
the Record Date will also
83
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on July 20, 2005, unless earlier redeemed by the Company as
described below.
In the event that any person becomes the beneficial owner of 17% or
more of the voting power of the Company, ten (10) days thereafter (the "Flip-In
Event") each holder of a Right will thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price of the Right, Common Stock
(or, in certain circumstances, a combination of cash, other property, Common
Stock or other securities) which has a value of two times the Purchase Price of
the Right (such right being called the "Flip-In Right"). In the event that the
Company is acquired in a merger or other business combination transaction where
the Company is not the surviving corporation or in the event that 50% or more of
its assets, cash flow or earning power is sold, proper provision shall be made
so that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the then current Purchase Price of the Right, common
stock of the acquiring entity which has a value of two times the Purchase Price
of the Right (such right being called the "Flip-Over Right"). The holder of a
Right will continue to have the Flip-Over Right whether or not such holder
exercises the Flip-In Right. Upon the occurrence of the Flip-In Event, any
Rights that are or were at any time owned by an Acquiring Person shall become
null and void insofar as they relate to the Flip-In Right.
For example, at a Purchase Price of $120 per Right, if any person
becomes the beneficial owner of 17% or more of the voting power of the Company,
ten (10) Business Days thereafter each Right other than a Right owned by such
17% beneficial owner would entitle its holder to purchase $240 worth of the
Company's Common Stock (or other consideration, as noted above) for $120.
Assuming that the Common Stock had a per share value of $24 at such time, the
holder of each Right would effectively be entitled to purchase 10 shares of
Common Stock for $120.
Similarly, assuming, following the Stock Acquisition Date, the
occurrence of a business combination with another entity in which the Company's
Common Stock is converted or exchanged, or a sale of 50% or more of the
Company's assets, cash flow or earning power, each Right would entitle its
holder to purchase $240 worth of the acquiring entity's stock for $120.
The Purchase Price payable, and the number of shares of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for Preferred Stock or convertible
securities at less than the current market price of the Preferred Stock or (iii)
upon the distribution to holders of the
84
Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 17% or more of the voting power of
the Company and prior to the acquisition by such person or group of 50% or more
of the voting power of the Company, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group which have
become null and void), in whole or in part, at an exchange ratio of one share of
Common Stock, or one one-hundredth of a share of Preferred Stock (or of a share
of a class or series of the Company's preferred stock having equivalent rights,
preferences and privileges), 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
the Purchase Price. No fractions of shares will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Preferred
Stock on the last trading date prior to the date of exercise.
At any time prior to the earlier to occur of (i) the tenth (10th)
Business Day after the Stock Acquisition Date, or (ii) the expiration of the
Rights, the Company may redeem the Rights in whole, but not in part, at a price
of $.001 per Right (the "Redemption Price"), which redemption shall be effective
at such time as the Board of Directors of the Company shall establish.
Additionally, the majority of the members of the Board of Directors of the
Company may, following the tenth (10th) Business Day after the Stock Acquisition
Date, redeem the then outstanding Rights in whole, but not in part, at the
Redemption Price provided that either (a) the Acquiring Person reduces his
beneficial ownership to less than 17% of the voting power of the Company in a
manner which is satisfactory to the majority of the members of the Board of
Directors of the Company and there are no other Acquiring Persons, or (b) such
redemption is incidental to a merger or other business combination transaction
or series of transactions involving the Company but not involving an Acquiring
Person or any person who was an Acquiring Person. The redemption of Rights
described in the preceding sentence shall be effective only after ten (10)
Business Days prior notice. Upon the effective date of the 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 Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable. Each share of Preferred Stock will have a preferential quarterly
dividend in an amount equal to 100 times the dividend declared on each share of
Common Stock. In the event of liquidation, the holders of Preferred Stock will
receive a preferred liquidation payment of $100 per whole share of Preferred
Stock. Each whole share of Preferred Stock will have 100 votes, voting together
with the Common Stock. In the event of any merger, consolidation or other
transaction in which Common Stock are exchanged, each share of Preferred Stock
will be entitled to receive 100 times the amount and type of consideration
received per share of Common Stock. The rights of the Preferred Stock as to
dividends and liquidations, and in the event of mergers and consolidations, are
protected by customary anti-dilution provisions. Fractional shares of Preferred
Stock in integral multiples of one one-hundredth of a share of Preferred Stock
will be
85
issued unless the Company elects to distribute depositary receipts in lieu of
such fractional shares. In lieu of fractional shares other than fractions that
are multiples of one one-hundredth of a share, an adjustment in cash will be
made based on the market price of the Preferred Stock on the last trading date
prior to the date of exercise.
Until a Right is exercised, it will not entitle the holder to any
rights as a shareholder of the Company (other than those as an existing
shareholder), including, without limitation, the right to vote or to receive
dividends.
The terms of the Rights may be amended by the Board of Directors of the
Company (i) prior to the Distribution Date in any manner, and (ii) on or after
the Distribution Date to cure any ambiguity, to correct or supplement any
provision of the Rights Agreement which may be defective or inconsistent with
any other provisions, or in any manner not adversely affecting the interests of
the holders of the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A/A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
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