EXHIBIT 4
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RIGHTS AGREEMENT
BY AND BETWEEN
CROSSROADS SYSTEMS, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY,
AS RIGHTS AGENT
DATED AS OF
AUGUST 21, 2002
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TABLE OF CONTENTS
PAGE
Section 1. Certain Definitions.............................................................................1
Section 2. Appointment of Rights Agent.....................................................................6
Section 3. Issue of Rights Certificates....................................................................6
Section 4. Form of Rights Certificates.....................................................................8
Section 5. Countersignature and Registration...............................................................8
Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates...................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..................................10
Section 8. Cancellation and Destruction of Rights Certificates............................................12
Section 9. Reservation and Availability of Preferred Stock................................................12
Section 10. Preferred Stock Record Date....................................................................13
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.............................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....................................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...........................22
Section 14. Fractional Rights and Fractional Shares........................................................25
Section 15. Rights of Action...............................................................................25
Section 16. Agreement of Rights Holders....................................................................26
Section 17. Rights Certificate Holder Not Deemed a Stockholder.............................................27
Section 18. Concerning the Rights Agent....................................................................27
Section 19. Merger or Consolidation or Change of Name of Rights Agent......................................27
Section 20. Duties of Rights Agent.........................................................................28
Section 21. Change of Rights Agent.........................................................................30
Section 22. Issuance of New Rights Certificates............................................................31
Section 23. Redemption and Termination.....................................................................31
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Section 24. Exchange.......................................................................................33
Section 25. Notice of Certain Events.......................................................................34
Section 26. Notices........................................................................................35
Section 27. Supplements and Amendments.....................................................................35
Section 28. Successors.....................................................................................36
Section 29. Determinations and Actions by the Board of Directors...........................................36
Section 30. Benefits of This Agreement.....................................................................37
Section 31. Severability...................................................................................37
Section 32. Governing Law..................................................................................37
Section 33. Counterparts...................................................................................37
Section 34. Descriptive Headings...........................................................................37
EXHIBITS
Exhibit A Form of Certificate of Designation of Series A Junior
Participating Preferred Stock
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights to Purchase Shares of Series A Preferred
Stock
ii
RIGHTS AGREEMENT
THIS
RIGHTS AGREEMENT, dated as of August 21, 2002 (the
"Agreement"), is entered into by and between Crossroads Systems, Inc., a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, a New York corporation (the "Rights Agent").
WHEREAS, effective August 21, 2002 (the "Rights Dividend
Declaration Date"), the board of directors of the Company authorized and
declared a distribution of one Right (each, a "Right") for each share of Common
Stock (as hereinafter defined) of the Company outstanding as of the Close of
Business (as hereinafter defined) on September 3, 2002 (the "Record Date"), each
Right initially representing the right to purchase one one-thousandth of a share
(a "Unit") of Preferred Stock (as hereinafter defined) upon the terms and
subject to the conditions in this Agreement, and has further authorized and
directed the issuance of one Right with respect to each share of Common Stock of
the Company that shall become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein set forth, the parties hereto, intending to be legally
bound, hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
"Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the shares of
Common Stock of the Company then outstanding, but shall not include (1) the
Company, any Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or any Subsidiary of the Company, or
any entity holding shares of Common Stock of the Company for or pursuant to the
terms of any such plan, (2) Xxxxx X. Xxxxx ("Xxxxx") or any of his Affiliates or
Associates (collectively with Xxxxx, the "Xxxxx Investor Group") to the extent
that the members of the Xxxxx Investor Group shall beneficially own in the
aggregate up to, but not exceeding, 20% of the shares of Common Stock of the
Company then outstanding, or (3) Austin Ventures IV-A, L.P. ("Austin Ventures")
or any of its Affiliates or Associates (collectively with Austin Ventures, the
"AV Investor Group") to the extent that the members of the AV Investor Group
beneficially own shares of Common Stock of the Company as of the close of
business on the date hereof (other than as a result of a stock dividend, stock
split or similar transaction effected by the Company in which all holders of
Common Stock of the Company are treated equally). Xxxxx and Xxxxxx Ventures
shall collectively be known as the "Permitted Investors" and the Xxxxx Investor
Group and AV Investor Group shall collectively be known as the "Investor
Groups". Notwithstanding the foregoing:
(i) no Person shall become an "Acquiring Person" as the result
of an acquisition of shares of Common Stock by the Company which, by
reducing the number
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of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the shares of
Common Stock of the Company then outstanding; (or, in the case of the
Xxxxx Investor Group, more than 20% of the shares of Common Stock of
the Company then outstanding); provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the shares of
Common Stock of the Company then outstanding (or, in the case of the
Xxxxx Investor Group, more than 20% of the shares of Common Stock of
the Company then outstanding) as a result of any such acquisition of
shares of Common Stock by the Company and shall, after such acquisition
of shares by the Company, become the Beneficial Owner of any additional
shares of Common Stock of the Company (other than as a result of a
stock dividend, stock split or similar transaction effected by the
Company in which all holders of Common Stock of the Company are treated
equally) (or, in the case of the members of the Investor Groups, become
the Beneficial Owner of any additional shares of Common Stock of the
Company), then such Person shall be deemed to be an "Acquiring Person"
hereunder;
(ii) no Person who, alone or together with all Affiliates and
Associates of such Person (including, but not limited to, the AV
Investor Group), was, at the time of the public announcement by the
Company of the declaration by its Board of Directors on August 21, 2002
of the dividend distribution of the Rights, the Beneficial Owner of 15%
or more of the Common Stock of the Company then outstanding shall be
deemed to have become an Acquiring Person unless and until such time as
(A) such Person or any Affiliate or Associate of such Person thereafter
becomes the Beneficial Owner of any additional Common Stock of the
Company (other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all holders of
Common Stock of the Company are treated equally); and
(iii) if the board of directors of the Company determines in
good faith that a Person who would otherwise be an "Acquiring Person"
as defined pursuant to the provisions of subparagraph (i), has become
such inadvertently, and such Person divests as promptly as practicable
a sufficient number of shares of Common Stock of the Company so that
such Person would no longer be an "Acquiring Person," then such Person
shall not be deemed to be an "Acquiring Person" for any purpose of this
Agreement.
"Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii).
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the Exchange Act Regulations (as
hereinafter defined) as in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall
be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of
Section 13(d) of the Exchange Act (as hereinafter defined) and Rule
13d-3 thereunder (or any comparable or successor law or regulation); or
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(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire
(whether such right is exercisable immediately, contingently or only
after the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing, other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided further, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," any security under this subparagraph (ii) as a result of any
agreement, arrangement or understanding to vote such security if such
agreement, arrangement or understanding: (x) arises solely from a
revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act and the Exchange Act Regulations, and
(y) is not reportable by such 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 first mentioned Person (or any of such first mentioned Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing, other than customary
agreements with and between underwriters and selling group members with
respect to a bona fide public offering of securities), for the purpose
of acquiring, holding, voting (except to the extent contemplated by the
proviso to clause (B) of subparagraph (ii) above) or disposing of any
securities of the Company; provided, however, that in no case shall any
officer or director of the Company be deemed (A) the Beneficial Owner
of any securities beneficially owned by another officer or director of
the Company solely by reason of actions undertaken by such persons in
their capacity as officers or directors of the Company or (B) the
Beneficial Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of the Company
for the benefit of any employee of the Company or any Subsidiary of the
Company, other than such officer or director, by reason of any
influence that such officer or director may have over the voting of the
securities held in the plan;
Notwithstanding anything in this definition of "Beneficial Owner" and
"beneficially own" to the contrary, the phrase "then outstanding," when used
with reference to a Person who is the Beneficial Owner of securities of the
Company, shall mean the number of such securities then issued and outstanding
together with the number of such securities not then actually issued and
outstanding which such Person would be deemed to beneficially own hereunder.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
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"Close of Business" on any given date shall mean 5:00 p.m.,
New York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., New York City time, on the next succeeding
Business Day.
"Common Stock" when used with reference to the Company shall
mean the shares of common stock, par value $0.001 per share, of the Company.
"Common Stock" when used with reference to any Person other than the Company
shall mean the capital stock (or other equity interest) with the greatest voting
power of such other Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first-mentioned
Person.
"Company" shall have the meaning set forth in the forepart of
this Agreement.
"Current Per Share Market Price" shall have the meaning set
forth in Section 11(d)(i).
"Current Value" shall have the meaning set forth in Section
11(a)(iii).
"Distribution Date" shall have the meaning set forth in
Section 3(a).
"Equivalent Preferred Stock" shall have the meaning set forth
in Section 11(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor statute.
"Exchange Act Regulations" shall mean the Rules and
Regulations under the Exchange Act, as amended from time to time (including any
successor rules).
"Expiration Date" shall have the meaning set forth in Section
7(a).
"Final Expiration Date" shall have the meaning set forth in
Section 7(a).
"Nasdaq" shall have the meaning set forth in Section 11(d).
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such entity.
"Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the Company,
having the rights and preferences set forth in the Form of Certificate of
Designation attached to this Agreement as Exhibit A.
"Preferred Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii).
"Principal Party" shall have the meaning set forth in Section
13.
"Purchase Price" shall have the meaning set forth in Section
7(b).
"Record Date" shall have the meaning set forth in the recitals
to this Agreement.
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"Redemption Date" shall have the meaning set forth in Section
7(a).
"Redemption Price" shall have the meaning set forth in Section
23(a).
"Right" shall have the meaning set forth in the recitals to
this Agreement.
"Rights Agent" shall have the meaning set forth in the
forepart of this Agreement and shall include any Person that shall become a
successor Rights Agent pursuant to the terms of this Agreement.
"Rights Certificate" shall have the meaning set forth in
Section 3(a).
"Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals to this Agreement.
"Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B) or (C).
"Section 11(a)(iii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii).
"Section 13 Event" shall have the meaning set forth in Section
13.
"Section 24(a) Exchange Ratio" shall have the meaning set
forth in Section 24(a).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor statute.
"Share Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such.
"Spread" shall have the meaning set forth in Section
11(a)(iii).
"Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
"Summary of Rights" shall have the meaning set forth in
Section 3(b).
"Trading Day" shall have the meaning set forth in Section
11(d)(i).
"Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
"Unit" shall have the meaning set forth in the recitals to
this Agreement.
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Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions of this Agreement, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint co-Rights Agents as it
may deem necessary or desirable upon ten days' prior written notice to the
Rights Agent and any co-Rights Agents. The Rights Agent shall have no duty to
supervise, and in no event shall be liable for, the acts or omissions of any
such co-Rights Agent.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the Close of Business on the tenth day
after the Share Acquisition Date and (ii) the Close of Business on the tenth day
(or such later date as may be determined by action of the Company's board of
directors prior to such time as any Person becomes an Acquiring Person and of
which later date the Company will give the Rights Agent prompt written notice)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any Person holding shares of Common Stock
for or pursuant to the terms of any such plan) is commenced within the meaning
of Rule 14d-2(a) of the Exchange Act Regulations or of the first public
announcement of the intention of any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company or any entity holding shares of Common Stock for or
pursuant to the terms of any such plan) to commence a tender or exchange offer,
if upon consummation thereof such Person would be the Beneficial Owner of 15% or
more of the shares of Common Stock of the Company then outstanding (the earlier
of the events described in (i) and (ii) above being the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions of Section 3(b)) by
the certificates for shares of Common Stock of the Company registered in the
names of the holders thereof (which certificates shall also be deemed to be
Rights Certificates) and not by separate Rights Certificates, and (y) the right
to receive Rights Certificates will be transferable only in connection with the
transfer of shares of Common Stock of the Company. As soon as practicable after
the Distribution Date, the Company will notify the Rights Agent of the
occurrence of the Distribution Date and the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested and provided with all necessary
information, send) by first-class, insured, postage-prepaid mail, to each record
holder of shares of Common Stock of the Company as of the Close of Business on
the Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate, in substantially the form of Exhibit B (a "Rights
Certificate"), evidencing one Right for each share of Common Stock so held. From
and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates. The Rights Agent shall have no duty or obligation to take
any action under any section of this Agreement which requires the payment by a
Rights holder of applicable taxes and governmental charges unless and until the
Rights Agent is satisfied that all such taxes and/or charges have been paid.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send, or cause to be sent, a copy of a Summary of Rights to
Purchase Preferred Stock, in substantially the form of Exhibit C (the "Summary
of Rights"), by first-class, postage-prepaid mail, to each record holder of
shares of Common Stock of the Company as of the Close of Business on the Record
Date, at the address of such holder shown on the records of the Company. Until
the
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earlier of the Distribution Date or the Expiration Date, the surrender for
transfer of any certificate for shares of Common Stock of the Company shall also
constitute the transfer of the Rights associated with the shares of Common Stock
represented thereby.
(c) Certificates evidencing shares of Common Stock of the Company which
become outstanding (whether originally issued or delivered from the Company's
treasury) or are otherwise transferred after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date shall have impressed
on, printed on, written on or otherwise affixed to them the following legend (or
such other legend as the Company may deem appropriate that is not inconsistent
with the provisions of this Agreement but which does not affect the rights,
duties or indemnities of the Rights Agent):
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF
TO CERTAIN RIGHTS AS SET FORTH IN A
RIGHTS AGREEMENT BETWEEN
CROSSROADS SYSTEMS, INC. AND AMERICAN STOCK TRANSFER & TRUST
COMPANY, DATED AS OF AUGUST 21, 2002 (THE "
RIGHTS AGREEMENT"),
THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE
AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF CROSSROADS SYSTEMS, 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. CROSSROADS SYSTEMS,
INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE
RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN
REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN
THE
RIGHTS AGREEMENT, RIGHTS ISSUED TO ANY PERSON WHO BECOMES
AN ACQUIRING PERSON (AS DEFINED IN THE
RIGHTS AGREEMENT),
WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON OR BY
ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
If the Company purchases or acquires any shares of Common Stock of the Company
prior to the Distribution Date, any Rights associated with such shares of Common
Stock of the Company shall be deemed cancelled and retired so that the Company
shall not be entitled to exercise any Rights associated with any shares of
Common Stock of the Company which are no longer outstanding.
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Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase Units and of assignment to be printed on the reverse thereof) shall be
substantially the same 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 (but which do not affect the rights, duties or
immunities of the Rights Agent) and as are not inconsistent with the provisions
of this Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange or transaction reporting system on which the Rights may
from time to time be listed or traded, or to conform to usage. Subject to the
provisions of Sections 11 and 22, the Rights Certificates shall entitle the
holders thereof to purchase the number of Units as shall be set forth therein at
the price per Unit set forth therein, but the number of such Units and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to this Agreement
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 of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such; or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) that 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 holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the board of directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e); shall in each case contain (to the extent the Rights Agent has
notice thereof and to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT BY AND BETWEEN
CROSSROADS SYSTEMS, INC. AND AMERICAN STOCK TRANSFER & TRUST
COMPANY, AS RIGHTS AGENT, DATED AS OF AUGUST 21, 2002 (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 THE RIGHTS
AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by any officer of the Company, either manually or by facsimile signature, shall
have affixed thereto the
8
Company's seal or a facsimile thereof, and shall be attested by the Secretary or
an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned by the Rights Agent
and shall not be valid for any purpose unless 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. Any
Rights Certificate 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
this Agreement any such person was not such an officer.
(b) Following the Distribution Date and receipt by the Rights Agent of
notice thereof, the Rights Agent will keep or cause to be kept, at its office
designated for such purpose, books for registration and transfer of the Rights
Certificates issued under this Agreement. 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 Sections 4(b), 7(e) and 14, 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 Rights
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Rights Certificates evidencing exercisable Rights,
entitling the registered holder to purchase a like number of Units (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Rights Certificates
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 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 Rights Certificates until the registered holder shall have
properly completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate or Rights 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 or the Rights Agent shall reasonably request. Thereupon
the Rights Agent shall, subject to Sections 4(b), 7(e) and 14, 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 from holders of Rights Certificates 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. The Rights Agent shall
have no duty or obligation to take any action under any section of this
Agreement which requires the payment by
9
a Rights holder of applicable taxes and governmental charges unless and until
the Rights Agent is satisfied that all such taxes and/or charges have been paid.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and of indemnity or security reasonably satisfactory to
them, and, at the Company's request, reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Rights Certificate if mutilated, the
Company will make and deliver a new Rights Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered holder in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) The registered holder of any Rights Certificate evidencing
exercisable Rights may exercise the Rights evidenced thereby (except as
otherwise provided in this Agreement) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the related certification properly completed and duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each Right being
exercised (as such amount may be reduced (including to zero) pursuant to Section
11(a)(iii)) and an amount equal to any applicable transfer tax or charge
required to be paid by the holder of such Rights Certificate in accordance with
Section 9 in cash, or by certified check, wire transfer or bank draft payable to
the order of the Company), at or prior to the earliest of (i) the Close of
Business on the tenth anniversary hereof (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in Section 23 (the "Redemption
Date"), and (iii) the time at which such Rights are exchanged as provided in
Section 24 (the earliest of (i), (ii) and (iii) being the "Expiration Date").
(b) The Purchase Price for each Unit pursuant to the exercise of a
Right shall initially be $12.00 and, shall be subject to adjustment from time to
time as provided in Sections 11 and 13 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 evidencing exercisable Rights
(with the form of election to purchase and certification properly completed and
duly executed) accompanied by payment as provided in Section 7(a), the Rights
Agent shall, subject to Section 20(k), thereupon promptly (i) (A) requisition
from any transfer agent of the Preferred Stock a certificate or certificates for
the number of Units to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B) if the
Company shall have elected to deposit the total number of Units issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent of a depositary receipt or depositary receipts representing
such number of Units as are to be purchased (in which case certificates for the
Units represented by such receipt or receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such requests; (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14; (iii) after receipt of such
10
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 to or upon the order of
the registered holder of such Rights Certificate. If the Company is obligated to
issue other securities of the Company, pay cash and/or distribute other property
pursuant to Section 11(a), the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when necessary to comply with the terms
of this Agreement.
(d) If the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
a number of Rights equivalent to the number of Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Rights
Certificate or to such registered holder's duly authorized assigns, subject to
Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person; (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate thereof) who becomes a transferee after the Acquiring Person becomes
such; (iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate thereof) 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 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 board of directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e); or
(iv) any subsequent transferee shall not be exercisable without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights or any Rights Certificate which formerly evidenced such
Rights, and neither the Company nor the Rights Agent shall have any obligations
whatsoever with respect to such Rights or any Rights Certificate, whether under
any provision of this Agreement or otherwise. The Company shall use commercially
reasonable efforts to ensure that the provisions of Section 4(b) and this
Section 7(e) are complied with, but neither the Company nor the Rights Agent
shall have no liability to any holder of Rights Certificates or to any other
Person as a result of its making or failing to make any determinations with
respect to an Acquiring Person or any of such Acquiring Person's Affiliates,
Associates or transferees or taking or failing to take any actions with respect
any Rights or Rights Certificates of any such Person.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
properly completed and duly executed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
11
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 to any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by 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 Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such cancelled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will use its best efforts
to cause to be reserved and kept available out of, and to the extent of, its
authorized and unissued Preferred Stock not reserved for another purpose a
number of shares that will be sufficient to permit the exercise in full of all
outstanding Rights. Upon the occurrence of any events resulting in an increase
in the aggregate number of shares of Preferred Stock (or other equity securities
of the Company) issuable upon exercise of all outstanding Rights above the
number then reserved, the Company shall make appropriate increases in the number
of shares so reserved.
(b) If the Units to be issued and delivered upon the exercise of the
Rights are at any time listed on a national securities exchange or included for
quotation on any transaction reporting system, the Company shall during the
period from the Distribution Date to the Expiration Date use its best efforts to
cause all shares reserved for such issuance to be listed on such exchange or
included for quotation on any such transaction reporting system upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section
11(a)(iii), or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement under the Securities Act, with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
reasonably practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction, unless the requisite qualification
of the offering made upon exercise of the Rights in such jurisdiction shall have
been obtained, or an exemption therefrom shall be available and until a
registration statement has been declared effective.
12
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Units (and, following the occurrence of a
Triggering Event, any other securities that may be delivered upon exercise of
Rights) shall, at the time of delivery of the certificates for such Units or
other securities subject to payment of the Purchase Price, be duly and validly
authorized and issued and fully paid and non-assessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all governmental transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates or of
any Units (and, following the occurrence of a Triggering Event, any other
securities that may be delivered upon exercise of Rights) upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax or
charge which may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of certificates
or depositary receipts for Units in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Units (or
other securities that may be delivered upon the exercise of any Rights) until
any such tax shall have been paid (any such tax or charge being payable by the
holder of such Rights Certificate at the time of surrender) or until it has been
established to the Company's or the Rights Agent's reasonable satisfaction that
no such tax or charge is due.
Section 10. Preferred Stock Record Date. Each Person in whose
name any certificate for Units (or, following the occurrence of a Triggering
Event, other securities that may be delivered upon exercise of Rights) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Units (or, following the occurrence of a Triggering
Event other securities that may be delivered upon the exercise of the Rights)
represented thereby on, and such certificate shall be dated, at the Close of
Business on the date upon which the Rights Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price (and any applicable
transfer taxes or charges) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Stock (or, following
the occurrence of a Triggering Event, other securities that may be delivered
upon the exercise of the Rights) transfer books of the Company are closed, such
person shall be deemed to have become the record holder of such shares at the
Close of Business on, and such certificate shall be dated, the next succeeding
Business Day on which such transfer books are open; provided further, however,
that if delivery of Units (or following the occurrence of a Triggering Event,
other securities that may be delivered upon the exercise of the Rights) is
delayed pursuant to Section 9(c), such Persons shall be deemed to have become
the record holders of such Units (or following the occurrence of a Triggering
Event, other securities that may be delivered upon the exercise of the Rights)
only when such Units first become deliverable. Prior to the exercise of the
Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a stockholder of the Company with respect to
securities for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as expressly provided in this
Agreement.
Section 11. Adjustment of Purchase Price, Number of Shares or
Number of Rights. The Purchase Price, the number and kinds of securities covered
by each Right and the
13
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
shares of Preferred Stock, (C) combine the outstanding Preferred Stock
into a smaller number of shares Preferred Stock, 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), the Purchase Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of capital stock
for which the Rights shall be exercisable, shall be proportionately
adjusted so that the holder of any Rights 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 capital stock
which, if such Rights had been exercised immediately prior to such date
and at a time when the applicable transfer books were open, such holder
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock issuable upon exercise of one Right. If an
event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition, and shall be made prior, to any
adjustment required pursuant to Section 11(a)(ii).
(i) Subject to Section 24, if:
(A) any Person shall become an Acquiring Person,
unless the event causing the Person to become an Acquiring
Person is a transaction to which the provisions of Section
13(a) apply;
(B) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date
of this Agreement, directly or indirectly, shall (1) merge
into the Company or otherwise combine with the Company and the
Company shall be the continuing or surviving corporation of
such merger or combination and shares of Common Stock of the
Company shall remain outstanding and unchanged; (2) in one
transaction or a series of transactions, transfer any assets
to the Company or any of its Subsidiaries in exchange (in
whole or in part) for shares of Common Stock of the Company,
for other equity securities of the Company or any of its
Subsidiaries, or for securities exercisable for or convertible
into shares of equity securities of the Company or any of its
Subsidiaries (whether shares of Common Stock of the Company or
otherwise) or otherwise obtain from the Company or any of its
Subsidiaries, with or without consideration, any additional
shares of such equity securities or securities exercisable for
or convertible into such equity securities (other than
pursuant to a pro rata distribution to all holders of shares
of Common Stock of the Company); (3) sell, purchase, lease,
exchange, mortgage, pledge, transfer or
14
otherwise acquire or dispose of, in one transaction or a
series of transactions, to, from or with the Company or any of
its Subsidiaries or any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity,
assets (including securities) on terms and conditions less
favorable to the Company or such Subsidiary, plan, trustee or
fiduciary than those that could have been obtained in
arm's-length negotiations with an unaffiliated third party,
other than pursuant to a transaction set forth in Section
13(a); (4) sell, purchase, lease, exchange, mortgage, pledge,
transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or with the
Company or any of its Subsidiaries or any employee benefit
plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in
such capacity (other than transactions, if any, consistent
with those engaged in, as of the date hereof, by the Company
and such Acquiring Person or such Associate or Affiliate
thereof), assets (including securities or intangible assets)
having an aggregate fair market value of more than $5,000,000,
other than pursuant to a transaction set forth in Section
13(a); (5) receive, or any designee, agent or representative
of such Acquiring Person or any Affiliate or Associate of such
Acquiring Person shall receive, any compensation from the
Company or any of its Subsidiaries other than compensation for
full-time employment as a regular employee at rates in
accordance with the Company's (or its Subsidiaries') past
practices; or (6) receive the benefit, directly or indirectly
(except proportionately as a holder of shares of Common Stock
of the Company or as required by law or governmental
regulation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Company or any of its Subsidiaries
or any employee benefit plan maintained by the Company or any
of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity; or
(C) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including
any reverse stock split), or recapitalization of the Company,
or any merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of
transactions involving the Company or any of its Subsidiaries,
other than a transaction or transactions to which the
provisions of Section 13(a) apply (whether or not with or into
or otherwise involving an Acquiring Person), which has the
effect, directly or indirectly, of increasing by more than one
percent the proportionate share of the outstanding shares of
any class of equity securities of the Company or any of its
Subsidiaries that is directly or indirectly beneficially owned
by any Acquiring Person or any Person or any Associate or
Affiliate of any Acquiring Person;
then promptly following the occurrence of an event described
in Section 11(a)(ii)(A), (B) or (C) (each being a "Section 11(a)(ii)
Event"), proper provision shall be made so that each holder of a Right,
except as otherwise provided in Section 7(e), shall thereafter have the
right to receive for each Right, upon exercise thereof in accordance
with the terms of this Agreement and payment of the then-current
Purchase Price, in lieu of the number of Units for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, such number of Units as shall equal the result
obtained by multiplying the then-current Purchase Price by the then
number of Units for
15
which a Right was exercisable (or would have been exercisable if the
Distribution Date had occurred) immediately prior to the first
occurrence of a Triggering Event, and dividing that product by 50% of
the Current Per Share Market Price for shares of Common Stock on the
date of occurrence of the most recent Triggering Event (such number of
Units being hereinafter referred to as the "Adjustment Shares"). Upon
the occurrence of a Section 13 Event, any Rights that shall not have
been previously exercised pursuant to this Section 11(a)(ii) shall
thereafter be exercisable only pursuant to Section 13 and not pursuant
to this Section 11(a)(ii). The Company shall notify the Rights Agent
when this Section 11(a)(ii) applies and shall use all commercially
reasonable efforts to ensure that the provisions of this Section
11(a)(ii) are complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of Rights Certificates or
other Person as a result of the Company's failure to make any
determinations with respect to any Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(ii) In the event that the number of shares of Preferred Stock
which are authorized by the Company's certificate of incorporation but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in
full of the Rights, or if any necessary regulatory approval for such
issuance has not been obtained by the Company, the Company shall, in
lieu of issuing Units in accordance with Section 11(a)(ii) hereof: (A)
determine the excess of (1) the value of the Units issuable upon the
exercise of a Right (the "Current Value") over (2) the Purchase Price
(such excess being referred to as the "Spread") and (B) with respect to
each Right, make adequate provision to substitute for such Units, upon
exercise of the Rights, (1) cash, (2) a reduction in the Purchase
Price, (3) other equity securities of the Company (including, without
limitation, Common Stock of the Company or shares or units of shares of
any series of preferred stock which the board of directors of the
Company shall have conclusively deemed to have the same value as the
Units (such shares or units of preferred stock are herein called
"Preferred Stock Equivalents")), except to the extent that the Company
has not obtained any necessary regulatory approval for such issuance,
(4) debt securities of the Company, except to the extent that the
Company has not obtained any necessary regulatory approval for such
issuance, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, as determined by
the board of directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the board of
directors of the Company (which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive and
binding on the Rights Agent, the holders of the Rights and all other
persons); provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within
thirty days following the later of (x) occurrence of a Section
11(a)(ii) Event, and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section 11(a)(iii) Trigger Date"),
then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase
Price, Units (to the extent available), except to the extent that the
Company has not obtained any necessary regulatory approval for such
issuance, and then, if necessary, cash, having an aggregate value equal
to the Spread.
16
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling
them (for a period expiring within forty five calendar days after such
record date) to subscribe for or purchase Preferred Stock (or shares
having the same rights, privileges and preferences as the Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into
Preferred Stock or Equivalent Preferred Stock at a price per Unit or
Equivalent Preferred Stock (or having a conversion price per Unit, if a
security convertible into Units or Equivalent Preferred Stock) less
than the then Current Per Share Market Price (as determined pursuant to
Section 11(d)) of a Unit 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 sum of the number of
Units outstanding on such record date plus the number of Units which
the aggregate offering price of the total number of Units 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 Per Share Market Price and the
denominator of which shall be the sum of the number of Units
outstanding on such record date plus the number of additional Units
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). If such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash,
the value of such consideration shall be as determined in good faith by
the board of directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive and binding on the Rights Agent and the holders of the
Rights. Units 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 if such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(c) If the Company shall fix a record date for a distribution
to all holders of Units (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend), assets (other than a
dividend payable in Units or Equivalent Preferred Stock but including
any dividend payable in equity securities other than Preferred Stock or
Equivalent Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(d)), the Purchase Price to
be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then Current Per Share
Market Price (as determined pursuant to Section 11(d)) of the Preferred
Stock on such record date, less the fair market value (as determined in
good faith by the board of directors of the Company, whose
determination shall be described in a statement filed with the Rights
Agent and shall be conclusive and binding on the Rights Agent and the
holders of the Rights) of the cash, assets or evidences of indebtedness
to be distributed or of such subscription rights or warrants
distributable in respect of a share of Preferred Stock, and the
denominator of which shall be such Current Per Share Market Price of a
share of Preferred Stock. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted
to be the Purchase Price which would then be in effect if such record
date had not been fixed.
17
(d) (i) For the purpose of any computation hereunder, the
"Current Per Share Market Price" of any security on any date shall be
deemed to be the average of the daily closing prices per share of such
security for the thirty consecutive Trading Days (as such term is
hereinafter defined) ending on and including the Trading Day
immediately prior to such date; provided, however, that in the event
that the Current Per Share Market Price of the security is determined
during a period following the announcement by the issuer of such
security of (A) a dividend or distribution on such security payable in
shares of such security or securities convertible into such security,
or (B) any subdivision, combination or reclassification of such
security and prior to the expiration of thirty Trading Days after and
not including the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Per Share
Market Price shall be appropriately adjusted to reflect the current
market price per share equivalent of such security. The closing price
for each day shall be the last sale price, regular way, 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 Nasdaq Stock Market ("Nasdaq") or,
if the security is not listed or admitted to trading on the Nasdaq, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the security is listed or admitted to trading or, if
the security is not listed or admitted to trading on any national
securities exchange, the last quoted price 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 Nasdaq or such other system then in use, or,
if on any such date the security is not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
security selected by the board of directors of the Company. If on any
such date no market maker is making a market in the security, the
Current Per Share Market Price of such security on such date shall mean
the fair value per share or other trading unit as determined in good
faith by the board of directors of the Company as provided for above
(which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive and binding on the Rights Agent,
the holders of the Rights and all other Persons). The term "Trading
Day" shall mean a day on which the principal national securities
exchange on which the security is listed or admitted to trading is open
for the transaction of business or, if the security is not listed or
admitted to trading on any national securities exchange, a Business
Day.
(ii) For the purpose of any computation hereunder, the Current
Per Share Market Price of the Preferred Stock shall be determined in
accordance with the method set forth in Section 11(d)(i). If the
Current Per Share Market Price of the Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is
not publicly held or listed or traded in a manner described in Section
11(d)(i), the Current Per Share Market Price of the Preferred Stock
shall be conclusively deemed to be an amount equal to the product of
$1,000 (as such amount may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to
shares of Common Stock of the Company occurring after the date of this
Agreement) multiplied by the Current Per Share Market Price of Common
Stock of the Company. If no shares of the Common Stock of the Company
or the Preferred Stock are publicly held or so listed
18
or traded, "Current Per Share Market Price" of the Preferred Stock
shall mean the fair value per share as determined in good faith by the
board of directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive and binding on the Rights Agent and the holders of the
Rights for all purposes. For all purposes of this Agreement, the
Current Per Share Market Price of a Unit shall be equal to the Current
Per Share Market Price of one share of Preferred Stock divided by
1,000.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least one percent in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one-hundred-thousandth
(1/100,000) of a share of Preferred Stock or one-hundredth (1/100) of any other
share or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii),
the holder of any Rights thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Units, thereafter the
number of such other shares so receivable upon exercise of any Rights and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), (b), (c), (d), (e),
(g), (h), (i), (j), (k), (l) and (m), and the provisions of Sections 7, 9, 10,
13 and 14 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 shall evidence the right to purchase, at
the adjusted Purchase Price, the number of Units purchasable from time to time
upon exercise of the Rights, all subject to further adjustment as provided in
this Agreement.
(h) Unless the Company shall have exercised its election under Section
11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of Units (calculated to
the nearest one-millionth of a share of Preferred Stock) obtained by dividing
(i) the product obtained by multiplying (x) the number of Units covered by a
Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, by (ii) 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 Units purchasable upon the exercise of a Right. Each
of the Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of Units for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
19
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-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. The Company shall give the Rights
Agent a copy of such announcement. 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 days later than the date of
the public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(i), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14, 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 to be so distributed shall
be issued, executed and countersigned in the manner provided for herein and
shall be registered in the names of the holders of record of 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 Units issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per Unit and the number of Units 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 par value of the number of Units issuable upon
exercise of the Rights, the Company shall take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable number of Units at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, the issuing to the holder of any Rights exercised after such record date
of that number of Units and other capital stock or securities of the Company, if
any, issuable upon such exercise over and above the Units and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) upon the occurrence of the event requiring such
adjustment. The Company shall give the Rights Agent notice of its election under
this Section 11(e).
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be
20
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any Unit at less than the Current Per
Share Market Price, (iii) issuance wholly for cash of Preferred Stock or
securities which by their terms are convertible into or exchangeable for
Preferred Stock, (iv) dividends on Preferred Stock payable in Preferred Stock,
or (v) issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of Units of its Preferred Stock shall
not be taxable to such stockholders.
(n) The Company shall not, at any time after the Distribution Date, (i)
consolidate with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), (ii) merge with or into any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction, or a series of
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)), if (x)
at the time of or immediately after such consolidation, merger or sale there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
Person which constitutes, or would constitute, the Principal Party (as defined
in Section 13(b)) shall have distributed or otherwise transferred to its
stockholders or other persons holding an equity interest in such Person, Rights
previously owned by such Person or any of its Affiliates and Associates;
provided, however, this Section 11(n) shall not affect the ability of any
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 27, take (or permit any of its Subsidiaries
to take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) If, at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on
outstanding shares of Common Stock of the Company payable in shares of Common
Stock of the Company or (ii) effect a subdivision, combination or consolidation
of the Common Stock of the Company (by reclassification or otherwise than by
payment of dividends in shares of Common Stock of the Company) into a greater or
lesser number of shares of Common Stock of the Company, then in any such case
the number of Units purchasable after such event upon proper exercise of each
Right shall be determined by multiplying the number of Units so purchasable
immediately prior to such event by a fraction, the numerator of which shall be
the number of shares of Common Stock of the Company outstanding immediately
before such event and the denominator of which shall be the number of shares of
Common Stock of the Company outstanding immediately after such event. The
adjustments provided for in this Section 11(p) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or 13, the
Company shall promptly
21
(a) prepare a certificate setting forth such adjustment, and a brief statement
of the computations and facts accounting for such adjustment, (b) file with the
Rights Agent and with each transfer agent for the shares of Common Stock of the
Company or Units a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 25 hereof.
Notwithstanding the foregoing sentence, the failure by the Company to make such
certification or give such notice shall not affect the validity of or the force
or effect of the requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment or
statement contained therein and shall have no duty or liability with respect to,
shall not be deemed to have knowledge of, and adjustment or any such event
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following a Share Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o)), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o)) shall consolidate with the Company, or merge with and 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 shares of Common Stock of the Company 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) to any Person or
Persons (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)), in one or more transactions, directly or indirectly, assets
or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole), (any such event being a
"Section 13 Event"), then, and in each such case, proper provision shall be made
so that: (i) each holder of a Right, except as provided in Section 7(e), shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price, such number of validly authorized and issued, fully paid
and non-assessable shares of Common Stock of the Principal Party, which shares
shall not be subject to any liens, encumbrances, rights of first refusal,
transfer restrictions or other adverse claims, as shall be equal to the product
obtained by (1) multiplying the then current Purchase Price by the number of
Units for which a Right is exercisable immediately prior to the first occurrence
of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of such Units
for which a Right would be exercisable hereunder but for the occurrence of such
Section 11(a)(ii) Event by the Purchase Price which would be in effect hereunder
but for such first occurrence), and (2) dividing that product (which, following
the first occurrence of a Section 13 Event, shall be the "Purchase Price" for
all purposes of this Agreement) by 50% of the Current Per Share Market Price of
the shares of Common Stock of such Principal Party on the date of consummation
of such Section 13 Event; (ii) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall, for all purposes of this Agreement, thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 shall apply only to such Principal
22
Party following the first occurrence of a Section 13 Event; (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to ensure that the
provisions of this Agreement shall thereafter be applicable to its shares of
Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) shall be of no further effect following the
first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), (A) the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, or, if there is
more than one such issuer, the issuer whose outstanding shares of
Common Stock have the greatest aggregate Current Per Share Market Price
and (B) if no securities are so issued, the Person that is the other
party to such merger or consolidation, or, if there is more than one
such Person, the Person whose outstanding shares of Common Stock have
the greatest aggregate Current Per Share Market Price; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the largest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives the
same portion of the assets or earning power transferred pursuant to
such transaction or transactions or if the Person receiving the largest
portion of the assets or earning power cannot be determined, whichever
Person whose outstanding shares of Common Stock have the greatest
aggregate Current Per Share Market Price; 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-month
period registered under Section 12 of the Exchange Act ("Registered
Common Stock"), or such Person is not a corporation, and such Person is
a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, "Principal Party" shall refer to such other
Person; (2) if the Common Stock of such Person is not Registered Common
Stock or such Person is not a corporation, and such Person is a direct
or indirect Subsidiary of another Person but is not a direct or
indirect Subsidiary of another Person which has Registered Common Stock
outstanding, "Principal Party" shall refer to the ultimate parent
entity of such first-mentioned Person; (3) if the Common Stock of such
Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by
more than one Person, and one or more of such other Persons has
Registered Common Stock outstanding, "Principal Party" shall refer to
whichever of such other Persons is the issuer of the Registered Common
Stock having the highest aggregate Current Per Share Market Price; and
(4) if the Common Stock of such Person is not Registered Common Stock
or such Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and none of such other
Persons has Registered Common Stock outstanding, "Principal Party"
shall refer to whichever ultimate parent entity is the corporation
having the greatest stockholders' equity or, if no
23
such ultimate parent entity is a corporation, shall refer to whichever
ultimate parent entity is the entity having the greatest net assets.
(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 the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable
following the execution of such agreement, a registration statement
under the Securities Act with respect to the shares of Common Stock of
such Principal Party that may be acquired upon exercise of the Rights,
(B) cause such registration statement to remain effective (and to
include a prospectus complying with the requirements of the Securities
Act) until the Expiration Date, and (C) as soon as practicable
following the execution of such agreement take such action as may be
required to ensure that any acquisition of such shares of Common Stock
of such Principal Party upon the exercise of the Rights complies with
any applicable state securities or "blue sky" laws; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 (or any successor form) under the Exchange Act.
(d) In case the Principal Party which is to be a party to a transaction
referred to in this Section 13 has a provision in any of its authorized
securities or in its certificate of incorporation, bylaws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue, in connection with, or as a consequence
of, the consummation of a transaction referred to in this Section 13, shares of
Common Stock of such Principal Party at less than in the Current Per Share
Market Price or securities exercisable for, or convertible into, shares of
Common Stock of such Principal Party at less than in the Current Per Share
Market Price (other than to holders of Rights pursuant to this Section 13) or
(ii) providing for any special payment, tax or similar provisions in connection
with the issuance of the shares of Common Stock of such Principal Party pursuant
to the provisions of this Section 13, then, in such event, the Company shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been cancelled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights that have not theretofore been exercised
shall thereafter be exercisable in any manner provided in Section 13(a).
24
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the Current Per
Share Market Price of a whole Right. For purposes of this Section 14(a), the
Current Per Share Market Price of a whole Right shall be the closing price per
share of a whole Right on the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of Preferred
Stock (other than fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Stock (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock). Fractions of Preferred Stock in integral multiples of one one-thousandth
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, however, 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 Preferred Stock represented by such depositary receipts. In lieu of
fractional shares of Preferred Stock that are not integral multiples of one
one-thousandth of a share of Preferred Stock, the Company shall 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
Per Share Market Price of one share of Preferred Stock.
(c) The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right (except as provided above).
(d) Whenever a payment for fractional Rights or fractional shares is to
be made by the Rights Agent, the Company shall (i) promptly prepare and deliver
to the Rights Agent a certificate setting forth in reasonable detail the facts
related to such payment and the prices and/or formulas utilized in calculating
such payments, and (ii) provide sufficient monies to the Rights Agent in the
form of fully collected funds to make such payments. The Rights Agent shall be
fully protected in relying upon such a certificate and shall have no duty to
respect to, and shall not be deemed to have knowledge of any payment for
fractional Rights or fractional shares under any section of this Agreement
relating to the payment of fractional Rights or fractional shares unless and
until the Rights Agent shall have received such a certificate and sufficient
monies.
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, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
certificates representing shares of Common Stock of the Company); and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
a certificate representing shares of Common Stock of the Company), without the
consent of the Rights Agent
25
or of the holder of any other Rights Certificate (or, prior to the Distribution
Date, of a certificate representing shares of Common Stock of the Company), may,
in such holder's own behalf and for such holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder's right to exercise the
Rights evidenced by such Rights Certificate or, prior to the Distribution Date,
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 will be entitled to specific
performance of the obligations hereunder, and injunctive relief against actual
or threatened violations of the obligations of any Person subject to this
Agreement.
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 shares of Common Stock of the Company;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer with all required certificates
completed;
(c) subject to Sections 6(a) and 7(f), the Company and the Rights Agent
may deem and treat the Person in whose name the 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 Certificates 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;
(d) such holder expressly waives any right to receive any fractional
Rights and any fractional securities upon exercise or exchange of a Right,
except as otherwise provided in Section 14; and
(e) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company shall use
commercially reasonable efforts to have any such order, decree or ruling lifted
or otherwise overturned as soon as practicable.
26
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. 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 Units or
any other securities of the Company which may at any time be issuable upon the
exercise of the Rights represented thereby, nor shall anything contained in this
Agreement or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in Section 25), 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 this Agreement.
Section 18. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
under this Agreement and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
preparation, negotiation, execution, delivery, amendment and administration of
this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, damage, judgment, fine, penalty, claim, demand, settlement,
cost, liability or expense (including, without limitation, the reasonable fees
and disbursements of counsel), incurred without gross negligence or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the execution, acceptance and
administration of this Agreement and the exercise and performance of its duties,
including, without limitation, the costs and expenses of defending against and
appealing any claim of liability arising therefrom, directly or indirectly. This
indemnity shall survive the termination of this Agreement and the expiration of
the Rights. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company.
In the absence of gross negligence or willful misconduct, the
Rights Agent is authorized and shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement and the exercise and performance of
its duties hereunder, in reliance upon any Rights Certificate or certificate for
Units 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.
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
shareholder services, stock transfer or corporate trust business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto; provided, that such corporation
must be eligible for appointment as a
27
successor Rights Agent under the provisions of Section 21. 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 the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent 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 to perform only the duties and obligations expressly imposed by this
Agreement upon the following terms and conditions, all of which the Company and
the holders of Rights Certificates, by their acceptance thereof, shall be bound,
and no implied duties or obligations shall be read into this Agreement against
the Rights Agent:
(a) Before the Rights Agent acts or refrains from acting, it may
consult with legal counsel of its choice (who may be legal counsel for the
Company), and the advice or opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent, and the Rights Agent shall
incur no liability for or in respect of, as to any action taken, suffered or
omitted by it in good faith and in accordance with such advice or opinion.
(b) Whenever in the administration, exercise and performance of its
duties under this Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter be proved or established by the Company prior
to taking, suffering or omitting to take any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any officer of the Company and delivered to the Rights
Agent; and such certificate shall be full and complete authorization and
protection to the Rights Agent for or in respect of any action taken, suffered
or omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence 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 (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
28
(e) The Rights Agent shall not be under any responsibility or have any
liability in respect of the legality, validity or enforceability of this
Agreement or the execution and delivery hereof (except the due execution by the
Rights Agent) or in respect of the legality, validity or enforceability or the
execution of any Rights Certificate (except its countersignature); nor shall it
be liable or 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 change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii)) or any change or adjustment
in the terms of the Rights (including the manner, method or amount thereof)
provided for in Section 3, 11, 13, 23 or 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after receipt
of the certificate described in Section 12, upon which the Rights Agent may
rely); nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Units or other securities
to be issued upon the exercise of any Rights or as to whether any such security
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the administration, exercise and performance of its
duties hereunder from any one officer of the Company, and to apply to such
officers for advice or instructions in connection with its duties under this
Agreement, and such instructions shall be full authorization and protection to
the Rights Agent and the Rights Agent shall not be responsible or liable for, or
in respect of, any action taken, suffered or omitted to be taken by it in good
faith in accordance with instructions of any such officer or for any delay in
acting while waiting for those instructions. The Rights Agent shall be fully
authorized and protected in relying upon the most recent instructions received
from such officers. Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken, suffered or omitted by the Rights Agent under
this Agreement and the date on and/or after which such action shall be taken or
such omission shall be effective. The Rights Agent shall not be liable for any
action taken or suffered by, or omission of, the Rights Agent in accordance with
a proposal included in any such application on or after the date specified in
such application (which date shall not be less than five Business Days after the
date any officer of the Company actually received such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken, suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent, or
29
any such stockholder, affiliate, director, officer or employee from acting in
any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers vested in it or perform any duty under this Agreement either itself
(through its directors, officers and employees) or by or through its attorneys
or agents, and the Rights Agent shall not be answerable or accountable for any
act, omission, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, omission, default,
neglect or misconduct, provided that 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
the Rights Agent in good faith believes that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise, transfer, split up, combination or exchange, the
certification on the form of assignment or form of election to purchase, as the
case may be, that has been completed to certify the holder is an Acquiring
Person (or an Affiliate or Associate thereof) has either not been completed or
in any manner indicates any other response thereto, the Rights Agent shall not
take any further action with respect to such requested exercise, transfer, split
up, combination or exchange, without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock of the Company or Preferred Stock (as to
which the Rights Agent has received prior written notice) by registered or
certified mail, and the Company shall mail notice thereof 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 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 or Preferred Stock (as to which the Rights Agent has
received prior written notice) by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of thirty 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 such holder's 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 corporation organized and doing
business under the laws of the United States or of any state of the United
States, in good standing, authorized under such laws to exercise corporate trust
or stock transfer powers, and 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
30
surplus of at least $50 million. 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 or Preferred Stock, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its board of directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock of
the Company following the Distribution Date and prior to the Expiration Date,
the Company (a) shall, with respect to shares of Common Stock of the Company so
issued or sold pursuant to the exercise of stock options or under any employee
benefit plan or arrangement or upon the exercise, conversion or exchange of
securities of the Company currently outstanding or issued at any time in the
future by the Company and (b) may, in any other case, if deemed necessary or
appropriate by the board of directors of the Company issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
and this sentence shall be null and void ab initio if, and to the extent that,
such issuance or this sentence would create a significant risk of or result in
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued or would create a significant risk of or
result in such options' or employee plans' or arrangements' failing to qualify
for otherwise available special tax treatment and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Company may, at its option, upon approval by the board of
directors, at any time on or prior to the Close of Business (or such later date
as may be determined by its board of directors) on the earlier of (i) the
Distribution Date or (ii) the Final Expiration Date redeem all but not less than
all of the then outstanding Rights at a redemption price of $0.01 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement (such redemption price
being hereinafter referred to as the "Redemption Price"), and the Company may,
at its option, pay the Redemption Price either in cash, shares of Common Stock
of the Company (based on the Current Per Share Market Price thereof at the time
of redemption), or any other form of consideration deemed appropriate by its
board of directors. The redemption of the Rights by the board of directors of
31
the Company may be made effective at such time on such basis and with such
conditions as the board of directors of the Company in its sole discretion may
establish. Any such redemption will be effective immediately upon the action of
the board of directors of the Company ordering the same, unless such action of
the board of directors of the Company expressly provides that such redemption
will be effective at a subsequent time or upon the occurrence or nonoccurrence
of one or more specified events (in which case such redemption will be effective
in accordance with the provisions of such action of the board of directors of
the Company).
(b) Immediately upon the effectiveness of the redemption of the Rights
pursuant to Section 23(a), and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption (with a
copy to the Rights Agent); provided, however, that the failure to give, or any
defect in, any such notice shall not affect the validity of such redemption.
Within 10 days after the effectiveness of the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and shall mail
a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Stock. Any notice which is mailed in such manner shall be deemed
given, whether or not the holder receives the notice. Each notice of redemption
will state the method by which the payment of the Redemption Price will be made.
Neither the Company nor any of its Affiliates or Associates may redeem, acquire
or purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 or other than in
connection with the purchase of shares of Common Stock prior to the Distribution
Date.
(c) Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable pursuant to Section 7(a) at any
time when the Rights are redeemable hereunder.
32
Section 24. Exchange.
(a) The Company, at its option, upon approval by its board of
directors, at any time after any Person becomes an Acquiring Person, may
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become unexerciseable pursuant to the provisions of
Section 7(e)) for Units at an exchange ratio equal to, subject to adjustment to
reflect stock splits, stock dividends and similar transactions occurring after
the date hereof, that number obtained by dividing the Purchase Price by the then
Current Per Share Market Price per Unit on the earlier of (i) the date on which
any Person becomes an Acquiring Person and (ii) the date on which a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting in
such capacity) is commenced within the meaning of Rule 14d-2(a) of the Exchange
Act Regulations or any successor rule, if upon consummation thereof such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock of
the Company then outstanding (such exchange ratio being hereinafter referred to
as the "Section 24(a) Exchange Ratio"). Notwithstanding the foregoing, the
Company may not effect such exchange at any time after any Person (other than
the Company, any Subsidiary of the Company, any employee benefit plan maintained
by the Company or any of its Subsidiaries, or any trustee or fiduciary with
respect to such plan acting in such capacity), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
shares of Common Stock of the Company then outstanding.
(b) Immediately upon the action of the board of directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Units equal to the number of
such Rights held by such holder multiplied by the Section 24(a) Exchange Ratio.
The Company shall promptly give public notice of any such exchange (with a copy
provided to the Rights Agent); 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 provided in this
Agreement shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of
Units 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
unexerciseable pursuant to the provisions of Section 7(e)) held by each holder
of Rights.
(c) In the event that the number of shares of Preferred Stock
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit 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 shares of Preferred Stock for issuance upon exchange of the
Rights or make adequate provision to substitute (1) cash, (2) Common Stock of
the Company or other equity securities of the Company, (3) debt securities of
the Company, (4) other assets, or
33
(5) any combination of the foregoing, having an aggregate value equal to the
aggregate Current Per Share Market Price of the Units that would otherwise be
issuable in such exchange, all as determined by the board of directors of the
Company (which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive and binding on the Rights Agent, the
holders of the Rights and all other Persons). To the extent that the Company
determines that some action need be taken pursuant to Section 24(a), the board
of directors of the Company may temporarily suspend the exercisability of the
Rights for a period of up to sixty days following the date on which the event
described in Section 24(a) shall have occurred, in order to seek any
authorization of additional shares of Preferred Stock and/or to decide the
appropriate form of distribution to be made pursuant to the above provision and
to determine the value thereof. Upon any such suspension, the Company shall
notify the Rights Agent thereof and issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the supervision is no longer in effect (a copy of
which shall be provided to the Rights Agent).
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any dividend payable
in stock of any class to the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock (other than a regular
quarterly cash dividend), (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional Units or
shares of stock of any class or any other securities, rights or options, (iii)
to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding Preferred Stock),
(iv) to effect any consolidation or merger into or with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o)), or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one or more transactions,
of 50% or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company or (vi) to declare or pay
any dividend on the Common Stock of the Company payable in shares of Common
Stock of the Company or to effect a subdivision, combination or consolidation of
the shares of Common Stock of the Company (by reclassification or otherwise than
by payment of dividends in shares of Common Stock), then, in each such case, the
Company shall give to the Rights Agent and each holder of a Rights Certificate,
in accordance with Section 26, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, or distribution
of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
shares of Common Stock of the Company and/or shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least ten 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 ten 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 Common Stock of the Company and/or
shares of Preferred Stock, whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in
34
accordance with Section 26, a notice of the occurrence of such event, which
notice shall describe such event and the consequences of such event to holders
of Rights under Section 11(a)(ii). In the event any Person becomes an Acquiring
Person, the Company will promptly notify the Rights Agent thereof.
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 or by telecopier, addressed (until another
address is filed in writing by the Company with the Rights Agent) as follows:
Crossroads Systems, Inc.
0000 Xxxxx XxXxx Xxxxxxxxxx
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxx xx xxx Xxxx
Xxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Attention: J. Xxxxxxx Xxxxx, P.C.
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 sent by registered or certified
mail and shall be deemed given upon receipt and addressed (until another address
is filed in writing by the Rights Agent with the Company) as follows:
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Executive Vice President
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. Prior to the
Distribution Date, the Company may supplement or amend this Agreement in any
respect, without the approval of any holders of Rights, by action of its board
of directors. From and after the Distribution Date, the Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Rights, by action of its board of directors in order (i) to cure any ambiguity,
(ii) to correct or supplement any provision contained herein which may be
defective or inconsistent
35
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person),
including, without limitation, to change the Purchase Price, the Redemption
Price, any time periods herein specified, and any other term hereof, any such
supplement or amendment to be evidenced by a writing signed by the Company and
the Rights Agent; provided, however, that from and after such time as any Person
becomes an Acquiring Person, this Agreement shall not be amended in any manner
which would adversely affect the interests of the holders of Rights. Upon
receipt of a certificate from an appropriate officer of the Company that the
proposed supplement or amendment is consistent with this Section 27 and, after
such time as any Person has become an Acquiring Person, that the proposed
supplement or amendment does not adversely affect the interests of the holders
of Rights, the Rights Agent shall execute such supplement or amendment.
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. Determinations and Actions by the Board of
Directors. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock of the Company outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of the Company of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the Exchange Act Regulations. 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 (i) interpret the provisions of this Agreement and (ii) make all
determinations or calculations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing), which are done or made by the
board of directors of the Company in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights
Certificates and all other Persons and (y) not subject the board of directors of
the Company to any liability to the holders of the Rights. The Rights Agent
shall be entitled to assume that the Board of Directors acted in good faith and
shall be fully protected and incur no liability in reliance thereon.
36
Section 30. 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, shares of Common Stock of the Company) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, shares of Common Stock of the Company).
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;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the board of
directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement and the right of redemption set forth in Section 23
shall have expired, such right shall be reinstated and shall not expire until
the tenth Business Day following the date of such determination by the board of
directors of the Company.
Section 32. Governing Law. This Agreement and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of
Delaware and for all purposes shall be governed by and
construed in accordance with the internal laws of the State of
Delaware
applicable to contracts to be made and performed entirely within such state,
without regard to the choice-of-law or conflict-of-laws principles of any
jurisdiction.
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
one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several sections of this Agreement are inserted or convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Agreement.
[Signature page follows]
37
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.
CROSSROADS SYSTEMS, INC.
By: /s/
--------------------------------------
Name:
Title:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/
--------------------------------------
Name:
Title:
[SIGNATURE PAGE TO CROSSROADS SYSTEMS, INC. RIGHTS AGREEMENT]
EXHIBIT A
FORM
OF
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
CROSSROADS SYSTEMS, INC.,
(Pursuant to Section 151 of the
Delaware General Corporation Law)
----------
Crossroads Systems, Inc., a corporation organized and existing
under the General Corporation Law of the State of
Delaware (hereinafter called
the "Corporation"), hereby certifies that the following resolution was adopted
by the board of directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on August 21, 2002;
RESOLVED, that pursuant to the authority granted to and vested
in the board of directors of the Corporation (hereinafter the "Board") in
accordance with the provisions of the certificate of incorporation of the
Corporation, as currently in effect, the Board hereby creates a series of
Preferred Stock, par value $0.001 per share (the "Preferred Stock"), of the
Corporation and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be one hundred seventy-five thousand (175,000). Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series A Preferred Stock.
A-1
Section 2. Dividends and Distributions.
(a) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Preferred Stock with respect to dividends, each holder of a share of Series A
Preferred Stock, in preference to the holders of shares of common stock, par
value $0.001 per share (the "Common Stock"), of the Corporation, and of any
other junior stock, shall be entitled to receive, when declared by the Board out
of funds legally available for the purpose, dividends in an amount per share
(rounded to the nearest cent) equal to, subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock. In the
event the Corporation shall, at any time after August 21, 2002 (the "Rights
Declaration Date"), declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock (and an equivalent dividend is not declared on
the Series A Preferred Stock or the Series A Preferred Stock is not similarly
subdivided or combined), then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) The Corporation shall declare a dividend or distribution on the
shares of Series A Preferred Stock as provided in Section 2(a) immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, that, in no
event shall a dividend or distribution be declared by the Board on the Common
Stock for which it does not declare and pay the dividend required to be declared
on the Preferred Stock pursuant to Section 2(a).
(c) Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more than sixty
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 1,000
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall, at any time after the Rights Declaration
Date, declare or pay any dividend on the Common Stock payable in shares of
A-2
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 (and an equivalent dividend is not declared on the
Series A Preferred Stock or the Series A Preferred Stock is not similarly
subdivided or combined), then in each such case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in the Certificate of
Incorporation, in any other Certificate of Designation creating a series of
Preferred Stock or any similar stock, or by law, the holders of shares of Series
A Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(c) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the shares of Series A
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 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 Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred
A-3
Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board) to all holders of such shares upon such
terms as the Board, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under Section 4(a), purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
certificate of incorporation, or in any other certificate of designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation, dissolution or winding up of the Corporation,
no distribution shall be made (i) to the holders of shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received the greater of (x) $1,000 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon to the date of such payment (the "Series A Liquidation Preference") and
(y) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to the product of 1,000 times the aggregate amount
to be distributed per share to holders of shares of Common Stock, or (ii) to the
holders of shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Corporation shall, at any time after the Rights Declaration Date
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock (and an equivalent dividend is not declared on the
Series A Preferred Stock or the Series A Preferred Stock is not similarly
subdivided or combined), then in each such case the aggregate amount to which
holders of shares of Series A Preferred Stock were entitled immediately prior to
such event under the proviso in clause (i) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-4
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of Series A Preferred Stock
and such parity shares in proportion to their respective liquidation
preferences.
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 converted or changed into other
stock or securities, cash and/or any other property (or into the right to
receive any of the foregoing), then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged, converted or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is converted, changed or
exchanged. In the event the Corporation shall, at any time after the Rights
Declaration Date declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock (and an equivalent dividend is not declared on
the Series A Preferred Stock or the Series A Preferred Stock is not similarly
subdivided or combined), then in each such case the amount set forth in the
preceding sentence with respect to the conversion, exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank, with respect
to the payment of dividends and the distribution of assets, junior to all series
of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The certificate of incorporation of the
Corporation shall not be amended, including any amendment through consolidation,
merger, combination or other transaction, in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least a majority of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
[Signature page follows]
A-5
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation as of the date first written above.
CROSSROADS SYSTEMS, INC.
By:
--------------------------------------
Name:
Title:
A-6
EXHIBIT B
Form of Rights Certificate
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER TEN YEAR ANNIVERSARY OF RECORD DATE OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
THE OPTION OF THE COMPANY AT $0.01 PER RIGHT AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE
OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
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 SUCH AGREEMENT]*
Rights Certificate
CROSSROADS SYSTEMS, 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 August 21, 2002 (the "Rights Agreement"),
between Crossroads Systems, Inc., a
Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, as Rights Agent (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., New York City
time, on September 3, 2012 at the office of the Rights Agent designated for such
purpose, or at the office of its successor as Rights Agent, one one-thousandth
(a "Unit") of a fully paid non-assessable share of Series A Junior Participating
Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock") of
the Company, at a purchase price of $12.00 per Unit of Series A Preferred Stock
(the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and certification duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of Units of Series A Preferred Stock which may be purchased upon exercise
hereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of September 3, 2002 based on the Series A Preferred Stock
as constituted at
----------
* The bracketed language is to be inserted in place of the preceding
sentence where applicable.
B-1
such date. As provided in the Rights Agreement, the Purchase Price and the
number of Units of Series A Preferred Stock which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
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.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office 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 Units of Series A Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at a redemption
price of $0.01 per Right.
No fractional shares of Series A Preferred Stock will be
issued upon the exercise of any Rights or Rights evidenced hereby (other than
fractions which are integral multiples of one one-thousandth of a share of
Series A 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, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
Units of Series A 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 stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
B-2
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
WITNESS the signature of the proper officers of the Company
and its corporate seal.
Dated as of CROSSROADS SYSTEMS, INC.
--------------
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Countersigned:
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Rights Agent
By:
------------------------------
Authorized Signatory
Name:
-------------------------
Title:
------------------------
B-3
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ________________________________ hereby
sells, assigns and transfers unto
--------------------------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
DATED: ,
----------------------------- ---
-------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in an "eligible
guarantor institution" as defined in Rule 17Ad-5 promulgated under the
Securities Exchange Act of 1934, as amended.
B-4
CERTIFICATE
The undersigned hereby certifies that the Rights evidenced by
this Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (each as defined in the Rights Agreement).
-------------------------------
Signature
----------
NOTICE
The signature in the foregoing Form of Assignment must conform
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment is not completed, the Company and the Rights Agent will deem the
beneficial owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (each as defined in the
Rights Agreement) and such Assignment will not be honored.
B-5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights Certificate.)
To Crossroads Systems, Inc.:
The undersigned hereby irrevocably elects to exercise
________________ Rights represented by this Rights Certificate to purchase the
Units of Series A Preferred Stock issuable upon the exercise of such Rights and
requests that certificates for such Series A Preferred Stock be issued in the
name of:
Please insert social security
or other identifying number
----------------------------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
----------------------------------------------------
(Please print name and address)
DATED: ,
----------------------------- ---
-------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in an "eligible
guarantor institution" as defined in Rule 17Ad-5 promulgated under the
Securities Exchange Act of 1934, as amended.
B-6
CERTIFICATE
The undersigned hereby certifies that the Rights evidenced by
this Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (each as defined in the Rights Agreement).
-------------------------------
Signature
----------
NOTICE
The signature in the foregoing Form of Election to Purchase
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Election to Purchase, as the case may be, is not completed, the Company and the
Rights Agent will deem the beneficial owner of the Rights evidenced by this
Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (each as defined in the Rights Agreement) and such Election to Purchase
will not be honored.
B-7
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On August 21, 2002, the board of directors of Crossroads
Systems, Inc. (the "Company") declared a dividend distribution of one right (a
"Right") for each outstanding share of our common stock to stockholders of
record at the close of business on September 3, 2002. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
our Series A Junior Participating preferred stock, par value $0.001 per share
(the "Preferred Stock"), at a purchase price of $12.00, subject to adjustment.
The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and American Stock Transfer & Trust
Company, as Rights Agent.
Initially, the Rights will be attached to all common stock
certificates representing shares then outstanding, and no separate Rights
certificates will be distributed (the "Distribution Date"). The Distribution
Date will occur on the earlier of (i) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has (subject to certain exceptions) acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of our
common stock (the "Share Acquisition Date"), other than as a result of
repurchases of stock by the Company, or (ii) ten days (or a later date that the
board shall determine) following the commencement of, or public announcement of
an intention to make, a tender offer or exchange offer that would result in a
person or group beneficially owning 15% or more of the outstanding shares of our
common stock. The Rights Agreement specifically provides that our Chairman,
President and Chief Executive Officer, Xxxxx X. Xxxxx, who currently owns 11.9%
of our common stock, may acquire up to an aggregate of 20% of our common stock
without triggering the exercisability of the rights. Additionally, Austin
Ventures and its affiliates currently beneficially own 16.1% of our common
stock. The rights agreement provides that so long as Austin Ventures and its
affiliates do not acquire any additional shares of our common stock, their
ownership of our common stock will not trigger the exercisability of the rights
in the event that their ownership percentage rises above 15%.
Until the Distribution Date, (i) the Rights will be evidenced
by the common stock certificates and will be transferred with and only with our
common stock certificates, (ii) new common stock certificates issued after the
record date will contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any certificates for common
stock outstanding will also constitute the transfer of the Rights associated
with the common stock represented by such certificate. Pursuant to the Rights
Agreement, the company reserves the right to require prior to the occurrence of
a Triggering Event (as defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of preferred stock will
be issued.
C-1
The Rights can not be exercised until the Distribution Date
and will expire at the close of business on September 3, 2012, unless earlier
redeemed by the Company as described below.
Shortly after the Distribution Date, Rights certificates would
be mailed to record holders of our common stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights certificates alone
will represent the Rights. Unless our board of directors decides differently,
only shares of our common stock issued before the Distribution Date will be
issued with Rights.
If an Acquiring Person becomes (subject to certain exceptions)
the beneficial owner of 15% or more of the then outstanding shares of common
stock (other than pursuant to an offer for all the outstanding shares of common
stock that our board of directors determines to be fair to and otherwise in the
best interests of the Company and its stockholders), each holder of a Right will
thereafter have the right to receive, upon exercise, preferred stock (or, in
certain circumstances, cash, property or other securities of the company) having
a value equal to two times the exercise price of the Right. If, at any time
after the Stock Acquisition Date, (i) we are acquired in a merger or other
business combination transaction in which we are not the surviving corporation,
other than a merger that results from an offer for all the outstanding shares of
common stock that our board decides is fair and in the best interests of the
Company and its stockholders, or (ii) 50% or more of our assets, cash flow or
earning power is sold or transferred, each holder of a Right, except Rights
which previously have been voided, will have the right to receive, after
exercise of the Right, common stock of the company that acquires us having a
value equal to two times the exercise price of the Right. The events described
in this paragraph are "Triggering Events."
For example, at an exercise price of $12 per Right, each Right
not owned by an Acquiring Person (or by certain related parties) following a
Triggering Event would entitle its holder to purchase $24 worth of preferred
stock (or other consideration, as noted above) for $12. Assuming that our common
stock had a per share value of $10 at such time, the holder of each valid Right
would be entitled to purchase preferred stock that would be economically
equivalent to 2.4 shares of our common stock for $12.
All Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person will
not be exercisable. At any time after a person becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding common stock, the board may exchange the Rights (other than Rights
owned by the person or group which will not be exercisable), in whole or in
part, at an exchange ratio of one share of common stock, or one one-thousandth
of a share of preferred stock (or of a share of a class or series of our
preferred stock having equivalent rights, preferences and privileges), per
Right.
At any time until ten days following the Share Acquisition
Date, the board may redeem the Rights in whole, but not in part, at a price of
$0.01 per Right (payable in cash, common stock or other consideration deemed
appropriate by the board). Immediately upon the action of the board ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.01 redemption price.
C-2
Until a Right is exercised, the holder of a Right will have no
rights by virtue of ownership as a stockholder of the company, such as the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for preferred stock (or other consideration) of the company or for
common stock of the acquiring company.
Any of the provisions of the Rights Agreement may be amended
by the board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the board in order to cure
any ambiguity, to make changes which do not adversely affect the interests of
holders of Rights, or to shorten or lengthen any time period under the Rights
Agreement, but no amendment may be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an exhibit to a Current Report on Form
8-K. A copy of the Rights Agreement is available free of charge from the company
upon a written request. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is incorporated herein by reference.
C-3
