RIGHTS AGREEMENT
DATED AS OF
JULY 20, 2001
BETWEEN
HAUPPAUGE DIGITAL, INC.
A DELAWARE CORPORATION
AND
XXXXXXX XXXXXXXXX
d/b/a NORTH AMERICAN TRANSFER CO.
AS RIGHTS AGENT
TABLE OF CONTENTS
Section 1. Certain Definitions......................................................................1
Section 2. Appointment of Rights Agent...............................................................6
Section 3. Issuance of Rights Certificates..........................................................7
Section 4. Form of Rights Certificates..............................................................8
Section 5. Countersignature and Registration........................................................9
Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates..............................................10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............................11
Section 8. Cancellation and Destruction of Rights Certificates......................................12
Section 9. Reservation and Availability of Capital Stock............................................13
Section 10. Common Stock Record Date................................................................14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.............14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares..............................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
Earning Power..............................................................................22
Section 14. Fractional Rights and Fractional Shares................................................24
Section 15. Rights of Action........................................................................25
Section 16. Agreement of Rights Holders.............................................................25
Section 17. Rights Certificate Holder Not Deemed a Stockholder......................................26
Section 18. Concerning the Rights Agent............................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent..............................27
Section 20. Duties of Rights Agent..................................................................27
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Section 21. Change of Rights Agent..................................................................29
Section 22. Issuance of New Rights Certificates.....................................................30
Section 23. Redemption and Termination.............................................................30
Section 24. Notice of Certain Events...............................................................33
Section 25. Notices.................................................................................34
Section 26. Supplements and Amendments..............................................................34
Section 27. Successors..............................................................................35
Section 28. Determinations and Actions by the Board of Directors, etc...............................35
Section 29. Benefits of this Agreement..............................................................35
Section 30. Severability............................................................................35
Section 31. Governing Law...........................................................................36
Section 32. Counterparts............................................................................36
Section 33. Descriptive Headings....................................................................36
EXHIBITS
Exhibit A - Form of Rights Certificate
Exhibit B - Form of Summary Rights
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July 20, 2001 (the "Agreement"), by and
between HAUPPAUGE DIGITAL, INC., a Delaware corporation (the "Company"), and
XXXXXXX XXXXXXXXX d/b/a NORTH AMERICAN TRANSFER CO. (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on July 19, 2001 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company (the "Board of Directors") authorized and
declared a dividend distribution of one Right (as hereinafter defined) for each
share of common stock, par value $0.01 per share, of the Company (the "Common
Stock") outstanding at the close of business on August 5, 2001 (the "Record
Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11 hereof) for
each share of Common Stock of the Company issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and the
Distribution Date (as hereinafter defined) each Right initially representing the
right to purchase one share of Common Stock upon the terms and subject to the
conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean (x) any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 10% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company, or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan,
(iv) any Person who becomes the Beneficial Owner of 10% or more of the
shares of Common Stock then outstanding as a result of a reduction in the
number of shares of Common Stock outstanding due to the repurchase of
shares of Common Stock by the Company other than during the Special Period
(as defined in Section 23(c) hereof) or at a time when the rights are not
redeemable, unless and until such Person, after becoming aware that such
Person has become the Beneficial Owner of 10% or more of the then
outstanding shares of Common Stock, acquires beneficial ownership of
additional shares of Common Stock representing 1% or more of the shares of
Common Stock then outstanding, (v) any Exempted Person, unless and until
such Person is an Exempted Person pursuant to clause (i) of the definition
thereof and after the date such Person initially is an Exempted Person,
such Person acquires beneficial ownership of additional shares of Common
Stock representing 1% or more of the shares of Common Stock then
outstanding, (vi) any Passive Institutional Investor, or (vii) any such
Person who has reported or is required to report such ownership on Schedule
13G under the Securities Exchange Act of 1934, as amended and in effect
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on the date of the Agreement (the "Exchange Act") (or any comparable or
successor report) or on Schedule 13D under the Exchange Act (or any
comparable or successor report) which Schedule 13D does not state any
intention to or reserve the right to control or influence the management or
policies of the Company or engage in any of the actions specified in Item 4
of such schedule (other than the disposition of the Common Stock) and,
within ten (10) Business Days of being requested by the Company to advise
it regarding the same, certifies to the Company that such Person acquired
shares of Common Stock in excess of 9.9% inadvertently or without knowledge
of the terms of the Rights and who, together with all Affiliates and
Associates, thereafter does not acquire additional shares of Common Stock
while the Beneficial Owner of 10% or more of the shares of Common Stock
then outstanding; that if the Person requested to so certify fails to do so
within ten (10) Business Days, then such Person shall become an Acquiring
Person immediately after such 10-Business-Day period or (y) any Person who
or which has entered into any agreement or arrangement with the Company or
any Subsidiary of the Company providing for an Acquisition Transaction (as
defined in Section 1(b) hereof).
(b) "Acquisition Transaction" shall mean (x) a merger, consolidation
or similar transaction involving the Company or any of its Subsidiaries as
a result of which stockholders of the Company will no longer own a majority
of the outstanding shares of Common Stock of the Company or a publicly
traded entity which controls the Company or, if appropriate, the entity
into which the Company may be merged, consolidated or otherwise combined
(based solely on the shares of Common Stock received or retained by such
stockholders, in their capacity as stockholders of the Company, pursuant to
such transaction), (y) a purchase or other acquisition of all or a
substantial portion of the assets of the Company and its Subsidiaries, or
(z) a purchase or other acquisition of securities representing 10% or more
of the shares of Common Stock then outstanding.
(c) "Act" shall mean the Securities Act of 1933, as amended.
(d) "Affected Transaction" shall have the meaning set forth in Section
23(c) hereof.
(e) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act.
(f) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a
tender or exchange offer made by such Person or any of such
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Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, (B)
securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event (as
hereinafter defined), or (C) securities issuable upon
exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person
or any of such Person's Affiliates or Associates prior to
the Distribution Date (as hereinafter defined) or pursuant
to Section 3(a) or Section 22 hereof (the "Original Rights")
or pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act), including, but not limited to,
pursuant to any agreement, arrangement or understanding,
whether or not in writing; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subparagraph
(ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement,
arrangement or understanding: (A) arises solely from a
revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not
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 Person (or any of such Person's Affiliates
or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph
(ii) of this paragraph (d)) or disposing of any voting
securities of the Company; provided, however, that nothing
in this paragraph (d) shall cause a Person engaged in
business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in
good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition,
and then only if such securities continue to be owned by
such Person at such expiration of forty days and provided
further, however, that any stockholder of the Company, with
affiliate(s), associate(s) or other person(s) who may be
deemed representatives of it serving as director(s) of the
Company, shall not be deemed to beneficially own securities
held by other Persons as a result of (i) persons affiliated
or otherwise associated with such stockholder serving as
directors or taking any action in connection
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therewith, (ii) discussing the status of its shares with the
Company or other stockholders of the Company similarly
situated or (iii) voting or acting in a manner similar to
other stockholders similarly situated, absent a specific
finding by the Board of Directors of an express agreement
among such stockholders to act in concert with one another
as stockholders so as to cause, in the good faith judgment
of the Board of Directors, each such stockholder to be the
Beneficial Owner of the shares held by the other
stockholder(s).
(g) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(h) "Close of business" on any given date shall mean 5:00 P.M.,
Eastern time, on such date; provided, however, that if such date is not a
Business Day, it shall mean 5:00 P.M., Eastern time, on the next succeeding
Business Day.
(i) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such
Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(j) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(k) "Current Market Price" shall have the meaning set forth in Section
11(d)(i) hereof.
(l) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(m) "Distribution Date" shall have the meaning set forth in Section
3(a) hereof.
(n) "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended.
(o) "Exempted Person" shall mean any Person who (i) is the Beneficial
Owner, on the date hereof, of securities representing 10% or more of the
shares of Common Stock outstanding on the date hereof, and such Person's
Affiliates and Associates as of the date hereof (provided that any Person
who, following the date hereof, fails to continue to be the Beneficial
Owner of securities representing at least 10% of the shares of Common Stock
outstanding at any time shall, as of such date, no longer be deemed to be a
"Exempted Person" pursuant to this clause(i)) or, (ii) becomes, after the
date hereof, the Beneficial Owner of securities representing 10% or more of
the outstanding shares of Common Stock as a result of a Qualified Offer.
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(p) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(q) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(r) "Independent Advisor" shall have the meaning set forth in Section
23(c) hereof.
(s) "Interest" shall have the meaning set forth in Section 23(c)
hereof.
(t) "Passive Institutional Investor" shall mean an institutional
investor that, together with its Affiliates and Associates, is (A) the
Beneficial Owner of less than 20% of the shares of Common Stock then
outstanding and (B) such investor reports or is required to report such
ownership on Schedule 13G of the Exchange Act (or any comparable or
successor report) and is not permitted to, and does not, report such
ownership on Schedule 13D under the Exchange Act (or any comparable or
successor report); provided that any such Person that, together with its
Affiliates and Associates, (A) becomes the Beneficial Owner of 20% or more
of the shares of Common Stock then outstanding or (B) becomes required to
report, or reports, such ownership on Schedule 13D of the Exchange Act (or
any comparable or successor report) shall, at such time, immediately cease
to be a Passive Institutional Investor.
(u) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(v) "Principal Party" shall have the meaning set forth in Section
13(b) hereof.
(w) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
(x) "Qualified Offer" shall have the meaning set forth in Section
11(a)(ii) hereof.
(y) "Record Date" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Agreement.
(z) "Rights" shall have the meaning set forth in the WHEREAS clause at
the beginning of this Agreement.
(aa) "Rights Agent" shall have the meaning set forth in the parties
clause at the beginning of this Agreement.
(bb) "Rights Certificate" shall have the meaning set forth in Section
3(a) hereof.
(aa1.) "Rights Dividend Declaration Date" shall have the meaning set
forth in the WHEREAS clause at the beginning of this Agreement.
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(bb1.) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(cc1.) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) hereof.
(dd1.) "Special Period" shall have the meaning set forth in Section
23(c) hereof.
(ee1.) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(ff1.) "Stock Acquisition Date" shall mean the earlier (i) the first
date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed or amended pursuant to Section
13(d) under the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such pursuant to clause (x) of the definition
of Acquiring Person other than pursuant to a Qualified Offer , and (ii) the
date that an Acquiring Person has become such pursuant to clause (y) of the
definition of Acquiring Person.
(gg1.) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at
least a majority of the directors of such corporation is beneficially
owned, directly or indirectly, by such Person, or otherwise controlled by
such Person.
(hh1.) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ii1.) "Summary of Rights" shall have the meaning set forth in Section
3(b) hereof.
(jj1.) "Transaction" shall have the meaning set forth in Section 23(c)
hereof.
(kk1.) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(ll1.) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(mm1.) "Value Enhancement Procedures" shall have the meaning set forth
in Section 23(c) hereof.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-rights agents as it may deem
necessary or desirable, upon 10 days' prior written notice to the Rights Agent.
The Rights Agent shall have no duty to supervise, and shall in no event be
liable for, the acts or omissions of any such co-rights agent.
6
Section 3. Issuance of Rights Certificates.
(a) Until the earlier of (i) the close of business on the tenth
Business Day after the Stock Acquisition Date (or, if the tenth Business
Day after the Stock Acquisition Date occurs before the Record Date, the
close of business on the Record Date), or (ii) the close of business on the
tenth Business Day (or such later date as the Board of Directors shall
determine provided, however, that no deferral of a Distribution Date by the
Board of Directors pursuant to this clause (ii) may be made at any time
during the Special Period) after the date of the commencement of a tender
or exchange offer by any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any Person or entity organized, appointed or established
by the Company for or pursuant to the terms of any such plan) within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act, or any successor provision thereto, if upon consummation
thereof, such Person would become an Acquiring Person, in either instance
other than pursuant to a Qualified Offer (the earlier of (i) and (ii) being
herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by
the certificates for the Common Stock registered in the names of the
holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection
with the transfer of the underlying shares of Common Stock (including a
transfer to the Company). As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured, postage-prepaid
mail, to each record holder of the Common Stock as of the close of business
on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more right certificates, in substantially
the form of Exhibit A hereto (the "Rights Certificates"), evidencing one
Right for each share of Common Stock so held, subject to adjustment as
provided herein. In the event that an adjustment in the number of Rights
per share of Common Stock has been made, at the time of distribution of the
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that
Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) The Company will make available, as promptly as practicable
following the Record Date, a copy of a Summary of Rights, in substantially
the form attached hereto as Exhibit B (the "Summary of Rights") to any
holder of Rights who may so request from time to time prior to the
Expiration Date. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights
will be evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the registered holders
of the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7(a) hereof), the
transfer of any certificates representing shares of Common Stock in respect
of which Rights have been issued shall also constitute the transfer of the
Rights associated with such shares of Common Stock.
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(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or
the Expiration Date. Certificates representing such shares of Common Stock
shall also be deemed to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between
Hauppauge Digital, Inc. (the "Company") and the Rights Agent
thereunder (the "Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the
holder of this certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge, promptly after
receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued
to, or held by, any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become
null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation
made pursuant thereto or with any rule or regulation of any stock exchange
on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record
Date and on their face shall entitle the holders thereof to purchase such
number of shares of Common Stock as shall be set forth therein at the price
set forth therein (such exercise price per share, the "Purchase Price"),
but the amount and type of securities
8
purchasable upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a), Section
11(i) or Section 22 hereof that represents Rights beneficially owned by:
(i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or 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) 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 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) hereof, and any Rights Certificate issued
pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in
this sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by the
Rights Agent, either manually or by facsimile signature, and shall not be
valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to
be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and
delivered by the Company with the same force and effect as though the
person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificates may be signed on behalf
of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign
such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.
9
(b) Following the Distribution Date, the Rights Agent will keep, or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates
issued hereunder. Such books shall show the names and addresses of the
respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the
Expiration Date, any Rights Certificate or Certificates may be transferred,
split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of
shares of Common Stock, other securities, cash or other assets, as the case
may be as the Rights Certificate or Certificates surrendered then entitles
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights Certificate
or Certificates to be transferred, split up, combined or exchanged at the
principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on
the reverse side of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to them, and
reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will
execute and deliver a new Rights Certificate of like tenor to the Rights
Agent for countersignature and delivery to the registered owner in lieu of
the Rights Certificate so lost, stolen, destroyed or mutilated.
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Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, at any time after the Distribution
Date the registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein including,
without limitation, the restrictions on exercisability set forth in Section
9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the
Rights Agent at the principal office or offices of the Rights Agent
designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of shares (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i)
5:00 P.M., Hauppauge, New York time, on July 19, 2011, or such later date
as may be established by the Board of Directors prior to the expiration of
the Rights (such date, as it may be extended by the Board of Directors, the
("Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i) and (ii)
being herein referred to as the "Expiration Date").
(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Right shall initially be $11.00, and shall be subject to
adjustment from time to time as provided in Section 11 and Section 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly
executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per share of Common Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
(A) requisition from any transfer agent of the shares of Common Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of shares of Common Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Company shall have elected to deposit
the total number of shares of Common Stock issuable upon exercise of the
Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of shares of Common
Stock as are to be purchased (in which case certificates for the shares of
Common Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the
Company the amount of cash, if any, to be paid in lieu of fractional shares
in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or,
upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder, and
(iv) after receipt thereof, deliver such cash, if any, to or upon the order
of the registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) shall be made in cash or by certified bank check or bank
draft payable to the order of the Company. In the event that the Company is
obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company
will make all arrangements
11
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon
the order of, the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an 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) 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), shall become null and
void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise. The Company shall use all reasonable
efforts to insure that the provisions of this Section 7(e) and Section 4(b)
hereof are complied with, but shall have no liability to any holder of
Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate
12
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company,
or shall, at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available, out of its authorized and unissued shares of Common
Stock and/or other securities or out of its authorized and issued shares
held in its treasury, the number of shares of Common Stock and/or other
securities that, as provided in this Agreement, including Section
11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Common Stock and/or other securities
issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Act, with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities, and (B)
the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability
of the Rights in order to prepare and file such registration statement and
permit it to become effective. Upon any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such
time as the suspension has been rescinded. In addition, if the Company
shall determine that a registration statement is required following the
Distribution Date, the Company may temporarily suspend the exercisability
of the Rights until such time as a registration statement has been declared
effective. Notwithstanding any provision of this Agreement to the contrary,
the Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law, or a
registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be
13
necessary to ensure that all shares of Common Stock and/or other securities
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for shares of Common Stock and/or
other securities, as the case may be, upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may
be payable in respect of any transfer or delivery of Rights Certificates to
a Person other than, or the issuance or delivery of the shares of Common
Stock and/or other securities, as the case may be, in respect of a name
other than that of the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for shares of Common Stock and/or other securities, as the
case may be, in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction
that no such tax is due.
Section 10. Common Stock Record Date. Each person in whose name any
certificate for shares of Common Stock and/or other securities, as the case may
be, is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of the shares of Common Stock and/or other
securities, as the case may be, represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and all
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Common Stock and/or other
securities, as the case may be, transfer books of the Company are closed, such
Person shall be deemed to have become the record holder of such shares on, and
such certificate shall be dated, the next succeeding Business Day on which the
Common Stock and/or other securities, as the case may be, transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Common Stock
payable in shares of Common Stock, (B) subdivide the outstanding
Common Stock, (C) combine the outstanding Common Stock into a
smaller number of shares, or (D) issue any shares of its capital
stock in a reclassification of the Common Stock (including any
such reclassification in
14
connection with a consolidation or merger in which the Company is
the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of
shares of Common Stock or capital stock, as the case may be,
issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Common Stock
or capital stock, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when
the Common Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event any Person shall, at any time after the Rights
Dividend Declaration Date, become an Acquiring Person, unless the
event causing such Person to become an Acquiring Person is a
transaction set forth in Section 13(a) hereof, or is an
acquisition of shares of Common Stock pursuant to a tender offer
or an exchange offer for all outstanding shares of Common Stock
at a price and on terms determined by at least a majority of the
members of the Board of Directors who are not officers of the
Company and who are not representatives, nominees, Affiliates or
Associates of an Acquiring Person, after receiving advice from
one or more investment banking firms, to be (a) at a price which
is fair to stockholders and not inadequate (taking into account
all factors which such members of the Board of Directors deem
relevant, including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on
an orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Company and its
stockholders (provided, however, that no such determination shall
be made during the Special Period) (a "Qualified Offer") then,
promptly following the occurrence of such event, proper provision
shall be made so that each holder of a Right (except as provided
below and in Section 7(e) hereof) shall thereafter have the right
to receive, upon exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, in lieu of
a number of shares of Common Stock for which a Right was
theretofore exercisable, such number of shares of Common Stock of
the Company as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of shares of
Common Stock for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event, and (y)
dividing that product (which, following such first occurrence,
shall thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by 50% of the
Current Market Price (determined pursuant to Section
15
11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's Certificate of
Incorporation, as amended, but which are 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 in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company shall (A) determine the value of
the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for
the Adjustment Shares, upon the exercise of a Right and payment
of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Stock or other equity securities
of the Company (including, without limitation, shares, or units
of shares, of preferred stock which the Board of Directors has
deemed to have essentially the same value or economic rights as
shares of Common Stock (such shares of preferred stock being
referred to as "Common Stock Equivalents")), (4) debt securities
of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value,
where such aggregate value has been determined by the Board of
Directors based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors;
provided, however, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be
obligated to deliver, upon the surrender for exercise of a Right
and without requiring payment of the Purchase Price, shares of
Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to
the Spread. For purposes of the preceding sentence, the term
"Spread" shall mean the excess of (i) the Current Value over (ii)
the Purchase Price. If the Board of Directors determines in good
faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in
full of the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization
of such additional shares (such thirty (30) day period, as it may
be extended, is herein called the "Substitution Period"). To the
extent that action is to be taken pursuant to the first and/or
third sentences of this Section 11(a)(iii), the Company (1) shall
provide, subject to Section 7(e) hereof, that such action shall
apply uniformly to all outstanding Rights, and (2) may suspend
the exercisability of the Rights until the expiration of the
Substitution Period in order to seek such stockholder approval
for such authorization of additional shares and/or to decide the
appropriate form of
16
distribution to be made pursuant to such first sentence and to
determine the value thereof. In the event of any such suspension,
the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as
well as a public announcement at such time as the suspension is
no longer in effect. For purposes of this Section 11(a)(iii), the
Current Value of the Common Stock shall be the Current Market
Price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date and the value of any Common Stock Equivalent shall
be deemed to equal the Current Market Price per share of the
Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them
to subscribe for or purchase (for a period expiring within forty-five (45)
calendar days after such record date) Common Stock or securities
convertible into Common Stock at a price per share of Common Stock (or
having a conversion price per share, if a security convertible into Common
Stock) less than the Current Market Price (as determined pursuant to
Section 11(d) hereof) per share of Common Stock on such record date, the
Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding on such record date, plus the number of
shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so to be offered)
would purchase at such Current Market Price, and the denominator of which
shall be the number of shares of Common Stock outstanding on such record
date, plus the number of additional shares of Common Stock to be offered
for subscription or purchase (or into which the convertible securities so
to be offered are initially convertible). In case such subscription price
may be paid by delivery of consideration, part or all of which may be in a
form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Common Stock owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is
fixed, and in the event that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Common Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a
cash dividend out of the earnings or retained earnings of the Company),
assets (other than a dividend payable in Common Stock, but including any
dividend payable in stock other than Common Stock), or of subscription
rights or warrants (excluding those referred to in Section 11(b) hereof),
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Current
Market Price (as determined pursuant to Section 11(d) hereof) per share
17
of Common Stock on such record date, less the fair market value (as
determined in good faith by the Board of Directors, whose determination
shall be described in a statement filed with the Rights Agent) of the
portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a
share of Common Stock, and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d) hereof) per share of
Common 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 be adjusted to be the Purchase Price which
would have been in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days immediately prior to such date,
and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the Current Market Price per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event that the Current
Market Price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10) Trading
Day period, as set forth above, then, and in each such case, the Current
Market Price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
on the principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market
maker making a market in the Common Stock selected by the Board of
Directors. If on any such date no market maker is making a market in the
Common Stock, the fair value of such shares on such date as determined in
good faith by the Board of Directors shall be used. The term "Trading Day"
shall mean a day on which the principal national securities exchange on
which the shares of Common Stock are listed or admitted to trading is open
for the transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national
18
securities exchange, a Business Day. If the Common Stock is not publicly
held or not so listed or traded, Current Market Price per share shall mean
the fair value per share as determined in good faith by the Board of
Directors, whose determination shall be described in a statement filed with
the Rights Agent and shall be final, conclusive and binding for all
purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest ten-thousandth of a
share of Common Stock or other share, as the case may be. Notwithstanding
the first sentence of this Section 11(e), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three (3) years
from the date of the transaction which mandates such adjustment, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Common
Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Common Stock contained
in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Common Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common
Stock purchasable from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of shares of Common Stock (calculated to the nearest one-ten-thousandth)
obtained by (i) multiplying (x) the number of shares covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii)
dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of shares of Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of shares of
Common Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to
19
such adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is
adjusted or any day thereafter, but, if the Rights Certificates have been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment
of the number of Rights pursuant to this Section 11(i), the Company shall,
as promptly as practicable, cause to be distributed to holders of record of
Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at the option of the
Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights
to which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Rights Certificates on the record
date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of Common Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per share and the number of shares
which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the shares of
Common Stock issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date the shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and
above the number of shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such
additional shares or securities upon the occurrence of the event requiring
such adjustment.
20
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that in their good faith judgment the Board of Directors
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Common Stock, (ii) issuance wholly for cash of any
shares of Common Stock at less than the Current Market Price, (iii)
issuance wholly for cash of shares of Common Stock or securities which by
their terms are convertible into or exchangeable for shares of Common
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of
its Common Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it 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) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell
or transfer), in one transaction, or a series of related transactions,
assets, cash flow or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to
any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof), if (x) at the time of or immediately after such
consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the stockholders of the Person
who constitutes, or would constitute, the "Principal Party" for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 26 hereof,
take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded
by the Rights.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Common Stock, a copy of such certificate and (c) if a Distribution Date has
occurred, mail a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 25 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
21
Section 13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow
or Earning Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and
into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company
shall not be the continuing or surviving corporation of such consolidation
or merger, (y) any Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets, cash flow or
earning power aggregating more than 50% of the assets, cash flow or earning
power of the Company and its Subsidiaries (taken as a whole) to any Person
or Persons (other than the Company or any Subsidiary of the Company in one
or more transactions each of which complies with Section 11(o) hereof),
then, and in each such case (except as may be contemplated by Section 13(d)
hereof), proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Purchase
Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number
of shares of Common Stock for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section
11(a)(ii) Event has occurred prior to the first occurrence of a Section 13
Event, multiplying the number of such shares for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such
first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by (2) 50% of
the Current Market Price (determined pursuant to Section 11(d)(i) hereof)
per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of
any Section 13 Event.
22
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x)
or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the
Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z)
of the first sentence of Section 13(a), the Person that is
the party receiving the greatest portion of the assets, cash
flow or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number
of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and
such Principal Party shall have executed and delivered to the Rights Agent
a supplemental agreement providing for the terms set forth in paragraphs
(a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, and will
use its best efforts to cause such registration statement to
(A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all
times meeting the requirements of the Act) until the
Expiration Date; and
(ii) take such all such other action as may be necessary to
enable the Principal Party to issue the securities
purchasable upon exercise of the Rights, including but not
limited to the registration or qualification of such
securities under all requisite securities laws of
jurisdictions of the various states and the listing of such
securities on such exchanges and trading markets as may be
necessary or appropriate; and
23
(iii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the
requirements for registration on Form 10 under the Exchange
Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which is a Qualified Offer as such term is defined in Section
11(a)(ii) hereof (or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to
all holders of shares of Common Stock whose shares were purchased pursuant
to such tender offer or exchange offer and (iii) the form of consideration
being offered to the remaining holders of shares of Common Stock pursuant
to such transaction is the same as the form of consideration paid pursuant
to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(i) hereof,
or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the current market value of a whole Right. For purposes of this
Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable.
The closing price of the Rights for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading, or if the Rights are not listed or admitted to trading on any
national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on
any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights, selected by the
24
Board of Directors. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a share of Common Stock. For purposes of this Section 14(b), the
current market value of a share of Common Stock shall be the closing price
of one (1) share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares
upon exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer
and with the appropriate forms and certificates fully executed;
25
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock 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,
subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation; provided, however,
the Company must use its best efforts to have any such order, decree or
ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a 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 shares of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability,
or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of
this Agreement, including the costs and expenses of defending against any
claim of liability in the premises.
26
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to
be signed, executed and, where necessary, verified or acknowledged, by the
proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust, stock transfer or other shareholder
services 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; but only if such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to
the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of a predecessor Rights Agent and deliver
such Rights Certificates so countersigned; and in case at that time any of
the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of
the predecessor or in the name of the successor Rights Agent; and in all
such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
27
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and
the determination of Current Market Price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for any adjustment
required under the provisions of Section 11 or Section 13 hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by
Rights Certificates after actual notice of any such adjustment); nor shall
it by any act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any shares of Common Stock or other
securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or other securities
will, when so issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance
28
with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company resulting from
any such act, default, neglect or misconduct; provided, however, reasonable
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and, if
such resignation occurs after the Distribution Date, to the registered holders
of the Rights Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock, by registered or certified
mail, and, if such removal occurs after the Distribution Date, to the holders of
the Rights Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new
29
Rights Agent. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock, and, if such appointment occurs after the Distribution Date,
mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors, 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
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued, and
(ii) 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 Board of Directors may, at its option, at any time prior to
the earlier of (i) the close of business on the tenth Business Day
following the Stock Acquisition Date (or, if the Stock Acquisition Date
shall have occurred prior to the Record Date, the close of business on the
tenth Business Day following the Record Date), or (ii) the Final Expiration
Date, redeem all but not less than all of the then outstanding Rights at a
redemption price of $.001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price"). Notwithstanding anything contained
in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as
the Company's right of redemption hereunder has expired. The Company may,
at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price, as
30
defined in Section 11(d)(i) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the
Board of Directors.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price for each
Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's last
address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for
the Common Stock. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the payment of the
Redemption Price will be made.
(c) Notwithstanding the provisions of Section 23(a) hereof, if, within
180 days of a public announcement by a third party of an intent or proposal
to engage (without the current and continuing concurrence of the Board of
Directors) in a transaction involving an acquisition of or business
combination with the Company or otherwise to become an Acquiring Person,
there is an election of Directors (whether at one or more stockholder
meetings and/or pursuant to written stockholder consent) resulting in a
majority of the Board of Directors being comprised of persons who were not
nominated by the Board of Directors in office immediately prior to such
election, then following the effectiveness of such election for a period of
180 days (the "Special Period") the Rights, if otherwise then redeemable
absent the provisions of this paragraph (c), shall be redeemable upon
either of the following conditions being satisfied, but not otherwise:
(A) by a vote of a majority of the Directors then in office, provided
that
(I) before such vote, the Board of Directors shall have
implemented the Value Enhancement Procedures (as defined below) and
(II) promptly after such vote, the Company publicly announces
such vote and
(a) the manner in which the Value Enhancement Procedures
were implemented,
(b) any material financial, business, personal or other
benefit or relationship (an "Interest") which each Director and
each Affiliate of such Director (identifying each Director and
Affiliate separately in relation to each such Interest) has in
connection with any suggested, proposed or pending transaction
with or involving the Company (a "Transaction"), or with any
other party or Affiliate of any other party to a Transaction,
where such Transaction would or might, or is intended to, be
permitted or facilitated by redemption of the Rights (an
"Affected Transaction"), other than treatment as a shareholder on
a pro rata basis with other shareholders or pursuant to
compensation arrangements as a director or employee of the
Company or a subsidiary which have been previously
31
disclosed by the Company,
(c) the individual vote of each Director on the motion to
redeem the Rights, and
(d) the statement of any Director who voted for or against
the motion to redeem the Rights and desires to have a statement
included in such announcement, or
(B) if clause (A) is not applicable, by a vote of a majority of the
Directors then in office, provided that (I) if there is a challenge to the
Directors' action approving redemption and/or any related Affected
Transaction as a breach of the fiduciary duty of care or loyalty, the
Directors, solely for purposes of determining the effectiveness of such
redemption pursuant to this clause (B), are able to establish the entire
fairness of such redemption and, if applicable, such related Affected
Transaction, and (II) the Company shall have publicly announced the vote of
the Board of Directors approving such redemption and, if applicable, such
related Affected Transaction, which announcement shall set forth the
information prescribed by clauses (A)(II)(b), (c) and (d) above.
"Value Enhancement Procedures" shall mean:
(1) the selection by the Board of Directors of an independent
financial advisor (the "Independent Advisor") from among financial
advisors which have national standing, have established expertise in
advising on mergers, acquisitions and related matters and have no
Interest relating to an Affected Transaction, and have not during the
preceding year provided services to, been engaged by or been a
financing source for any other party to an Affected Transaction or any
Affiliate of any such party or of any Director (other than the Company
and its subsidiaries);
(2) whether or not there is a then-pending Affected Transaction,
the receipt by the Board of Directors from its Independent Advisor of
(a) such advisor's view (expressed in such form and subject to such
qualifications and limitations as the Independent Advisor deems
appropriate) regarding whether redemption of the Rights will serve the
best interests of the Company and its shareholders or (b) such
advisor's statement that it is unable to express such a view, setting
forth the reasons therefor;
(3) if there is a then-pending Affected Transaction,
(A) the establishment and implementation by the Board of
Directors of a process and procedures approved by its Independent
Advisor which the Board of Directors and such advisor conclude would
be most likely to result in the best value reasonably available to
shareholders (regardless of whether such Affected Transaction involves
a "sale of control" or "break-up" of the Company for Delaware law
purposes),
(B) the Board of Directors (I) receiving the opinion of its
Independent Advisor, in customary form and content for transactions of
the type involved, that the Affected Transaction is fair to the
Company's shareholders from a financial point of view and (II)
determining, and the
32
Independent Advisor confirming, that it has no reason to believe that
a superior transaction is reasonably available for the benefit of the
Company's shareholders, and
(C) the execution of a definitive transaction agreement and other
definitive documentation necessary to effect the Affected Transaction.
(d) 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
and other than in connection with the purchase or repurchase by any of
them of Common Stock prior to the Distribution Date.
Section 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to
the holders of Common Stock or to make any other distribution to the
holders of Common Stock (other than a regular quarterly cash dividend out
of earnings or retained earnings of the Company), or (ii) to offer to the
holders of Common Stock rights or warrants to subscribe for or to purchase
any additional shares of Common Stock or shares of stock of any class or
any other securities, rights or options, or (iii) to effect any
reclassification of its Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock), or
(iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), or to effect any sale or other transfer (or to
permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions, of more
than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such
case, the Company shall give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of
such stock dividend, distribution of rights or warrants, or the date on
which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock, if any
such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Common
Stock for purposes of such action, and in the case of any such other
action, at least twenty (20) 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 whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to holders of
Rights under Section
33
11(a)(ii) hereof.
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:
Hauppauge Digital, Inc.
00 Xxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Attention: Chairman of the Board
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing by the Rights Agent with the Company) as follows:
North American Transfer Co.
000 Xxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxxxx
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 26. Supplements and Amendments. Prior to the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. From and after the
Distribution Date, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) to shorten or lengthen any time period
hereunder, or (iv) to change or supplement the provisions hereunder in any
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring Person or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen any time
period hereunder, pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or
34
clarifying the rights of, and/or the benefits to, the holders of Rights. Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Stock.
Notwithstanding anything herein to the contrary, no supplement or amendment
shall be made to this Agreement during the Special Period or at a time when the
Rights are not redeemable.
Section 27. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act. The Board of Directors 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 to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, but not limited to, 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 in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other Persons, and (y) not subject the Board of Directors to any liability to
the holders of the Rights.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors determines in its good faith judgment that severing the invalid
language from this
35
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth Business Day following the
date of such determination by the Board of Directors.
Section 31. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State, except that the rights and
obligations of the Rights Agent shall be governed by the laws of the State of
New York.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: HAUPPAUGE DIGITAL, INC.
By: /s/ Xxxxxxxx X. Xxx By: /s/ Xxxxxxx Xxxxxxx
------------------------------- -----------------------------
Name: Xxxxxxxx X. Xxx Name: Xxxxxxx Xxxxxxx
-------------------------- -----------------------
(Please Print) (Please Print)
Title: Corporate Counsel Title:
Hauppauge Digital, Inc.
------------------------- -----------------------
/s/ Xxxxxxx Xxxxxxxxx
-------------------------------
Xxxxxxx Xxxxxxxxx
d/b/a North American Transfer
Company
37
Exhibit A
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER _________ __, 2011 UNLESS EXTENDED PRIOR THERETO BY THE
BOARD OF DIRECTORS OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT
TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]1 Rights Certificate
HAUPPAUGE DIGITAL, 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 ________ __, 2001 (the "Rights Agreement"), between
HAUPPAUGE DIGITAL, INC., a Delaware corporation (the "Company"), and
___________________________________, a _______________ banking corporation (the
"Rights Agent"), to purchase from the Company at any time prior to 5:00 P.M.
Hauppauge, New York time) on July 19, 2011 (unless such date is extended prior
thereto by the Board of Directors) at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one fully paid,
non-assessable share of Common Stock (the "Common Stock") of the Company, at a
purchase price of $11.00 per share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of July 19, 2001, based on the Common Stock as
constituted at such date.
--------
1The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
1
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Common Stock or other securities, which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common 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 its option at a redemption
price of $.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth Business Day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. For 180 days following a change in control of the Board
of Directors, that has not been approved by the Board of Directors, occurring
within six months of an unsolicited third party acquisition or business
combination proposal, the new directors are entitled to redeem the Rights
(assuming the Rights would have otherwise been redeemable), including to
facilitate an acquisition or business combination transaction involving the
Company, but only (1) if they have followed certain procedures or (2) if such
procedures are not followed, and if their decision regarding redemption and/or
any acquisition or business combination is challenged as a breach of fiduciary
2
duty of care or loyalty, the directors (solely for purposes of determining the
effectiveness of such redemption) are able to establish the entire fairness of
such redemption, and, if applicable, such transaction.
No fractional shares of Common Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Common 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
consent to or withhold consent from any corporate action, or, to receive notice
of meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of July __, 2001
ATTEST: HAUPPAUGE DIGITAL, INC.
By:_______________________ By:_________________________
Secretary Name:______________________
(Please Print)
Title:_____________________
Countersigned:
-------------------------------
Xxxxxxx Xxxxxxxxx
d/b/a North American Transfer Company
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:
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________, ____
-------------------------
Signature
Signature Guaranteed:
4
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented
by the Rights Certificate.)
To: HAUPPAUGE DIGITAL, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security
or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Dated: ___________, ____
-------------------------
Signature
Signature Guaranteed:
6
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: ____________, ____
------------------------
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
7
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On July 19, 2001, the Board of Directors of Hauppauge Digital, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Company Common Stock to stockholders of record at the close of business
on August 5, 2001 (the "Record Date"). Each Right entitles the registered holder
to purchase from the Company one share of Common Stock at a Purchase Price of
$11.00 per share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and North American Transfer Co., 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. Subject to certain exceptions specified in the Rights Agreement,
the Rights will separate from the Common Stock and a Distribution Date will
occur upon the earlier of (i) 10 business days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 10% or more of the outstanding
shares of Common Stock, other than as a result of repurchases of stock by the
Company or certain inadvertent actions by institutional or certain other
stockholders or the date a Person has entered into an agreement or arrangement
with the Company or any subsidiary of the Company providing for an Acquisition
Transaction (the "Stock Acquisition Date") or (ii) 10 business days (or such
later date as the Board shall determine, provided, however, that no deferral of
a Distribution Date by the Board of Directors pursuant to the terms of the
Rights Agreement described in this clause (ii) may be made at any time during
the Special Period (as defined below)) following the commencement of a tender
offer or exchange offer that would result in a person or group becoming an
Acquiring Person. An Acquisition Transaction is defined in the Rights Agreement
as (x) a merger, consolidation or similar transaction involving the Company or
any of its Subsidiaries as a result of which stockholders of the Company will no
longer own a majority of the outstanding shares of Common Stock of the Company
or a publicly traded entity which controls the Company or, if appropriate, the
entity into which the Company may be merged, consolidated or otherwise combined
(based solely on the shares of Common Stock received or retained by such
stockholders, in their capacity as stockholders of the Company, pursuant to such
transaction), (y) a purchase or other acquisition of all or a substantial
portion of the assets of the Company and its Subsidiaries, or (z) a purchase or
other acquisition of securities representing 10% or more of the shares of Common
Stock then outstanding. Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such 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.
The Rights are not exercisable until the Distribution Date and will expire
at 5:00 P.M.
1
(Hauppauge, New York time) on July 19, 2011, unless such date is extended or the
Rights are earlier redeemed or exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, except pursuant to
an offer for all outstanding shares of Common Stock which the independent
directors determine to be fair and not inadequate to and to otherwise be in the
best interests of the Company and its stockholders, after receiving advice from
one or more investment banking firms (a "Qualified Offer"), each holder of a
Right will thereafter have the right to receive, upon exercise, Common 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.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not exercisable following the
occurrence of the event set forth above until such time as the Rights are no
longer redeemable by the Company as set forth below.
For example, at an exercise price of $11.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $22.00
worth of Common Stock (or other consideration, as noted above) for $11.00.
Assuming that the Common Stock had a per share value of $22.00 at such time, the
holder of each valid Right would be entitled to purchase 1 share of Common Stock
(or other consideration) for $11.00.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company engages in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than with an entity
which acquired the shares pursuant to a Qualified Offer), (ii) the Company
engages in a merger or other business combination transaction in which the
Company is the surviving corporation and the Common Stock of the Company is
changed or exchanged, or (iii) 50% or more of the Company's assets, cash flow or
earning power is sold or transferred, each holder of a Right (except Rights
which have previously been voided as set forth above) shall thereafter have the
right to receive, upon exercise, common stock of the acquiring company having a
value equal to two times the exercise price of the Right. The events set forth
in this paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
At any time until ten business days following the Stock Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.001
per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). For 180 days (the "Special Period")
following a change in control of the Board of Directors, that has not been
approved
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by the Board of Directors, occurring within six months of an unsolicited third
party acquisition or business combination proposal, the new directors are
entitled to redeem the Rights (assuming the Rights would have otherwise been
redeemable), including to facilitate an acquisition or business combination
transaction involving the Company, but only (1) if they have followed certain
procedures or (2) if such procedures are not followed, and if their decision
regarding redemption and/or any acquisition or business combination is
challenged as a breach of fiduciary duty of care or loyalty, the directors
(solely for purposes of determining the effectiveness of such redemption) are
able to establish the entire fairness of such redemption, and, if applicable,
such transaction. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.001 redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. 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 Common Stock (or other consideration) of the Company or for
common stock of the acquiring company or in the event of the redemption of the
Rights as set forth above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in 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. The foregoing notwithstanding, no amendment
may be made to the Rights Agreement during the Special Period or at a time when
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 [Registration Statement on Form
8-A]/[Current Report on Form 8-K] dated _________, 2001. A copy of the Rights
Agreement is available free of charge from the Rights Agent. 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.
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