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OPTELECOM, INC.
and
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AMERICAN STOCK TRANSFER & TRUST COMPANY
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Rights Agreement
Dated as of June 15, 1998
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TABLE OF CONTENTS
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Section Page
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1. Certain Definitions............................................................ 1
2. Appointment of Rights Agent.................................................... 5
3. Issue of Rights Certificates................................................... 5
4. Form of Rights Certificates.................................................... 7
5. Countersignature and Registration.............................................. 8
6. Transfer, Split-up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed, Lost
or Stolen Rights Certificates.................................................. 8
7. Exercise of Rights; Purchase
Price; Expiration Date of Rights............................................. 9
8. Cancellation and Destruction of
Rights Certificates.......................................................... 11
9. Reservation and Availability of
Capital Stock................................................................ 11
10. Common Stock Record Date....................................................... 13
11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights........................................... 13
12. Certificate of Adjusted Purchase
Price or Number of Shares.................................................... 20
13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power.......................................... 21
14. Fractional Rights and Fractional
Shares....................................................................... 23
15. Rights of Action............................................................... 25
16. Agreement of Rights Holders.................................................... 25
17. Rights Certificate Holder Not Deemed
a Shareholder................................................................ 26
18. Concerning the Rights Agent.................................................... 26
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19. Merger or Consolidation or Change of
Name of Rights Agent......................................................... 26
20. Duties of Rights Agent......................................................... 27
21. Change of Rights Agent......................................................... 29
22. Issuance of New Rights Certificates............................................ 30
23. Redemption and Termination..................................................... 30
24. Notice of Certain Events....................................................... 32
25. Notices........................................................................ 32
26. Supplements and Amendments..................................................... 33
27. Successors..................................................................... 34
28. Determinations and Actions by
the Board of Directors, etc.................................................. 34
29. Benefits of This Agreement..................................................... 34
30. Severability................................................................... 34
31. Governing Law.................................................................. 35
32. Counterparts................................................................... 35
33. Descriptive Headings........................................................... 35
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Exhibit A -- Form of Rights Certificate
Exhibit B -- Form of Summary of Rights
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RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of June 15, 1998 (the "Agreement"), between
Optelecom, Inc., a Delaware corporation (the "Company"), and American Stock
Transfer & Trust Company, a New York trust company, (the "Rights Agent").
W I T N E S S E T H
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WHEREAS, on June 15, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the close of business on June 29, 1998
(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(o)
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 representing the
right to purchase one share of Common Stock of the Company, 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) "Act" shall mean the Securities Act of 1933.
(b) "Acquiring Person" shall mean 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 the Company, any Subsidiary of the Company (whether or not
such Subsidiary is acting on its own behalf or in any and all fiduciary capacity
or capacities), 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 employee benefit plan, or any
401(k) plan or employee stock ownership plan holding shares of Common Stock for
the benefit of employees of the Company, (including, but not limited to, any
trust or other entity holding such shares pursuant to such plan).
Notwithstanding the foregoing, no Person shall become an Acquiring Person solely
as a result of an acquisition directly from the Company of Beneficial Ownership
of 10% or more of the Common Stock then outstanding in a transaction which has
been approved by a majority of the Board of Directors of the Company; provided,
however, that if such Person shall thereafter become the Beneficial Owner of
additional Common Stock equal to 1.0% or more of the then outstanding shares of
Common Stock, then such Person shall thereupon be deemed to be an Acquiring
Person, unless such additional shares have been acquired directly from the
Company in a transaction approved by a majority of the Board of Directors of the
Company. Notwithstanding the foregoing, no Person shall become an Acquiring
Person solely as the result of an acquisition of shares
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of Common Stock by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person, together with all Affiliates and Associates of such Person, to 10%
or more of the Common Stock then outstanding. If a Person who would be an
Acquiring Person but for the immediately preceding sentence, or such Person's
Affiliates or Associates, shall thereafter become, as a result of actions taken
by such Person or its Affiliates or Associates, the Beneficial Owner of
additional Common Stock equal to 1.0% of the then outstanding shares of Common
Stock, then such Person shall thereupon be deemed to be an Acquiring Person;
provided, however, that the provisions of this sentence shall not apply with
respect to shares of Common Stock acquired directly from the Company in a
transaction approved by a majority of the Board of Directors of the Company.
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and in effect on the date of this Agreement.
(d) 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 Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of
a Triggering Event, 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 or pursuant to Section 3(a)
or Section 22 hereof (the "Original Rights") or pursuant to Section
11(a)(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 as in effect on the date of this Agreement), including pursuant to
any agreement, arrangement or understanding, whether or not in writing,
other than solely pursuant to a revocable proxy acquired pursuant to a
solication of all stockholders of the Company made pursuant to, and in
accordance with, the Rules adopted under the Exchange Act; or
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(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), to act together for the purpose of acquiring, holding,
voting 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.
Notwithstanding anything in this definition of Beneficial
Ownership to the contrary, no Person shall be deemed to be the Beneficial Owner
of, or to beneficially own, any security Beneficially Owned by another Person
solely by reason of any agreement, arrangement or understanding with such other
Person relating to the solicitation of revocable proxies from all stockholders
of the Company made pursuant to, and in accordance with, the Rules adopted
pursuant to the Exchange Act, provided that such other Person retains the right
at any time to withdraw from, revoke or terminate any such agreement,
arrangement or understanding and further provided that such Persons would not
otherwise be deemed to be a group under Section 13(d) of the Exchange Act or
otherwise be deemed to be acting in concert.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of Maryland
are authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean
5:00 P.M., New York, New York time, on such date; provided, however, that if
such date is not a Business Day it shall mean 5:00 P.M., New York, New York
time, on the next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par
value $.03 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 aggregate voting power, or the equity securities
or other equity interest having power to control or direct the management, of
such Person.
(h) "Common stock equivalents" shall have the meaning
set forth in Section 11(a)(iii) hereof.
(i) Current market price" shall have the meaning set
forth in Section 11(d) hereof.
(j) "Current Value" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set
forth in Section 3(a) hereof.
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(l) "Exchange Act" shall have the meaning set forth
in Section 1(c) hereof.
(m) "Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(n) "Final Expiration Date" shall mean the close of
business on June 29, 2008.
(o) "Original Rights" shall have the meaning set
forth in Section 1(d)(i) hereof.
(p) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(q) "Principal Party" shall have the meaning set
forth in Section 13(b) hereof.
(r) "Purchase Price" shall have the meaning set forth
in Section 4(a) hereof.
(s) "Record Date" shall have the meaning set forth in
the WHEREAS clause at the beginning of this Agreement.
(t) "Redemption Price" shall have the meaning set
forth in Section 23(a) hereof.
(u) "Rights" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(v) "Rights Certificates" shall have the meaning set
forth in Section 3(a) hereof.
(w) "Section 11(a)(ii) Event" shall have the
meaning set forth in Section 11(a)(ii) hereof.
(x) "Section 11(a)(ii) Trigger Date" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(y) "Section 13 Event" shall mean any event
described in clause (x), (y) or (z) of Section 13(a) hereof.
(z) "Spread" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(aa) "Stock Acquisition Date" shall mean the first
date of a public announcement (which, for purposes of this definition, shall
include, without limitation, a
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report filed pursuant to Section 13(d) under the Exchange Act) by the Company or
an Acquiring Person that an Acquiring Person has become such.
(bb) "Subsidiary" shall mean, with reference to any
Person, any corporation or financial institution of which an amount of voting
securities sufficient to elect at least a majority of the directors of such
corporation or financial institution is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(cc) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(dd) "Trading Day" shall have the meaning set forth
in Section 11(d) hereof.
(ee) "Triggering Event" shall mean any
Section 11(a)(ii) Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business
on the tenth business day after the Stock Acquisition Date or (ii) the close of
business on the tenth business day after the date that a tender or exchange
offer by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) that, if consummated, would result in
such Person's being an Acquiring Person is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act as in effect on the date hereof (the earliest of (i) and (ii)
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for 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 rights
certificates, in substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of
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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 pursuant to Section 11(o) hereof, 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) As promptly as practicable following the Record
Date, the Company will send a copy of a Summary of Rights to Purchase Common
Stock, in substantially the form attached hereto as Exhibit B, by first-class,
postage prepaid mail, to each record holder of the Common Stock as of the close
of business on the Record Date, at the address of such holder shown on the
records of the Company. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date 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 and no Right may be
assigned or transferred separately from the share of Common Stock in respect of
which it has been issued.
(c) Rights shall be issued in respect of all shares
of Common Stock which are issued 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 Optelecom,
Inc. (the "Company") and American Stock Transfer &
Trust Company (the "Rights Agent") dated as of June
15, 1998 (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
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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 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) or Section 22 hereof that represents Rights beneficially owned by any
Person known to be: (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 (or
from any such Associate or Affiliate) to holders of equity interests in such
Acquiring Person (or in any such Associate or Affiliate) or to any Person with
whom such Acquiring Person (or any such Associate or Affiliate) 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 when issued contain (to the extent feasible in the
circumstances) the following legend, modified as applicable to apply to such
Person:
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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.
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
Treasurer or an Assistant Treasurer or by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be manually countersigned by the Rights Agent and shall not
be valid for any purpose unless so countersigned. In case any officer of the
Company who shall have signed any of the Rights Certificates shall cease to be
such officer of the Company before countersignature by the Rights Agent and
issuance and delivery by the Company, such Rights Certificates, nevertheless,
may be countersigned by the Rights Agent and issued and delivered by the Company
with the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificates may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its office 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 certificate number 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 (or other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer,
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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 office of the Rights Agent designated for such purpose. Neither
the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate 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, splitup, 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.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii) and
Section 23(a) hereof) in whole or in part at any time after the Distribution
Date upon surrender of the Rights Certificate, with the form of election to
purchase and the certificate on the reverse side thereof duly executed, to the
Rights Agent at the office of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of shares of Common Stock (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) 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 $75, until the close of
business on June 14, 2000, $100 from June 15, 2000 until the close of business
on June 14, 2002, $125 from June 15, 2002 until the close of business on June
14, 2004, $150 from June 15, 2004, $150 from June 15, 2004 until the close of
business on June 14, 2006 and $175
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from June 15, 2006 until the close of business on June 15, 2008, and shall be
subject to adjustment from time to time as provided in Sections 11 and 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 one 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 adjusted pursuant to Section 11(a)(iii) hereof) may be made in
cash or by certified bank check or money order 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 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
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to either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or from any such Associate or Affiliate) to holders of equity interests
in such Acquiring Person (or in any such Associate or Affiliate) or to any
Person with whom the Acquiring Person (or any such Associate or Affiliate) 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 (whether before or after such transfer) 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 other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or any of its respective Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder 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 the Rights Agent shall so cancel, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of 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, the number of shares of Common
Stock 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;
provided that, prior to the occurrence of a Triggering Event, the number of such
shares to be reserved shall be only that number as shall be sufficient for that
purpose prior to such an event.
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(b) So long as the shares of Common Stock issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange or on the National Association of Securities Dealers, Inc.
Automated Quotation System ("Nasdaq"), 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 or Nasdaq 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 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, or as soon as is required by law following the Distribution Date, as the
case may be, 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 is no longer in effect. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall have
been obtained and until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will
take all such action as may be necessary to ensure that all shares of Common
Stock 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 a number of 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 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 a number of shares of
Common Stock (and/or other securities, as the case may be) in a name other than
that of the registered holder
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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 a number of 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 such 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 (fractional or otherwise) 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, as such, shall not be entitled to any rights of a shareholder of
the Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
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 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, he 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
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addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) A "Section 11(a)(ii) Event" shall be
deemed to occur in the event any Person, alone or together with its Affiliates
and Associates, 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.
Promptly following the first occurrence of a Section 11(a)(ii)
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
acquire upon exercise thereof, in lieu of the number of shares of Common Stock
theretofor purchasable upon exercise and at the Purchase Price theretofor in
effect, a total of three (3) shares of Common Stock for each such Right, at a
price per share equal to 50% of the current market price (determined pursuant to
Section 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 Articles of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company shall: (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the "Current Value") over (2) the
price required to be paid for such shares pursuant to the foregoing subparagraph
(ii) (which shall thereafter be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) (such excess, the "Spread"), and
(B) with respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon 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 of the Company has deemed to have
the same value as shares of Common Stock (such shares of preferred stock,
"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 of the Company based upon the advice of one or more
investment or financial advisors selected by the Board of Directors of the
Company; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the 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. If the Board of Directors of the Company shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could be
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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 shareholder approval for the authorization of such
additional shares (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall 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 value of the Common Stock shall be deemed to be the current market price per
share of Common Stock (as determined pursuant to Section 11(d) hereof) on the
Section 11(a)(ii) Trigger Date and the value of any "Common stock equivalent"
shall be deemed to have the same value as a share of Common Stock on such date.
(iv) In lieu of issuing shares of Common Stock
in accordance with subparagraph (ii) of this Section 11(a), the Company may with
respect to each Right, if a majority of members of the Board of Directors
determine that such action is in the best interests of the Company and not
contrary to the interests of the holders of Rights, make adequate provision to
substitute for the Adjustment Shares, (x) upon the surrender for exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in
Purchase Price, (3) Common Stock, or other equity securities of the Company
(including without limitation preferred 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 of the Company based upon the advice
of one or more investment or financial advisers selected by the Board of
Directors of the Company or (y) upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, (1) cash, (2) Common Stock or
other equity securities of the Company (including, without limitation, preferred
stock equivalents), (3) debt securities of the Company, (4) other assets or (5)
any combination of the foregoing, having an aggregate value equal to the Spread
where such aggregate value has been determined by the Board of Directors of the
Company based upon the advice of one or more investment or financial advisors
selected by the Board of Directors of the Company.
(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 shares
having the same rights, privileges and preferences as the shares of Common Stock
("equivalent common stock")) or securities convertible into Common Stock or
equivalent common stock at a price per share of Common Stock or per share of
equivalent common stock (or having a conversion price per share, if a
-15-
security convertible into Common Stock or equivalent common stock) less than the
current market price (as determined pursuant to Section 11(d)(ii) 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 and/or equivalent 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 and/or equivalent 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 paid by the Company in the ordinary course of business) assets (other
than a dividend payable in Common Stock, but including any dividend payable in
stock other than Preferred Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b) 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 of Common Stock on such record date, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent) 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, 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)
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consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, provided, however, that in the event that the current market price
per share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common Stock,
and prior to the expiration of the requisite thirty (30) Trading Day period
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the "current market price" shall be properly adjusted to take into account
ex-dividend trading. The closing price for each day shall be 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 applicable, 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
reported by Nasdaq or such other system then in use and 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
reported by Nasdaq or such other system then in use and are not listed or
admitted to trading on any national securities exchange, 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 of the Company.
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 of the Company 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 securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(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.
-17-
(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), and (l), 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 then purchasable 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 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 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
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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) 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 number of 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 (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(l) 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 of the Company 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 shareholders.
(m) 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(n) hereof), (ii) merge with or into any other Person (other than
a Subsidiary of the Company in a transaction which complies with Section 11(n)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of
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which complies with Section 11(n) hereof), if (x) at the time of or immediately
after such consolidation, merger, sale or transfer 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, sale or transfer, the shareholders 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.
(n) 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.
(o) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time on or after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
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) mail a brief summary thereof
to each holder of a Rights Certificate (or, if prior to the Distribution Date,
to each holder of a certificate representing shares of Common Stock) in
accordance with Section 25 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be deemed to have knowledge of such adjustment unless and until it
shall have received such certificate.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets 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(n) 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(n) 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 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 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(n) hereof), then, and in
each such case, proper provision shall be made so that: (i) each holder of a
Right, except holders described in Section 7(e) hereof, shall thereafter have
the right to receive, upon the exercise thereof in accordance with the terms of
this Agreement, three (3) shares of validly authorized and issued, fully paid,
nonassessable and freely tradable 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, at a price per share equal to
50% of the current market price (determined pursuant to Section 13(d) hereof)
per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event (such price, following the first
occurrence of a Section 13 Event, being referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement); (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.
(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
-21-
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 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, sale or transfer 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) 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).
-22-
(d) For purposes of Section 13(a), the "current
market price" per share of the Common Stock of a Principal Party shall be deemed
to be the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
current market price per share of the Principal Party's Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of (A) a dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set forth
above, after the ex-dividend date for such dividend or distribution, or the
record date for such subdivision, combination or reclassification, then, and in
each such case, the "current market price" shall be properly adjusted to take
into account ex-dividend trading. The closing price for each day shall be the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or
such other system then in use, or, if applicable, 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 the Principal Party's Common Stock are not reported by Nasdaq or such other
system then in use and 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 reported by Nasdaq or such other
system then in use and are not listed or admitted to trading on any national
securities exchange, 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 of the Company. If on any such date no market
maker is making a market in the Principal Party's Common Stock, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall mean a day
on which the principal national securities exchange on which the shares of the
Principal Party's 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 securities exchange, a Business Day. If the
Principal Party's Common Stock is not publicly held or not so listed or traded,
"current market price" per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
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(o) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights,
-23-
there may be paid to the registered holders of the Rights Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the current 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 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 applicable, 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 reported by
Nasdaq or such other system then in use and 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 reported by Nasdaq or such other
system then in use and are not listed or admitted to trading on any national
securities exchange, or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Rights selected by the
Board of Directors of the Company. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock. In lieu of
fractional shares of Common Stock, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
one-hundredth of a share of Common Stock. For purposes of this Section 14(b),
the current market value of one share of Common Stock shall be the current
market price of a share of Common Stock (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of a Triggering Event,
the Company shall not be required to issue fractions of shares of Common Stock
upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional shares of Common Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market price of one (1) share of Common Stock (as
determined pursuant to Section 11(d) hereof).
(d) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
-24-
Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
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;
(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
-25-
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 Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of the
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(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 or stock transfer
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
-26-
paper or any further act on the part of any of the parties hereto; provided,
however, that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in 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.
(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) 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 Executive or Senior 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 negligence, bad faith or willful misconduct.
-27-
(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 receipt of the
certificate described in Section 12 hereof setting forth 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
issued pursuant to this Agreement or any Rights Certificate or as to whether any
shares of Common Stock will, when so issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Executive or Senior
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 with
instructions of any such officer.
(h) Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent under
this Rights Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
the Chairman of the Board, the President, any Executive or Senior Vice
President, the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company actually receives such application, unless
any such officer shall have consented in writing to an earlier date) unless,
prior to taking any such action (or the
-28-
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
(i) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(j) 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.
(k) 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.
(l) 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 thereby 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 to
the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) 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 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
-29-
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (a) a corporation or financial institution organized and doing
business under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of New York), in good
standing, and having a principal office in the State of New York, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $10,000,000 or (b) an affiliate of a corporation or financial institution
described in clause (a) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver, and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock 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, 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 of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued 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) (i) The Board of Directors of the Company may,
at its option, at any time prior to the earlier of (x) the close of business on
the tenth business day
-30-
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 (y) the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.0001 per Right, as such amount may be appropriately adjusted, as
determined by the Board of Directors, 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").
(ii) If, following the occurrence of a Stock
Acquisition Date and/or following the expiration of the right of redemption
hereunder but prior to any Triggering Event, (x) a Person who is an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or series of transactions, not directly or
indirectly involving the Company or any of its Subsidiaries, which did not
result in the occurrence of a Triggering Event such that such Person, together
with such Person's, Affiliates and Associates, is thereafter a Beneficial Owner
of less than 10% of the outstanding shares of Common Stock, and (y) there are no
other Persons, immediately following the occurrence of the event described in
clause (x), who are Acquiring Persons, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this Section 23.
(iii) Notwithstanding anything contained in
this Agreement to the contrary, the Rights shall not be exercisable after the
first occurrence of an event described in Section 11(a)(ii) until such time as
the Company's right of redemption hereunder has expired.
(iv) The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the "current market
price," as defined in Section 11(d) 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 of the Company ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price 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.
-31-
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(n) 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 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(n) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 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 any of the events set forth in Section
11(a)(ii) hereof 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 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.
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 delivered by hand,
sent by overnight courier or sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Optelecom, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xx. Xxxxxx X. Xxxxxx
-32-
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
delivered by hand, sent by overnight courier or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
American Stock Transfer & Trust Company
0000 00xx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, XX 00000
Attention: Corporate Trust Department
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
and subject to the penultimate sentence of this Section 26, 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 and
subject to the penultimate sentence of this Section 26, 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 any Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening of such other time period is for the purpose of protecting,
enhancing or 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. Notwithstanding anything contained in this Agreement to
the contrary, no supplement or amendment shall be made which changes the
Redemption Price, the Final Expiration Date, the Purchase Price or the number of
shares of Common Stock for which a Right is exercisable. 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.
-33-
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 as in effect on the date hereof. The Board of Directors
of the Company (or, as set forth herein, certain specified members thereof)
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 of
the Company 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 this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board 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 of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, 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 of the Company.
-34-
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.
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.
-35-
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: OPTELECOM, INC.
/s/ Xxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxxx
By: __________________________ By: ___________________________
Xxxxxx X. Xxxxxx Xxxxxx X. Xxxxxx
Secretary President and Chief
Executive Officer
Attest: AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ Xxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
__________________________ ___________________________
Xxxxx Xxxxxx Xxxxxxx X. Xxxxxx
Assistant Secretary Vice President
-36-
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER JUNE 15, 2008 OR EARLIER IF REDEEMED BY THE COMPANY. THE
RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.0001 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
OPTELECOM, 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 June 15, 1998 (the "Rights Agreement"), between
Optelecom, Inc., a Delaware corporation (the "Company"), and American Stock
Transfer & Trust Company, a New York chartered trust company (the "Rights
Agent"), to purchase from the Company at any time prior to 5:00 P.M. (New York,
New York time) on June 29, 2008 at the office or offices of the Rights Agent
designated for such purpose, or its successors as Rights Agent, one fully paid,
nonassessable share of Common Stock (the "Common Stock") of the Company for each
Right represented hereby, at a purchase price of $75 per share until the close
of business on June 14, 2000, $100 per share from June 15, 2000 until the close
of business on June 14, 2002, $125 per share from June 15, 2002 until the close
of business on June 14, 2002, $150 per share from June 15, 2004 until the close
of business on June 14, 2006 and $175 per share from June 15, 2006 until the
close of business on June 15, 2008 (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The Purchase Price may be paid in cash or by
certified bank check or money order payable to the order of the Company. The
number of Rights set forth above, and the Purchase Price
--------
(1) The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
per share set forth above, are the number and Purchase Price as of June 29,
1998, based on the Common Stock as constituted at such date.
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 an 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 any 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 (as such term is defined in the Rights Agreement).
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 available upon written request to the
Company.
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 $.0001 per Right at any time prior to the earliest 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. After the expiration of the redemption period, the
Company's right of redemption may be reinstated if an Acquiring Person reduces
his beneficial ownership to less than 10% of the outstanding shares of Common
Stock in a transaction or series of transactions not involving the Company and
there are no other Acquiring Persons.
-2-
The Company may (but shall not be required to) issue fractional shares
of Common Stock upon the exercise of any Right or Rights evidenced hereby, and
in lieu thereof a cash payment may be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of 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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
-3-
WITNESS, the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ____________, ____,
Attest: OPTELECOM, INC.
By: ________________________ By: ___________________________
Secretary Name: ____________________
Title: ___________________
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ________________________
Authorized Signature
Title: ______________________
-4-
[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 an 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: _____________________________
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.
-2-
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: OPTELECOM, 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: ___________________________
-3-
CERTIFICATION
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 an 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.
-4-
EXHIBIT B
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
On June 15, 1998, the Board of Directors of Optelecom, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Company Common Stock to shareholders of record at the close of business
on June 29, 1998. One Right will also be distributed for each share of Common
Stock issued after June 29, 1998 until the Distribution Date (which is described
in the next paragraph). Each Right entitles the registered holder to purchase
from the Company one share of common stock, par value $.03 per share, of the
Company (the "Common Stock"), at a Purchase Price of $75 per share until the
close of business on June 14, 2000, $100 per share from June 15, 2000 until the
close of business on June 14, 2002, $125 per share from June 15, 2002 until the
close of business on June 14, 2004, $150 per share from June 15, 2004 until the
close of business on June 14, 2006 and $175 per share from June 15, 2006 until
the close of business on June 15, 2008, subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement dated as of June 15,
1998 (the "Rights Agreement") between the Company and American Stock Transfer &
Trust Company, as Rights Agent.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earliest of (i) the close of business on
the tenth business day after a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 10% or more of the
outstanding shares of Common Stock (the "Stock Acquisition Date") or (ii) the
close of business on the tenth business day after the date of a tender or
exchange offer that, if consummated, would result in a person or group
beneficially owning 10% or more of the outstanding shares of Common Stock.
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 June 29,
1998 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 the close of business on June 15, 2008, unless earlier redeemed 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.
In the event that at any time following the Distribution Date, a person
is or becomes the beneficial owner of 10% or more of the then-outstanding shares
of Common
Stock (a "Triggering Event"), each holder of a Right will thereafter have the
right to purchase at the time specified in the Rights Agreement, upon exercise,
three (3) shares of the Company's Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) at a price per share equal to
50% of the then current market price of the Common Stock (as defined in the
Rights Agreement). The amount to be paid for such shares (or cash, property or
other securities of the Company) shall constitute the "Purchase Price" after the
occurrence of a Triggering Event. Alternatively, upon the occurrence of an event
described in the first sentence of this paragraph, the Board of Directors would
have the discretion, upon exercise of Rights, to distribute to the exercising
holders thereof shares of Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a value equal to the
difference between the Purchase Price of the Rights and the value of the
consideration which would be transferred to the holders of the Rights upon such
exercise in the absence of the exercise by the Board of Directors of its
discretion to invoke the provisions described in this sentence.
Notwithstanding any of the foregoing, following the occurrence of any
of the events set forth in the first sentence of the preceding 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 either of
the events set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, each Right not owned by an Acquiring Person (or by certain
related parties) would, following an Acquiring Person's becoming the beneficial
owner of 10% or more of the Common Stock, entitle the holder of the Right to
purchase three (3) shares of Common Stock (or other consideration, as noted
above) for 50% of the current market price of the Common Stock. Assuming that
the Common Stock had a per share market value of $20 at such time, the holder of
each valid Right would be entitled to purchase 3 shares of Common Stock for $30.
Alternatively, at the discretion of the Board of Directors, following an event
set forth in the first sentence of this paragraph, without payment of the
Purchase Price, each Right would entitle its holder to receive from the Company
Common Stock (or other consideration, as noted above) worth $30.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation, or (ii) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, at a price per
share equal to 50% of the then current market price for such shares. The events
set forth in this paragraph are also included in the phrase "Triggering Event."
A person or group of affiliated persons will not trigger the separation
and exercisability of the Rights if such person or group becomes the beneficial
owner of 10% or more of the Common Stock solely as a result of the Company's
reducing the number of
-2-
outstanding shares, unless such person or group subsequently acquires an
additional 1.0% or more of the then outstanding shares of Common Stock.
In general, the Company may redeem the Rights in whole, but not in
part, at a price of $.0001 per Right, at any time until 10 business days
following the Stock Acquisition Date. After the redemption period has expired,
the Company's right of redemption may be reinstated if an Acquiring Person
reduces his beneficial ownership to less than 10% of the outstanding shares of
Common Stock in a transaction or series of transactions not involving the
Company and there are no other Acquiring Persons. 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
$.0001 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 stock (or other consideration) of the Company or for common
stock of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of
the Rights, 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 (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made 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 dated
June 30, 1998. A copy of the Rights Agreement is available free of charge from
the Company.
This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
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