EXHIBIT 99.2
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COMMERCE ENERGY GROUP, INC.
AND
COMPUTERSHARE INVESTOR SERVICES LLC
AS RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF MARCH ___, 2004
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TABLE OF CONTENTS
Page
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Section 1. CERTAIN DEFINITIONS.............................................................. 1
Section 2. APPOINTMENT OF RIGHTS AGENT...................................................... 5
Section 3. ISSUE OF RIGHT CERTIFICATES...................................................... 5
Section 4. FORM OF RIGHT CERTIFICATES....................................................... 7
Section 5. COUNTERSIGNATURE AND REGISTRATION................................................ 8
Section 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES............... 8
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.................... 9
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES............................... 11
Section 9. AVAILABILITY OF PREFERRED SHARES................................................. 12
Section 10. PREFERRED SHARES RECORD DATE..................................................... 13
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS............... 13
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES....................... 21
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING POWER............. 21
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.......................................... 24
Section 15. RIGHTS OF ACTION................................................................. 26
Section 16. AGREEMENT OF RIGHT HOLDERS....................................................... 26
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER................................ 27
Section 18. CONCERNING THE RIGHTS AGENT...................................................... 27
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT........................ 28
Section 20. DUTIES OF RIGHTS AGENT........................................................... 29
Section 21. CHANGE OF RIGHTS AGENT........................................................... 31
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES............................................... 32
Section 23. REDEMPTION....................................................................... 32
Section 24. EXCHANGE......................................................................... 34
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TABLE OF CONTENTS
(continued)
Page
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Section 25. NOTICE OF CERTAIN EVENTS......................................................... 36
Section 26. NOTICES.......................................................................... 37
Section 27. SUPPLEMENTS AND AMENDMENTS....................................................... 37
Section 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC......................... 38
Section 29. SUCCESSORS....................................................................... 38
Section 30. BENEFITS OF THIS AGREEMENT....................................................... 39
Section 31. SEVERABILITY..................................................................... 39
Section 32. GOVERNING LAW.................................................................... 39
Section 33. COUNTERPARTS..................................................................... 39
Section 34. DESCRIPTIVE HEADINGS............................................................. 39
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RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT ("Rights Agreement"), dated as of March ___,
2004, between COMMERCE ENERGY GROUP, INC., a Delaware corporation (the
"Company"), and COMPUTERSHARE INVESTOR SERVICES LLC, a __________ limited
liability company ("Rights Agent").
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has authorized the issuance of one preferred share purchase right (a
"Right") for each share of Common Share (as such term is hereinafter defined)
issued in connection with the merger of CEGI Acquisition Corp., a subsidiary of
the Company, with and into Commonwealth Energy Corporation pursuant to the terms
of that certain Agreement and Plan of Reorganization dated _________, 2004 (the
"Effective Date"), each Right representing the right to purchase one
one-hundredth of a Preferred Share (as such term is hereinafter defined), upon
the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Effective Date and the earliest
to occur of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are hereinafter defined); provided, however, that Rights may
be issued with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 hereof; and
WHEREAS, the Board of Directors has approved and authorized the
appointment of the Rights Agent, and the Rights Agent desires to accept such
appointment.
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 Rights, the following terms
have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
then outstanding. Notwithstanding the foregoing, (A) the term Acquiring Person
shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit or compensation
plan of the Company or any Subsidiary of the Company, or (iv) any entity holding
Common Shares for or pursuant to the terms of any such employee benefit or
compensation plan of the Company or any Subsidiary of the Company, and (B) no
Person shall become an "Acquiring Person" either (x) as the result of an
acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the Common Shares then outstanding;
provided, however,
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that if a Person shall become the Beneficial Owner of 15% or more of the Common
Shares then outstanding by reason of share purchases by the Company and shall,
following written notice from, or public disclosure by the Company of such share
purchases by the Company, become the Beneficial Owner of any additional Common
Shares without the prior consent of the Company and shall then Beneficially Own
more than 15% of the Common Shares then outstanding, then such Person shall be
deemed to be an "Acquiring Person," or (y) as the result of the acquisition of
Common Shares directly from the Company as long as, prior to any acquisition of
Common Shares directly from the Company, the Company has been apprised by any
such Person of the number of Common Shares beneficially owned by such Person
immediately prior to any such acquisition; provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the Common Shares then
outstanding by reason of share purchases directly from the Company and shall,
after that date, become the Beneficial Owner of any additional Common Shares
without the prior written consent of the Company and shall then Beneficially Own
more than 15% of the Common Shares then outstanding, then such Person shall be
deemed to be an "Acquiring Person" or (z) if the Board of Directors determines
in good faith that a Person who would otherwise be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph (a), has become
such inadvertently, and without any intention of changing or influencing control
of the Company, and such Person promptly enters into an irrevocable written
commitment in favor of the Company to divest, and thereafter divests (without
retaining any power, including voting with respect to such Common Shares), as
promptly as practicable (as determined in good faith by the Board of Directors),
following receipt of written notice from the Company of such event, of
Beneficial Ownership of a sufficient number of Common Shares so that such Person
would no longer be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not be deemed to be an
"Acquiring Person" for any purposes of this Rights; provided, however, that if
such Person shall again become the Beneficial Owner of 15% or more of the Common
Shares then outstanding, such Person shall be deemed an "Acquiring Person,"
subject to the exceptions set forth in this Section 1(a).
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Rights Agreement; provided, however, that the limited
partners of a limited partnership shall not be deemed to be Associates of such
limited partnership solely by virtue of their limited partnership interests.
(c) A Person shall be deemed the "BENEFICIAL OWNER" or to have
"BENEFICIAL OWNERSHIP" of and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's Affiliates
or Associates is deemed to beneficially own, within the meaning of Rule 13d-3 of
the General Rules
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and Regulations under the Exchange Act as in effect on the date of this Rights
Agreement;
(ii) which such Person or any of such Person's Affiliates
or Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) other than agreements between the Company and any Person
pursuant to which the right to purchase securities is conditioned upon the
achievement of research or development milestones which have not yet been
achieved or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange; or (B) the right
to vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or understanding to
vote such security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations promulgated
under the Exchange Act and (2) is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B) hereof) or disposing of any securities of the Company; provided,
however, an agreement, arrangement or understanding for purposes of this Section
1(c)(iii) shall not be deemed to include actions, including any agreement,
arrangement or understanding, or statements by (A) any member of the Board of
Directors, as comprised on the date of this Rights Agreement (the "Existing
Directors"), (B) any subsequent directors of the Company who have been nominated
by a majority of the Existing Directors (the "Successor Directors"), or (C) any
subsequent member of the Board of Directors who is elected by a majority of the
Existing Directors and/or Successor Directors, nominating as a group.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase, "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not
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then actually issued and outstanding which such Person would be deemed the
Beneficial Owner hereunder.
(d) "BUSINESS DAY" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of California or the
State of New York are authorized or obligated by law or executive order to
close.
(e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
Pacific Time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Pacific Time, on the next succeeding
Business Day.
(f) "COMMON SHARES" shall mean the shares of common stock, par
value $.001 per share, of the Company; provided, however, that, "Common Shares,"
when used in this Rights Agreement in connection with a specific reference to
any Person other than the Company, shall mean the capital stock (or equity
interest) with the greatest voting power of such other Person or, if such other
Person is a Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(g) "DISTRIBUTION DATE" shall have the meaning set forth in
Section 3 hereof.
(h) "FINAL EXPIRATION DATE" shall have the meaning set forth in
Section 7(a) hereof.
(i) "INTERESTED STOCKHOLDER" shall mean any Acquiring Person or
any Affiliate or Associate of an Acquiring Person or any other Person in which
any such Acquiring Person, Affiliate or Associate has an interest, or any other
Person acting directly or indirectly on behalf of or in concert with any such
Acquiring Person, Affiliate or Associate.
(j) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company, joint venture, trust, association,
unincorporated organization, group or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(k) "PREFERRED SHARES" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.001 per share, of the Company having
the designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions set forth in the Certificate of Designation
attached to this Rights Agreement as Exhibit A.
(l) "PURCHASE PRICE" shall have the meaning set forth in Section
7(b) hereof.
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(m) "REDEMPTION DATE" shall have the meaning set forth in Section
7(a) hereof.
(n) "SHARES ACQUISITION DATE" shall mean the first date of public
announcement by the Company that an Acquiring Person exists, or by an Acquiring
Person that such Person has become an Acquiring Person; provided, however that,
if such Person is determined not to have become an Acquiring Person pursuant to
clause (z) of Subsection 1(a)(B) hereof, then no Shares Acquisition Date shall
be deemed to have occurred.
(o) "SUBSIDIARY" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by such Person.
(p) "TRANSACTION" shall mean any merger, consolidation or sale of
assets described in Section 13(a) hereof or any acquisition of Common Shares
which would result in a Person becoming an Acquiring Person or a Principal Party
(as such term is hereinafter defined in Section 13(b) hereof).
(q) "TRANSACTION PERSON" with respect to a Transaction shall mean
(i) any Person who (x) is or will become an Acquiring Person or a Principal
Party (as such term is hereinafter defined) if the Transaction were to be
consummated and (y) directly or indirectly proposed or nominated a director of
the Company which director is in office at the time of consideration of the
Transaction, or (ii) an Affiliate or Associate of such a Person.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable. The Rights Agent shall have no duty to supervise, and in
no event shall be liable for, the acts or omissions of any such co-Rights Agent.
SECTION 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier of the Close of Business on (i) the Shares
Acquisition Date or (ii) the tenth (10th) Business Day (or such later date as
may be determined by action of the Board of Directors prior to such time as any
Person becomes an Acquiring Person) after the date of the commencement
(determined in accordance with Rule 14d-2 under the Exchange Act) by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan or compensation plan of the Company or of any Subsidiary of the Company or
any entity holding Common Shares for or pursuant to the terms of any such plan)
of, or of the first public announcement of the intention of any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan or
compensation plan of the Company or of any Subsidiary of the Company or any
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entity holding Common Shares for or pursuant to the terms of any such plan) to
commence, a tender or exchange offer (which intention to commence remains in
effect for five (5) Business Days after such announcement), the consummation of
which would result in any Person becoming an Acquiring Person (including any
such date which is after the date of this Rights Agreement and prior to the
issuance of the Rights, the earlier of such dates being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced by the certificates
for Common Shares registered in the names of the holders thereof (which
certificates shall also be deemed to be Right Certificates) and not by separate
Right Certificates, and (y) the Rights (and the right to receive Right
Certificates therefor) will be transferable only in connection with the transfer
of Common Shares. As soon as practicable after the Distribution Date, the
Company shall promptly notify the Rights Agent of the occurrence thereof and, if
the Rights Agent is not then also the transfer agent and registrar for the
Common Stock, provide the Rights Agent with the names and addresses of all
record holders of Common Stock, and the Company will prepare and execute, the
Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, and provided with all necessary
information, send) by first-class, insured, postage-prepaid mail, to each record
holder of Common Shares as of the Close of Business on the Distribution Date, at
the address of such holder shown on the records of the Company, a Right
Certificate, in substantially the form of Exhibit B hereto (a "Right
Certificate"), evidencing one Right for each Common Share so held, subject to
the adjustment provisions of Section 11 of this Rights Agreement. As of the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(b) On the Effective Date, or as soon as practicable thereafter,
the Company will send (directly or through the Rights Agent or its transfer
agent) a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Shares as of
the Close of Business on the Effective Date, at the address of such holder shown
on the records of the Company. Until the Distribution Date (or, if earlier, the
Redemption Date or the Final Expiration Date), the Rights associated with the
Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any certificate for Common
Shares outstanding shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby (whether or not such certificates
have impressed on, printed, written on or otherwise affixed to them the legend
set forth in Section 3(c)).
(c) Certificates for Common Shares which become outstanding
(including, without limitation, reacquired Common Shares referred to in the last
sentence of this paragraph (c)) after the Effective Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date shall have impressed on, printed on, written on or otherwise affixed to
them a legend in substantially the following form:
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This certificate also evidences and entitles the holder hereof
to certain rights as set forth in a Rights Agreement between Commerce
Energy Group, Inc. (the "Company") and Computershare Investor Services
LLC, as Rights Agent (the "Rights Agent"), dated as of March ___, 2004,
as amended from time to time (the "Rights Agreement"), the terms of
which are hereby incorporated herein by reference and a copy of which
is on file at the principal executive offices of 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 without charge after
receipt of a written request therefor. As described in the Rights
Agreement, Rights issued to any Person who becomes an Acquiring Person
or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and certain related persons, whether currently held by or on
behalf of such Person or by any subsequent holder, shall become null
and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date (or, if earlier, the earlier of the Redemption Date
or the Final Expiration Date), the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Effective Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common Shares
which are no longer outstanding. Notwithstanding this Section 3(c), the omission
of a legend shall not affect the enforceability of any part of this Rights
Agreement or the rights of any holder of the Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES.
(a) The Right Certificates (and the form of election to purchase
Preferred Shares, the form of assignment and the form of certification to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate (provided that such marks, legends, summaries and endorsements do
not affect the rights, duties or responsibilities of the Rights Agent) and as
are not inconsistent with the provisions of this Rights Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
quotation system on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Sections 7, 11 and 22 hereof, the
Right Certificates shall entitle the holders thereof to purchase such number of
one one-hundredths of a Preferred Share as shall be set forth therein at the
Purchase Price, but the number of such one one-
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hundredths of a Preferred Share and the Purchase Price shall be subject to
adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights which are null and void pursuant to
Section 11(a)(ii) hereof and any Right Certificate issued pursuant to Section 6
or Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent the Rights Agent has notice thereof and to the extent feasible) the
following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void.
The provisions of Section 11(a)(ii) hereof shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, its President, its Vice Chairman of the Board, its Chief
Financial Officer, or any of its Vice Presidents, either manually or by
facsimile signature, shall have affixed thereto the Company's seal or a
facsimile thereof if the Company has a seal, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.
Following the Distribution Date, and receipt by the Rights Agent of
written notice to that effect and all other relevant information referred to in
Section 3(a), the Rights Agent will keep or cause to be kept, at its office
designated for such purpose, books for registration and transfer of the Right
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right Certificates and the date of each of the Right
Certificates.
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SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES. Subject to the
provisions of Section 11(a)(ii), Section 14 and Section 24 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the earlier of the Redemption Date or the Final Expiration
Date, any Right Certificate or Right Certificates may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Right Certificate or Right Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right 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 Right Certificate until the registered holder shall have properly
completed and signed the certificate contained in the form of assignment on the
reverse side of such Right 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 or the Rights Agent shall
request. Thereupon the Rights Agent shall, subject to Section 11(a)(ii), Section
14 and Section 24 hereof, countersign and deliver to the person entitled thereto
a Right Certificate or Right Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates. The Rights Agent shall have
no duty or obligation under this Section 6 or any other similar provision of
this Rights Agreement unless and until it is reasonably satisfied that all such
taxes and/or governmental charges have been paid in full.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will issue, execute and deliver
a new Right Certificate of like tenor to the Rights Agent for countersignature
and delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Notwithstanding any other provisions hereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Rights Certificates.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
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(a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent designated
for such purpose, together with payment of the Purchase Price for each one
one-hundredth of a Preferred Share (or such other number of shares or other
securities) as to which the Rights are exercised, at or prior to the earliest of
(i) the Close of Business on March 8, 2014 (the "Final Expiration Date"), (ii)
the time at which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), or (iii) the time at which such Rights are exchanged as
provided in Section 24 hereof.
(b) The purchase price for each one one-hundredth of a Preferred
Share pursuant to the exercise of a Right shall initially be $20.00 (the
"Purchase Price") and shall be subject to adjustment from time to time as
provided in Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares to be purchased and an amount equal
to any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check, cashier's
check, bank draft or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent for
the Preferred Shares certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the Preferred Shares issuable upon exercise of the
Rights hereunder into a depository, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a
Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with such request, (ii) when appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional 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 Right Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt, deliver such cash to or upon the order of the registered holder of such
Right Certificate. In the event that the Company is obligated to issue
securities of the Company other than Preferred Shares (including Common Shares)
of the Company pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities are available for
distribution by the Rights Agent, if and when appropriate.
10
In addition, in the case of an exercise of the Rights by a holder
pursuant to Section 11(a)(ii) hereof, the Rights Agent shall return such Right
Certificate to the registered holder thereof after imprinting, stamping or
otherwise indicating thereon that the rights represented by such Right
Certificate no longer include the rights provided by Section 11(a)(ii) hereof,
and, if fewer than all the Rights represented by such Right Certificate were so
exercised, the Rights Agent shall indicate on the Right Certificate the number
of Rights represented thereby which continue to include the rights provided by
Section 11(a)(ii) hereof. Neither the Company nor the Rights Agent shall have
any liability to any holder of Rights Certificates or to any other Person as a
result of the Company's failure to make any determinations with respect to an
Acquiring Person or such Acquiring Person's Affiliates, Associates or
transferees hereunder.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby (other than a partial
exercise of rights pursuant to Section 11(a)(ii) as described in Section 7(c)
hereof), a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Right Certificate or to his duly authorized assigns, subject to
the provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
or any Preferred Shares held in its treasury, the number of Preferred Shares
that will be sufficient to permit the exercise in full of all outstanding Rights
in accordance with this Section 7.
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) properly completed and signed the certification following
the form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, (ii) tendered the Purchase Price (and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Right Certificate in accordance with Section 9) to the Company in the
manner set forth in Section 7(c), and (iii) provided such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates
or Associates thereof as the Company or the Rights Agent shall reasonably
request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if delivered or surrendered to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Rights Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Right Certificate
11
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Right Certificates to the Company
approximately one and one-half years after the cancellation date, or shall, at
the written request of the Company, destroy such canceled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Company.
SECTION 9. AVAILABILITY OF PREFERRED SHARES. The Company covenants and agrees
that so long as the Preferred Shares (and, after the time a person becomes an
Acquiring Person, Common Shares or any other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange or
quotation system, 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 quotation system upon official notice
of issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (or Common Shares and other
securities, as the case may be) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such Preferred Shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares or other securities.
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Preferred Shares upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Right Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depositary receipts for Preferred Shares upon the exercise
of any Rights until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Company's reasonable satisfaction that no
such tax is due.
As soon as practicable after the Distribution Date, the Company shall
use its best efforts to:
(i) prepare and file a registration statement under the
Securities Act of 1933, as amended (the "Act"), with respect to the Rights and
the securities purchasable upon exercise of the Rights on an appropriate form,
will use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and will use its best efforts
to cause such registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the Final Expiration Date;
and
12
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate.
SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares or other securities is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Preferred Shares or other securities represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered with the forms of election and certification
duly executed and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Shares or other securities transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares or other securities
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate, as such, shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number of Preferred 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 Rights Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of Preferred
Shares or (D) issue any shares of its capital stock in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
13
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under both Section 11(a)(i)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 hereof and the provisions of
the next paragraph of this Section 11(a)(ii), in the event any Person shall
become an Acquiring Person, each holder of a Right shall, for a period of 60
days after the later of such time any Person becomes an Acquiring Person or the
effective date of an appropriate registration statement filed under the Act
pursuant to Section 9 hereof (provided, however that, if at any time prior to
the expiration or termination of the Rights there shall be a temporary
restraining order, a preliminary injunction, an injunction, or temporary
suspension by the Board of Directors, or similar obstacle to exercise of the
Rights (the "Injunction") which prevents exercise of the Rights, a new 60-day
period shall commence on the date the Injunction is removed), have a right to
receive, upon exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable, in accordance with the terms of this Rights
Agreement and in lieu of Preferred Shares, such number of Common Shares as shall
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (B) 50% of the then current per share
market price of the Common Shares (determined pursuant to Section 11(d) hereof)
on the date such Person became an Acquiring Person; provided, however, that if
the transaction that would otherwise give rise to the foregoing adjustment is
also subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii). In the event that any Person shall become an Acquiring Person
and the Rights shall then be outstanding, the Company shall not take any action
which would eliminate or diminish the benefits intended to be afforded by the
Rights.
Notwithstanding anything in this Rights Agreement to the contrary, from
and after the time any Person becomes an Acquiring Person, any Rights
beneficially owned by (i) such Acquiring Person or an Associate or Affiliate of
such Acquiring Person, (ii) a transferee of such Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee after the Acquiring Person
became such, or (iii) a transferee of such Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person's becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has as a
primary
14
purpose or effect the avoidance of this Section 11(a)(ii), 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 Rights Agreement or otherwise. The Company shall use all reasonable efforts
to insure that the provisions of this Section 11(a)(ii) and Section 4(b) hereof
are complied with, but neither the Company nor the Rights Agent shall have any
liability to any holder of Right Certificates or other Person as a result of the
Company's failure to make any determinations with respect to an Acquiring Person
or its Affiliates, Associates or transferees hereunder. No Right Certificate
shall be issued at any time upon the transfer of any Rights to an Acquiring
Person whose Rights would be null and void pursuant to the first sentence of
this paragraph or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be null
and void pursuant to the first sentence of this paragraph shall be canceled.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if a majority of the Board of
Directors then in office determines that such action is necessary or appropriate
and not contrary to the interests of holders of Rights, elect to (and, in the
event that the Board of Directors has not exercised the exchange right contained
in Section 24(c) hereof and there are not sufficient treasury shares and
authorized but unissued Common Shares to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Company shall)
take all such action as may be necessary to authorize, issue or pay, upon the
exercise of the Rights, cash (including by way of a reduction of the Purchase
Price), property, Common Shares, other securities or any combination thereof
having an aggregate value equal to the value of the Common Shares which
otherwise would have been issuable pursuant to Section 11(a)(ii) hereof, which
aggregate value shall be determined by a nationally recognized investment
banking firm selected by a majority of the Board of Directors then in office.
For purposes of the preceding sentence, the value of the Common Shares shall be
determined pursuant to Section 11(d) hereof. Any such election by the Board of
Directors must be made within 60 days following the date on which the event
described in Section 11(a)(ii) hereof shall have occurred. Following the
occurrence of the event described in Section 11(a)(ii) hereof, a majority of the
Board of Directors then in office may suspend the exercisability of the Rights
for a period of up to 60 days following the date on which the event described in
Section 11(a)(ii) hereof shall have occurred to the extent that such directors
have not determined whether to exercise their rights of election under this
Section 11(a)(iii). In the event of any such suspension, the Company shall
promptly notify the Rights Agent in writing of such suspension and shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred
15
Shares (or shares having the same designations and the powers, preferences and
rights, and the qualifications, limitations and restrictions as the Preferred
Shares ("equivalent preferred shares")) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or
equivalent preferred share (or having a conversion price per share, if a
security convertible into Preferred Shares or equivalent preferred shares) less
than the then current per share market price of the Preferred Shares (as such
term is hereinafter defined) 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 Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or equivalent preferred shares
so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or equivalent preferred shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors, whose determination shall be
described in a reasonably detailed statement filed with the Rights Agent.
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of
a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the then current per share market price of the Preferred Shares (as
such term is hereinafter defined) on such record date, less the fair market
value (as determined in good faith by the Board of Directors, whose
determination shall be described in a reasonably detailed statement filed with
the Rights Agent) of the portion of the assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however, that in no event shall
the consideration
16
to be paid upon the exercise of one Right be less than the aggregate par value
of the shares of capital stock of the Company to be issued upon exercise of one
Right. Such adjustments shall be made successively whenever such a record date
is fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d)
(i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11(d)(i)) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the 30 consecutive Trading
Days (as such term is hereinafter defined) immediately prior to such date;
provided, however, that in the event that the current per share market price of
the Security is determined during a period following the announcement by the
issuer of such Security of (A) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of such Security or
securities convertible into such shares, or (C) any subdivision, combination or
reclassification of such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each such
case, the current per share market price shall be appropriately adjusted to
reflect the current market price per share equivalent of such Security. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or as reported on the Nasdaq National Market or
Nasdaq Small Cap Market, or, if the Security is not listed or admitted to
trading on any national securities exchange or reported on the Nasdaq National
Market or Nasdaq Small Cap Market, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by the National Association of Securities Dealers, Inc. Automated
Quotations System ("Nasdaq") or such other system then in use, or, if on any
such date the Security is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors or, if on any
such date no professional market maker is making a market in the Security, the
price as determined in good faith by the Board of Directors. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the transaction
of business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
17
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares shall be determined in
accordance with the method set forth in Section 11(d)(i) hereof. If the
Preferred Shares are not publicly traded, the "current per share market price"
of the Preferred Shares shall be conclusively deemed to be the current per share
market price of the Common Shares as determined pursuant to Section 11(d)(i)
hereof (appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof) multiplied by one hundred.
If neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors, whose determination
shall be described in a reasonably detailed statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in the
Purchase Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one one-hundredth of a
Preferred Share or one ten-thousandth of any other share or security as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Shares contained in Sections 11(a) through 11(c) hereof, inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in Section 11(b) and Section 11(c) hereof,
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-hundredths of a Preferred Share (calculated to the nearest one
one-millionth of a Preferred Share)
18
obtained by (i) multiplying (x) the number of one one-hundredths of a Preferred
Share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one 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 promptly notify the Rights Agent in writing of such election and
shall make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least 10 days later than the date of
the public announcement. If Right 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 Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a Preferred Share which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below one one-hundredth of the then par value, if
any, of the Preferred Shares issuable upon exercise of the Rights, the Company
shall take any corporate action
19
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Preferred Shares at
such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (with prompt written notice
thereof to the Rights Agent) until the occurrence of such event the issuing to
the holder of any Right exercised after such record date of the Preferred Shares
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action the purpose of which is to, or if
at the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or eliminate the benefits intended to be
afforded by the Rights. Any such action taken by the Company during any period
after any Person becomes an Acquiring Person but prior to the Distribution Date
shall be null and void unless such action could be taken under this Section
11(m) from and after the Distribution Date.
(n) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Shares, issuance
wholly for cash of any Preferred Shares at less than the current market price,
issuance wholly for cash of Preferred Shares or securities which by their terms
are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in Section 11(b), hereafter made by the Company
to holders of its Preferred Shares shall not be taxable to such stockholders.
(o) In the event that at any time after the date of this Rights
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
into a greater or lesser number of Common Shares, then in any such case (A) the
number of one one-hundredths of a Preferred Share purchasable after such event
upon proper exercise of each Right shall be determined by multiplying the number
of one one-hundredths of a Preferred Share so purchasable immediately prior to
such event by a fraction, the numerator of which is the number of Common Shares
outstanding immediately before such event and the denominator of which is the
number
20
of Common Shares outstanding immediately after such event, and (B) each Common
Share outstanding immediately after such event shall have issued with respect to
it that number of Rights which each Common Share outstanding immediately prior
to such event had issued with respect to it. The adjustments provided for in
this Section 11(o) shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
(p) The exercise of Rights under Section 11(a)(ii) hereof shall
only result in the loss of rights under Section 11(a)(ii) hereof to the extent
so exercised and shall not otherwise affect the rights represented by the Rights
under this Rights Agreement, including the rights represented by Section 13
hereof.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever
an adjustment is made as provided in Sections 11 and 13 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment, and a
brief, reasonably detailed statement of the facts, computations and methodology
accounting for such adjustment, (b) file with the Rights Agent and with each
transfer agent for the Common Shares or the Preferred Shares a copy of such
certificate and (c) mail a brief summary thereof to each holder of a Right
Certificate in accordance with Section 25 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained, and shall have no duty or liability with respect to, and shall not be
deemed to have knowledge of any adjustment unless and until it shall have
received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Shares Acquisition Date or,
if a Transaction is proposed, the Distribution Date, directly or indirectly (x)
the Company shall consolidate with, or merge with and into, any Interested
Stockholder, or if in such merger or consolidation all holders of Common Shares
are not treated alike, any other Person, (y) any Interested Stockholder, or if
in such merger or consolidation all holders of Common Shares are not treated
alike, any other Person shall, consolidate with the Company, or merge with and
into the Company, and the Company shall be the continuing or surviving
corporation of such merger (other than, in the case of either transaction
described in (x) or (y), a merger or consolidation which would result in all of
the voting power represented by the securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into securities of the surviving entity) all
of the voting power represented by the securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation and
the holders of such securities not having changed as a result of such merger or
consolidation), or (z) the Company shall sell, mortgage or otherwise transfer
(or one or more of its Subsidiaries shall sell, mortgage or otherwise transfer),
in one or more transactions, assets or earning power aggregating more than 50%
of the assets or
21
earning power of the Company and its Subsidiaries (taken as a whole) to any
Interested Stockholder or Interested Stockholders, or if in such transaction all
holders of Common Shares are not treated alike, any other Person, (other than
the Company or any Subsidiary of the Company in one or more transactions each of
which individually and the aggregate does not violate Section 13(d) hereof)
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right, subject to Section 11(a)(ii) hereof, shall have the right to
receive, upon the exercise thereof at a price equal to the then current Purchase
Price multiplied by the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable in accordance with the terms of this Rights
Agreement and in lieu of Preferred Shares, such number of freely tradable Common
Shares of the Principal Party (as such term is hereinafter defined), free and
clear of liens, rights of call or first refusal, encumbrances or other adverse
claims, as shall be equal to the result obtained by (A) multiplying the then
current Purchase Price by the number of one one-hundredths of a Preferred Share
for which a Right is then exercisable (without taking into account any
adjustment previously made pursuant to Section 11(a)(ii) hereof) and dividing
that product by (B) 50% of the then current per share market price of the Common
Shares of such Principal Party (determined pursuant to Section 11(d) hereof) on
the date of consummation of such consolidation, merger, sale or transfer; (ii)
such Principal Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Rights 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 to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Shares in accordance with Section 9 hereof) in connection with such consummation
as may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights.
(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) hereof, the Person that is the
issuer of any securities into which Common Shares are converted in such merger
or consolidation, and if no securities are so issued, the Person that is the
other party to the merger or consolidation (or, if applicable, the Company, if
it is the surviving corporation); and
(ii) in the case of any transaction described in clause
(z) of Section 13(a) hereof, 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 case, (1) if the Common Shares of such Person are
not at such time and have not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary
22
or Affiliate of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) if such
Person is a Subsidiary, directly or indirectly, or Affiliate of more than one
Person, the Common Shares 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 Shares having the greatest aggregate market value; and (3)
if such Person is owned, directly or indirectly, by a joint venture formed by
two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized Common Shares that 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 each Principal Party and
each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have (i) 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 (ii) prepared, filed and had
declared and remain effective a registration statement under the Act on the
appropriate form with respect to the Rights and the securities exercisable upon
exercise of the Rights and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
paragraph (a) of this Section 13, the Principal Party at its own expense will:
(i) cause the registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under the blue
sky laws of such jurisdictions as may be necessary or appropriate;
(iii) list the Rights and the securities purchasable upon
exercise of the Rights on each national securities exchange on which the Common
Shares were listed prior to the consummation of such consolidation, merger, sale
or transfer of assets or on the Nasdaq National Market or Nasdaq Small Cap
Market if the Common Shares were listed on the Nasdaq National Market or Nasdaq
Small Cap Market or, if the Common Shares were not listed on a national
securities exchange or the Nasdaq National Market or Nasdaq Small Cap Market
prior to the consummation of such consolidation, merger, sale
23
or transfer of assets, on a national securities exchange or the Nasdaq National
Market or Nasdaq Small Cap Market; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all material respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
(d) After the Distribution Date, the Company covenants and agrees
that it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell
or transfer to, in one or more 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, any other Person (other than a Subsidiary of the Company in a
transaction which does not violate Section 11(m) hereof), if (x) at the time of
or after such consolidation, merger or sale there are any charter or bylaw
provisions or any rights, warrants or other instruments or securities
outstanding, agreements in effect or any other action taken which would diminish
or otherwise eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of the Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates. The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such other Person shall
have executed and delivered to the Rights Agent a supplemental agreement
evidencing compliance with this Section 13(d).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to, but not including, the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or as
reported on the Nasdaq National Market or Nasdaq SmallCap Market or, if the
Rights are
24
not listed or admitted to trading on any national securities exchange or
reported on the Nasdaq National Market or Nasdaq SmallCap Market, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors. If on any such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as determined in good faith by
the Board of Directors shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts; provided, however, that holders of such depositary receipts shall have
all of the designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral multiples
of one one-hundredth of a Preferred Share, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share. For the purposes of this Section 14(b), the
current market value of a Preferred Share shall be the current per share market
price of the Preferred Shares (as determined pursuant to the second sentence of
Section 11(d)(i) hereof) for the Trading Day immediately prior to, but not
including, the date of such exercise (or, if not publicly traded, in accordance
with Section 11(d)(ii) hereof).
(c) Following the occurrence of one of the transactions or events
specified in Section 11 hereof giving rise to the right to receive Common
Shares, capital stock equivalents (other than Preferred Shares) or other
securities upon the exercise of a Right, the Company shall not be required to
issue fractions of Common Shares or units of such Common Shares, capital stock
equivalents or other securities upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares, capital stock equivalents
or other securities. In lieu of fractional Common Shares, capital stock
equivalents or other securities, the Company shall pay to the registered holders
of Right Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
Common Share or unit of such Common Shares, capital stock equivalents or other
securities. For purposes of this Section 14(c), the current market value shall
be the current per share market price (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to, but not including,
the date of such exercise and, if such capital stock equivalent is not
25
traded, each such capital stock equivalent shall have the value of one
one-hundredth of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above); and
(e) Whenever a payment for fractional Rights or fractional shares
is to be made by the Rights Agent, the Company shall (i) promptly prepare and
deliver to the Rights Agent a certificate setting forth in reasonable detail the
facts related to such payment and the prices and/or formulas utilized in
calculating such payments, and (ii) provide sufficient monies to the Rights
Agent in the form of fully collected funds to make such payments. The Rights
Agent shall be fully protected in relying upon such a certificate and shall have
no duty with respect to, and shall not be deemed to have knowledge of any
payment for fractional Rights or fractional shares under any Section of this
Rights Agreement relating to the payment of fractional Rights or fractional
shares unless and until the Rights Agent shall have received such a certificate
and sufficient monies.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this Rights
Agreement, excepting the rights of action given to the Rights Agent under
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares) and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares), without the consent
of the Rights Agent or of the holder of any other Right Certificate (or, prior
to the Distribution Date, of the Common Shares), 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 Right Certificate in the manner
provided in such Right Certificate and in this Rights 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 Rights Agreement and will be entitled to
specific performance of the obligations under, and injunctive relief against
actual or threatened violations of the obligations of any Person subject to,
this Rights Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys fees, incurred by them in any
action to enforce the provisions of this Rights Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by accepting
the same, consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
26
(b) after the Distribution Date, the Right Certificates are
transferable (subject to the provisions of this Rights Agreement) only on the
registry books of the Rights Agent if surrendered at the office of the Rights
Agent designated for such purpose, duly endorsed or accompanied by a proper
instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated Common Shares
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Rights 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 Rights Agreement by reason of any preliminary
or permanent injunction or other order, decree, judgment or ruling (whether
interlocutory or final) issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, that the Company must use its reasonable best efforts to have
any such order, decree, judgment or ruling lifted or otherwise overturned as
soon as possible.
SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as
such, of any Right Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT. The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the preparation, delivery,
administration, execution and amendment of this Rights Agreement and the
exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to
27
hold it harmless against, any loss, liability, damage, judgment, fine, penalty,
claim, demand, settlement, cost or expense, incurred without gross negligence,
bad faith or willful misconduct (each as finally determined by a court of
competent jurisdiction) on the part of the Rights Agent, for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance,
administration and execution of this Rights Agreement or the exercise and
performance of its duties hereunder, including, without limitation, the costs
and expenses of defending against any claim of liability in the premises. The
provisions of this Section 18 and Section 20 below (including, but not limited
to, the indemnity provided herein) shall survive the exercise or expiration of
the Rights, the termination of this Rights Agreement and the resignation or
removal of the Rights Agent. The costs and expenses incurred in enforcing this
right of indemnification shall be paid by the Company.
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,
the acceptance and administration of this Rights Agreement in reliance upon any
Right Certificate or certificate for the Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof. The Rights Agent shall not be deemed to have any
duty or notice unless and until the Company has provided the Rights Agent with
actual written notice. Anything in this Rights Agreement to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, incidental or consequential loss or damage of any kind
whatsoever (including, but not limited to, lost profits), even if the Rights
Agent has been advised of the possibility of such loss or damage. Any liability
of the Rights Agent under this Rights Agreement shall be limited to the amount
of fees paid by the Company to the Rights Agent.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT. Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any Person succeeding to the shareholder services or corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Rights Agreement without the execution
or filing of any paper or any further act on the part of any of the parties
hereto, provided that such Person 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
Rights Agreement any of the Right Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been
28
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this Rights
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Rights Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations expressly imposed by this Rights Agreement (and no implied duties or
obligations shall be read against the Rights Agent) upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel of its choice
(who may be legal counsel for the Company), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any
action taken or omitted by it in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering (or
omitting to take) any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be deemed to
be conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President, the Treasurer or the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
and complete authorization and protection to the Rights Agent and the Rights
Agent shall incur no liability for or in respect of any action taken, suffered
omitted in good faith by it under the provisions of this Rights Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct (each as finally determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Rights Agreement or in
the Right
29
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not have any liability nor be under any
responsibility in respect of the validity of this Rights Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Rights
Agreement or in any Right Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming null
and void pursuant to Section 11(a)(ii) hereof) or any adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in
Sections 3, 11, 13, 23 or 24 hereof, or the ascertaining of the existence of
facts that would require any such change or adjustment (except with respect to
the exercise of Rights evidenced by Right Certificates after receipt of a
certificate pursuant to Section 12 hereof describing such change or adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares to be
issued pursuant to this Rights Agreement or any Right Certificate or as to
whether any Preferred Shares will, when issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may be required by
the Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
advice or instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President, the Secretary or the
Treasurer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and such advice or instructions
shall be full authorization and protection to the Rights Agent and the Rights
Agent shall incur no liability for or in respect of any action taken, suffered
or omitted by it in good faith in accordance with the advice or instructions of
any such officer or for any delay in acting while waiting for those
instructions. 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 with respect to its
duties or obligations under this Rights Agreement and the date on and/or after
which such action shall be taken or omitted and the Rights Agent shall not be
liable for any action taken, suffered or omitted in accordance with a proposal
included in any such application on or after the date specified therein (which
date shall not be less than three Business Days after the date indicated in such
application unless any such officer
30
shall have consented in writing to an earlier date) unless, prior to taking,
suffering or omitting any such action, the Rights Agent has received written
instructions in response to such application specifying the action to be taken,
suffered or omitted.
(h) The Rights Agent and any stockholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Rights Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Company or for any other
Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers 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, absent gross negligence, willful misconduct or bad faith
(each as finally determined by a court of competent jurisdiction) in the
selection and continued employment thereof.
(j) No provision of this Rights 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 it believes that repayment of such funds or adequate indemnification
against such risk or liability is not assured to it.
(k) If, with respect to any Right 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 not been
executed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
SECTION 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Rights Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
for the Common Shares or Preferred Shares by registered or certified mail, and
to the holders of the Right Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent for the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right 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 30 days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit his Right Certificate for
31
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by
such a court, shall be either (a) a Person organized and doing business under
the laws of the United States or of any State of the United States which is
authorized under such laws to conduct shareholder services business and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $10 million or (b) an Affiliate of such Person. 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 for the Common Shares or
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right 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 RIGHT CERTIFICATES. Notwithstanding any of the
provisions of this Rights Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Right Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Rights Agreement. In addition, in
connection with the issuance or sale of Common Shares following the Distribution
Date and prior to the earlier of the Redemption Date and the Final Expiration
Date, the Company (a) shall with respect to Common Shares so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement in existence prior to the Distribution Date, or upon the exercise,
conversion or exchange of securities, notes or debentures issued by the Company
and in existence prior to the Distribution Date, and (b) may, in any other case,
if deemed necessary or appropriate by the Board of Directors, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) the Company shall not be
obligated to issue any such Right Certificates 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 Right Certificate would be issued, and (ii) no Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
32
SECTION 23. REDEMPTION.
(a) The Rights may be redeemed by action of the Board of Directors
pursuant to Section 23(b) hereof and shall not be redeemed in any other manner.
(b)
(i) The Board of Directors may, at its option, at any
time prior to the earlier of (A) such time as any Person becomes an Acquiring
Person, or (B) the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $0.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"), and the Company may, at its
option, pay the Redemption Price in Common Shares (based on the "current
per-share market price," as such term is defined in Section 11(d) hereof, of the
Common Shares at the time of redemption), cash, property, indebtedness or any
other form of consideration deemed appropriate by the Board of Directors. The
redemption of the Rights by the Board of Directors may be made effective at such
time, on such basis and subject to such conditions as the Board of Directors in
its sole discretion may establish. Notwithstanding anything contained in this
Rights Agreement to the contrary, the Rights shall not be exercisable pursuant
to Section 11(a)(ii) hereof prior to the expiration or termination of the
Company's right of redemption under this Section 23(b)(i).
(ii) In addition, the Board of Directors may, at its
option, at any time after the time a Person becomes an Acquiring Person and
after the expiration of any period during which the holder of Rights may
exercise the rights under Section 11(a)(ii) hereof but prior to any event
described in clause (x), (y) or (z) of the first sentence of Section 13 hereof,
redeem all but not less than all of the then outstanding Rights at the
Redemption Price (x) in connection with any merger, consolidation or sale or
other transfer (in one transaction or in a series of related transactions) of
assets or earning power aggregating 50% or more of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) in which all holders of
Common Shares are treated alike and not involving (other than as a holder of
Common Shares being treated like all other such holders) an Interested
Stockholder or a Transaction Person or (y)(A) if and for so long as the
Acquiring Person is not thereafter the Beneficial Owner of 15% or more of the
then outstanding Common Shares, and (B) at the time of redemption no other
Persons are Acquiring Persons.
(c) Immediately upon the action of the Board of Directors ordering
the redemption of the Rights pursuant to Section 23(b) hereof, and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. The Company shall promptly notify the Rights Agent
in writing of such redemption and shall promptly give public notice of any such
redemption; provided, however, that the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption.
33
Within 10 days after such action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(b) hereof, the Company shall
mail a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares, provided, however, that failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. 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. Neither
the Company nor any of its Affiliates or Associates may redeem, acquire or
purchase for value any Rights at any time in any manner other than that
specifically set forth in this Section 23 or in Section 24 hereof, and other
than in connection with the purchase of Common Shares prior to the Distribution
Date.
(d) The Company may, at its option, discharge all of its
obligations with respect to any redemption of the Rights by (i) issuing a press
release announcing the manner of redemption of the Rights and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares, and upon such action, all outstanding Right Certificates
shall be null and void without any further action by the Company. In the event
the Company elects to discharge all of its obligations with respect to any
redemption of Rights by mailing payment of the Redemption Price to the
registered holders of the Rights as set forth in the preceding sentence, the
dollar amount sent to each such registered holder representing the full
Redemption Price to which such registered holder shall be entitled shall be
rounded up to the nearest whole cent.
SECTION 24. EXCHANGE.
(a) The Board of Directors may, at its option, at any time after
any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become null and void pursuant to the provisions of Section 11(a)(ii) hereof) for
Common Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Shares for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Shares then outstanding.
34
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to Section 24(a) hereof and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to the Rights
Agent and to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In lieu of issuing Common Shares in accordance with Section
24(a) hereof, the Company may, if a majority of the Board of Directors then in
office determines that such action is necessary or appropriate and not contrary
to the interests of the holders of Rights, elect to (and, in the event that
there are not sufficient treasury shares and authorized but unissued Common
Shares to permit any exchange of the Rights in accordance with Section 24(a)
hereof, the Company shall) take all such action as may be necessary to
authorize, issue or pay, upon the exchange of the Rights, cash (including by way
of a reduction of the Purchase Price), property, Common Shares, other securities
or any combination thereof having an aggregate value equal to the value of the
Common Shares which otherwise would have been issuable pursuant to Section 24(a)
hereof, which aggregate value shall be determined by a nationally recognized
investment banking firm selected by a majority of the Board of Directors then in
office. For purposes of the preceding sentence, the value of the Common Shares
shall be determined pursuant to Section 11(d) hereof. Any election pursuant to
this Section 24(c) by the Board of Directors must be made by resolution within
60 days following the date on which the event described in Section 11(a)(ii)
hereof shall have occurred. Following the occurrence on the event described in
Section 11(a)(ii) hereof, a majority of the Board of Directors then in office
may suspend the exercisability of the Rights for a period of up to 60 days
following the date on which the event described in Section 11(a)(ii) hereof
shall have occurred to the extent that such directors have not determined
whether to exercise their rights of exchange under this Section 24(c). In the
event of any such suspension, the Company shall promptly notify the Rights Agent
in writing of such suspension and shall issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended.
35
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company shall pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
Section 24(d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately after the date of
the first public announcement by the Company that an exchange is to be effected
pursuant to this Section 24.
(e) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions which are integral multiples of one
one-hundredth of a Preferred Share) upon exchange of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share).
Fractions of Preferred Shares in integral multiples of one one-hundredth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts; provided, however, that holders of such depositary receipts shall have
all of the designations and the powers, preferences and rights, and the
qualifications, limitations and restrictions to which they are entitled as
beneficial owners of the Preferred Shares represented by such depositary
receipts. In lieu of fractional Preferred Shares that are not integral multiples
of one one-hundredth of a Preferred Share, the Company shall pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Share. For the purposes of this Section 24(e), the
current market value of a Preferred Share shall be one hundred (100) times the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately after the date of
the first public announcement by the Company that an exchange is to be effected
pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred Shares or to make
any other distribution to the holders of its Preferred Shares (other than a
regular quarterly cash dividend), (ii) to offer to the holders of its Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, (iii) to effect any reclassification of its Preferred Shares (other
than a reclassification involving only the subdivision of outstanding Preferred
Shares), (iv) to effect any consolidation or merger into or with, or to effect
any sale or other transfer (or to permit one or more of its Subsidiaries to
effect any sale or other transfer), in one or more transactions, of 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole), to any other Person, (v) to effect the
36
liquidation, dissolution or winding up of the Company, or (vi) to declare or pay
any dividend on the Common Shares payable in Common Shares or to effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purpose of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or the Preferred Shares, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of the Preferred Shares for purposes of such
action, and in the case of any such other action, at least 10 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the Common Shares and/or the Preferred Shares, whichever shall
be the earlier.
(b) In case the event set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Rights Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Company shall be sufficiently given or made if sent by courier, via
a nationally recognized overnight delivery service or by U.S. mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Commerce Energy Group, Inc.
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
with a copy to:
Xxxx Xxxxxxxx Xxxxxxxx & Xxxxxx LLP
Seventeenth Floor
000 Xxxx Xxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx Xxxxxx, Esq.
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Rights Agreement to be given or made by the Company or by the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by courier, via a nationally recognized overnight delivery
service or by U.S. mail, postage
37
prepaid, addressed (until another address is filed in writing with the Company)
as follows:
Computershare Investor Services LLC
X.X. Xxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Notices or demands authorized by this Rights Agreement to be given or
made by the Company or the Rights Agent to the holder of any Right Certificate
shall be sufficiently given or made if sent by courier, via a nationally
recognized overnight delivery service or by U.S. mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, the
Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Rights Agreement without the approval of any holders
of the Rights. From and after the Distribution Date, the Company and the Rights
Agent shall, if the Company so directs, from time to time supplement or amend
any provision of this Rights Agreement without the approval of any holders of
Right Certificates in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or (iii) change any other provisions with
respect to the Rights which the Company may deem necessary or desirable;
provided, however, that no such supplement or amendment shall be made which
would adversely affect the interests of the holders of Rights (other than the
interests of an Acquiring Person or its Affiliates or Associates). Any
supplement or amendment adopted during any period after any Person has become an
Acquiring Person but prior to the Distribution Date shall become null and void
unless such supplement or amendment could have been adopted by the Company from
and after the Distribution Date. Any such supplement or amendment shall be
evidenced by a writing signed by the Company and the Rights Agent. Upon delivery
of a certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment unless
the Rights Agent shall have determined that such supplement or amendment would
adversely change or increase its rights, duties, obligations or liabilities
under this Rights Agreement. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.
SECTION 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all
purposes of this Rights Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares or any other
securities 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
38
Exchange Act as in effect on the date of this Rights Agreement. The Board of
Directors shall have the exclusive power and authority to administer this Rights
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors, or the Company, or as may be necessary or advisable in the
administration of this Rights Agreement, including without limitation, the right
and power to (i) interpret the provisions of this Rights Agreement, and (ii)
make all determinations deemed necessary or advisable for the administration of
this Rights Agreement (including a determination to redeem or not redeem the
Rights or to amend the Rights 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 in good faith, shall (x) be final, conclusive and binding on the
Rights Agent and the holders of the Rights, and (y) not subject the Board of
Directors to any liability to the holders of the Rights. The Rights Agent shall
always be entitled to assume that the Company's Board of Directors acted in good
faith and shall be fully protected and incur no liability in reliance thereon.
SECTION 29. SUCCESSORS. All the covenants and provisions of this Rights
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 30. BENEFITS OF THIS AGREEMENT. Nothing in this Rights Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Rights Agreement; but this Rights Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, the Common Shares).
SECTION 31. SEVERABILITY. If any term, provision, covenant or restriction of
this Rights 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 Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 32. GOVERNING LAW. This Rights Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State; provided, however, that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
governed and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such State.
SECTION 33. COUNTERPARTS. This Rights Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
39
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections
of this Rights Agreement are inserted for convenience only and shall not control
or affect the meaning or construction of any of the provisions hereof.
40
IN WITNESS WHEREOF, parties whereto have caused this Rights Agreement
to be duly executed, all as of the day and year first above written.
COMMERCE ENERGY GROUP, INC.
By: ________________________________
Name: ______________________________
Title: _____________________________
COUNTERSIGNED:
COMPUTERSHARE INVESTOR
SERVICES LLC
___________________________________
as Rights Agent
By: _______________________________
1
(EXHIBIT A TO RIGHTS AGREEMENT)
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
COMMERCE ENERGY GROUP, INC., a corporation organized and existing under
the General Corporation Law of the State of Delaware (hereinafter called the
"Company"), hereby certifies that the following resolution was adopted by the
Board of Directors of the Company as required by Section 151 of the General
Corporation Law at a meeting duly called and held on May 15, 2004:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company in accordance with the provisions of its
Amended and Restated Certificate of Incorporation, the Board of Directors
hereby creates a series of Preferred Stock, par value $.001 per share, of
the Company and hereby states the designation and number of shares, and
fixes the relative designations and the powers, preferences and rights, and
the qualifications, limitations and restrictions thereof (in addition to
the provisions set forth in the Certificate of Incorporation of the
Company, which are applicable to the Preferred Stock of all classes and
series), as follows:
Series A Junior Participating Preferred Stock:
SECTION 1. DESIGNATION AND AMOUNT. One Million Five Hundred Thousand (1,500,000)
shares of Preferred Stock, $.001 par value, are designated "Series A Junior
Participating Preferred Stock" with the designations and the powers, preferences
and rights, and the qualifications, limitations and restrictions specified
herein (the "Junior Preferred Stock"). Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Junior Preferred Stock to a number less
than the number of shares then outstanding plus the number of shares reserved
for issuance upon the exercise of outstanding options, rights or warrants or
upon the conversion of any outstanding securities issued by the Company
convertible into Junior Preferred Stock.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Junior Preferred Stock with respect to dividends, the holders of shares of
Junior Preferred Stock, in preference to the holders of Common Stock, par value
$.001 per share (the "Common Stock"), of the
1
Company, and of any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of April, July,
October and January in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Junior Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $l.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Junior Preferred Stock. In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Company shall declare a dividend or distribution on the
Junior Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, that in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from
the date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend
2
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Junior Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
SECTION 3. VOTING RIGHTS. The holders of shares of Junior Preferred Stock shall
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Junior Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Company. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate
of Designation creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Company having general voting
rights shall vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Junior Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred Stock
outstanding shall have been paid in full, the Company shall not:
3
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Junior
Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Junior Preferred Stock, provided
that the Company may at any time redeem, purchase or otherwise acquire shares of
any such junior stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Company shall not permit any subsidiary of the Company to
purchase or otherwise acquire for consideration any shares of stock of the
Company unless the Company could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Junior Preferred Stock purchased or
otherwise acquired by the Company in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Amended and
Restated Certificate of Incorporation, or in any other Certificate of
Designation creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (1) to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation,
4
dissolution or winding up) to the Junior Preferred Stock unless, prior thereto,
the holders of shares of Junior Preferred Stock shall have received [$20] per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that the
holders of shares of Junior Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except distributions made ratably
on the Junior Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Company shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Junior Preferred Stock were entitled immediately prior to
such event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Junior Preferred
Stock shall at the same time be similarly exchanged or changed into an amount
per share, subject to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Junior
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
SECTION 8. NO REDEMPTION. The shares of Junior Preferred Stock shall not be
redeemable.
5
SECTION 9. RANK. The Junior Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Company's Preferred Stock.
SECTION 10. AMENDMENT. The Amended and Restated Certificate of Incorporation of
the Company shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Junior Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of at
least two-thirds of the outstanding shares of Junior Preferred Stock, voting
together as a single class.
IN WITNESS WHEREOF, the undersigned have executed this certificate as
of March ___, 2004.
_______________________________________
Xxx X. Xxxxxx
Chief Executive Officer, President and
Treasurer
6
(EXHIBIT B TO RIGHTS AGREEMENT)
FORM OF RIGHT CERTIFICATE
CERTIFICATE NO. R- _______ _______ RIGHTS
NOT EXERCISABLE AFTER MARCH __, 2014 OR EARLIER IF REDEMPTION
OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT
$.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.
RIGHT CERTIFICATE
COMMERCE ENERGY GROUP, 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 March __, 2004 (the "Rights Agreement"), between Commerce
Energy Group, Inc., a Delaware corporation (the "Company"), and Computershare
Investor Services LLC (the "Rights Agent"), to purchase from the Company at any
time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 p.m., Pacific Time, on March 8, 2014 at the
office of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-hundredth of a fully paid non-assessable
share of Series A Junior Participating Preferred Stock, par value $0.001 per
share (the "Preferred Shares"), of the Company, at a purchase price of [$20]
per one one-hundredth of a Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of _______, 20___, based on
the Preferred Shares as constituted at such date.
From and after the time any Person becomes an Acquiring Person, (as
such terms are defined in the Rights Agreement), if the Rights evidenced by this
Right Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Associate or Affiliate who becomes a transferee after the Acquiring Person
becomes such, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such, such Rights shall become null and void without any further action and no
holder hereof shall have any right with respect to such Rights from and after
the time any Person becomes an Acquiring Person.
1
As provided in the Rights Agreement, the Purchase Price and the number
of one one-hundredths of a Preferred Share which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, as amended from time to time, which terms,
provisions and conditions are hereby incorporated herein by reference and made a
part hereof and to which Rights Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Rights Agreement are on file at the principal
executive offices of the Company and the above-mentioned offices of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
of Preferred Shares as the Rights evidenced by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at a redemption price of
$.001 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $0.001 per share, or, upon circumstances set
forth in the Rights Agreement, cash, property or other securities of the
Company, including fractions of a share of Preferred Stock.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts) but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the
2
Right or Rights evidenced by this Right Certificate shall have been exercised as
provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of __________.
COMMERCE ENERGY GROUP, INC.
By: _______________________________
Name: _____________________________
Title: ____________________________
COUNTERSIGNED:
COMPUTERSHARE
___________________________________
as Rights Agent
By: _______________________________
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER
DESIRES TO TRANSFER THE RIGHT CERTIFICATE.)
FOR VALUE RECEIVED ______________________________________ hereby sells,
assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
______________________________________________________ this Right Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ________________________ Attorney, to transfer the within
Right Certificate on the books of the within-named Company, with full power of
substitution.
Dated: ____________________
___________________________
Signature
1
SIGNATURE GUARANTEED:
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person, an Interested Stockholder or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement); and (2) after due inquiry and to the best of the knowledge of the
undersigned, the undersigned did not acquire the Rights evidenced by this Right
Certificate from any Person who is or was an Acquiring Person, an Interested
Stockholder, or an Affiliate or Associate thereof.
__________________________________
Signature
1
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED IF HOLDER DESIRES TO EXERCISE RIGHTS
REPRESENTED BY THE RIGHT CERTIFICATE.)
To COMPUTERSHARE INVESTOR SERVICES LLC:
The undersigned hereby irrevocably elects to exercise
___________________________ Rights represented by this Right Certificate to
purchase the Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares be issued in the name of:
Please insert social security or other identifying number: __________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number: __________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ________________
______________________________
Signature
1
SIGNATURE GUARANTEED:
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934,
as amended.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not beneficially owned by nor are they being exercised on
behalf of an Acquiring Person, an Interested Stockholder or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement); and (2)
after due inquiry and to the best of the knowledge of the undersigned, the
undersigned did not acquire the Rights evidenced by this Right Certificate from
any Person who is or was an Acquiring Person, an Interested Stockholder, or an
Affiliate or Associate thereof.
___________________________
Signature
NOTICE
The signature in the Form of Assignment or Form of Election to
Purchase, as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment or the Form of Election to Purchase, as the case may be, is not
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
1
(EXHIBIT C TO RIGHTS PLAN)
COMMERCE ENERGY GROUP, INC.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On March 5, 2004, the Board of Directors of COMMERCE ENERGY GROUP, INC.
(the "Company") authorized the issuance of one preferred share purchase right (a
"Right") for each share of common stock, par value $0.001 per share (the "Common
Shares")of the Company issued on the effective date of the merger of CEGI
Acquisition Corp., a subsidiary of the Company, with and into Commonwealth
Energy Corporation pursuant to the terms of that certain Agreement and Plan of
Reorganization dated ____________, 2004 (the "Effective Date"). The Rights will
also attach to new Common Shares issued after the Effective Date. Each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share of Series A Junior Participating Preferred Stock, par value $0.001 per
share (the "Preferred Shares"), of the Company at a price of [$20] per one
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. Each Preferred Share is designed to be the economic equivalent of
100 Common Shares. The description and terms of the Rights are set forth in a
Rights Agreement dated as of March __, 2004 (the "Rights Agreement"), between
the Company and Computershare Investor Services LLC (the "Rights Agent").
DETACHMENT AND TRANSFER OF RIGHTS
Initially, the Rights will be evidenced by the stock certificates
representing Common Shares then outstanding, and no separate Right Certificates
will be distributed. Until the earlier to occur of (i) a public announcement
that a person or group of affiliated or associated persons, has become an
"Acquiring Person" (as such term is defined in the Rights Agreement) or (ii) 10
business days (or such later date as the Board may determine) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer which would result in the beneficial ownership by an Acquiring
Person of 15% or more of the outstanding Common Shares (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Share certificates outstanding as of the Effective
Date, by such Common Share certificate. In general, an "Acquiring Person" is a
person, the affiliates or associates of such person, or a group, which has
acquired beneficial ownership of 15% or more of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferable
with and only with the Common Shares. Until the Distribution Date (or earlier
redemption or
1
expiration of the Rights), new Common Share certificates issued after the
Effective Date upon transfer or new issuance of Common Shares will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights) the surrender or
transfer of any certificates for Common Shares issued on the Effective Date,
even without such notation or a copy of this Summary of Rights being attached
thereto, will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Shares as of
the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
EXERCISABILITY OF RIGHTS
The Rights are not exercisable until the Distribution Date. The Rights
will expire on March 8, 2014 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below. 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.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable or payable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution. The number of
outstanding Rights and the number of one one-hundredths of a Preferred Share
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares, or subdivisions, consolidations or combinations of the
Common Shares occurring, in any such case, prior to the Distribution Date. With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Purchase
Price. No fractional Preferred Shares will be issued (other than fractions which
are integral multiples of one one-hundredth of a Preferred Share, which may, at
the election of the Company, be evidenced by depositary receipts) and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Shares on the last trading day prior to the date of exercise.
TERMS OF PREFERRED SHARES
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $l.00 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of [$20] per share but will be
entitled to an aggregate payment of 100 times the payment made per Common Share.
Each Preferred Share will have 100 votes, voting together with the Common
Shares. Finally, in the event of any merger, consolidation or other transaction
in which Common Shares are exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per Common Share. These rights are
protected by
customary anti-dilution provisions. Because of the nature of the Preferred
Shares' dividend, liquidation and voting rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon exercise of each
Right should approximate the value of one Common Share. The Preferred Shares
would rank junior to any other series of the Company's preferred stock.
TRIGGER OF FLIP-IN AND FLIP-OVER RIGHTS
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
or any affiliate or associate thereof (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Common Shares
having a market value of two times the exercise price of the Right. This right
will commence on the date of public announcement that a person has become an
Acquiring Person (or the effective date of a registration statement relating to
distribution of the rights, if later) and terminate 60 days later (subject to
adjustment in the event exercise of the rights is enjoined).
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold to an Acquiring Person, its affiliates or associates or certain
other persons in which such persons have an interest, proper provision will be
made so that each such holder of a Right will thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the
Right, that number of shares of common stock of the acquiring company which at
the time of such transaction will have a market value of two times the exercise
price of the Right.
REDEMPTION AND EXCHANGE OF RIGHTS
At any time prior to the earliest of (i) the close of business on the
day of the first public announcement that a person has become an Acquiring
Person, or (ii) the Final Expiration Date, the Board of Directors of the Company
may redeem the Rights in whole, but not in part, at a price of $0.001 per Right
(the "Redemption Price"). In general, the redemption of the Rights may be made
effective at such time on such basis with such conditions as the Board of
Directors in its sole discretion may establish Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
At any time after any Person becomes an Acquiring Person and prior to the
acquisition by such person or group of 50% or more of the outstanding Common
Shares, the Board of Directors of the Company may exchange the Rights (other
than Rights owned by such person or group which will have become void), in whole
or in part, at an exchange ratio of one Common Share, or, under circumstances
set forth in the Rights Agreement, cash, property or other securities of the
Company, including fractions of a Preferred Share (or of a share of a class or
series of the Company's preferred stock having equivalent
designations and the powers, preferences and rights, and the qualifications,
limitations and restrictions), per Right (with value equal to such Common
Shares).
AMENDMENT OF RIGHTS
The terms of the Rights generally may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights,
except that from and after such time as the Rights are distributed no such
amendment may adversely affect the interests of the holders of the Rights
(excluding the interest of any Acquiring Person).
ADDITIONAL INFORMATION
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form S-4 dated
March __, 2004. A copy of the Rights Agreement is available from the Company by
writing to: Attn: Investor Relations, Commerce Energy Group, Inc., 00000 Xxx
Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000. This summary description of
the Rights is not intended to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is hereby incorporated herein by
reference.
