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RIGHTS AGREEMENT
between
DAISYTEK INTERNATIONAL CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Dated: As of October 15, 1999
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TABLE OF CONTENTS
Section Page
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Section 1. Certain Definitions................................................1
Section 2. Appointment of Rights Agent........................................5
Section 3. Issue of Right Certificates........................................6
Section 4. Form of Right Certificates.........................................7
Section 5. Countersignature and Registration..................................9
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates..................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.......................................................10
Section 8. Cancellation and Destruction of Right Certificates................12
Section 9. Reservation and Availability of Series A Preferred
Shares; Registration.........................................12
Section 10. Series A Preferred Shares Record Date............................14
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights...................................14
Section 12. Certificate of Adjusted Purchase Price or Number of
Shares.......................................................22
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power................................................23
Section 14. Fractional Rights and Fractional Shares..........................25
Section 15. Rights of Action.................................................26
Section 16. Agreement of Right Holders.......................................26
Section 17. Right Certificate Holder Not Deemed a Shareholder................27
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Section Page
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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.........................................................33
Section 25. Notice of Certain Events.........................................34
Section 26. Notices..........................................................35
Section 27. Supplements and Amendments.......................................35
Section 28. Successors.......................................................35
Section 29. Determinations and Actions by the Board of Directors.............36
Section 30. Benefits of this Agreement.......................................36
Section 31. Severability.....................................................36
Section 32. Governing Law....................................................36
Section 33. Consequential Damages............................................37
Section 34. Counterparts.....................................................37
Section 35. Descriptive Headings.............................................37
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Section Page
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Exhibits
A. Certificate of Designations in respect of Series A Preferred Stock
B. Form of Right Certificate
C. Summary of Rights to Purchase Series A Preferred Stock
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RIGHTS AGREEMENT
Rights Agreement, dated as of October 15, 1999, between Daisytek
International Corporation, a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company
(the "Rights Agent", which term shall include any successor Rights Agent
hereunder).
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each Common Share
(as hereinafter defined) of the Company outstanding at the close of business on
October 25, 1999 (the "Record Date"), each Right representing the right to
purchase one one-thousandth (1/1000) of a share of Series A Preferred Stock, par
value $1.00 per share, of the Company ("Series A Preferred Stock") having the
rights and preferences set forth in the Certificate of Designations of Preferred
Stock with respect to the Series A Preferred Stock, a copy of which is attached
hereto as Exhibit A. The Board of Directors has further authorized the issuance
of one Right with respect to each Common Share that shall become outstanding
(whether originally issued or delivered from the Company's treasury) after the
Record Date and on or prior to the earliest of the Separation Date, the
Redemption Date and the Final Expiration Date (each as hereinafter defined).
Accordingly, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who, together
with all Affiliates and Associates of such Person, shall hereafter become the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include (i) the Company, (ii) any wholly owned Subsidiary of the Company and
(iii) any employee benefit plan of the Company or any Subsidiary of the Company,
or any entity holding Common Shares for or pursuant to the terms of any such
plan; provided, however, that any Person, who, together with all Affiliates and
Associates of such Person, on the date of this Agreement is the Beneficial Owner
of 15% or more of the outstanding Common Shares shall not be, or be deemed to
be, an Acquiring Person unless and until such Person becomes the Beneficial
Owner of an additional one percent ([1]%) or more of the outstanding Common
Shares. Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as a 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 of
the Company then outstanding; provided, however, that if a Person shall become
the beneficial owner of 15% or more of the Common Shares of the Company then
outstanding by reason of share purchases by the Company and shall, after share
purchases by the Company, acquire any additional Common Shares of the Company,
then such Person shall be deemed to be an "Acquiring Person." Notwithstanding
the foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provision, has become such inadvertently, and such Person
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divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions, then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
(b) "Adverse Person" shall mean any person declared to be an
Adverse Person by a majority of directors upon determination that the criteria
set forth in Section 11(a)(ii)(B) apply to such person.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations (the "Rules") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as in effect on the Record Date.
(d) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) that such Person or any of such Person's Affiliates
or Associates, directly or indirectly, now or hereafter owns or has (or by
agreement with the Company is, on the date of this Agreement, entitled to
receive) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided, however, that a
Person shall not be deemed to be 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; and provided further, that a Person shall not be
deemed to be the Beneficial Owner of, or to beneficially own, securities
that such Person has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) upon the
exercise of (a) employee stock options now or hereafter (but prior to the
Separation Date) issued by the Company, or (b) conversion rights conferred
in any class or series of Preferred Stock of the Company issued prior to
the Separation Date if the resolutions of the Board providing for the
issuance of such class or series of Preferred Stock shall specifically
refer to this Rights Agreement and provide that the right to acquire
securities upon the exercise of conversion rights so conferred shall not
be deemed to constitute beneficial ownership of such securities;
(ii) that such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote (except as
hereinafter provided) or dispose of, or of which any of them, directly or
indirectly, has "beneficial ownership" (as determined pursuant to Rule
13d-3 of the Rules, as in effect on the Record Date) (including, except as
hereinafter provided, pursuant
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to any agreement, arrangement or understanding, whether or not in
writing); provided, however, that a Person shall not be deemed to be the
Beneficial Owner of, or to beneficially own, any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding arises solely from a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the Rules and is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report);
(iii) that are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof)
with which such Person (or any of such Person's Affiliates or Associates)
has any agreement, arrangement or understanding (whether or not in
writing), for the purpose of, or with respect to, acquiring, holding,
voting (except as described in the proviso to subparagraph (ii) of this
paragraph (d)) or disposing of any voting securities of the Company; and
(iv) that are, pursuant to the foregoing subparagraphs
of this paragraph (d), or otherwise, deemed to be owned by a voting trust,
voting agent, recipient of a proxy that is not immediately revocable (a
"Non-revocable Proxy") or any other Person to whom such Person (the
"Grantor Person") has contributed, conveyed, delegated, given, granted,
tendered, transferred or otherwise assigned or conferred (collectively,
"given") some or all of the voting rights attributable to the Common
Shares of which the Grantor Person (alone or in conjunction with any other
Person) is also deemed to be a Beneficial Owner. Solely for purposes of
this Agreement, the Grantor Person shall be deemed to be the Beneficial
Owner of all Common Shares that such voting trust, voting Agent, proxy
holder or other Person has the right, by Non-revocable Proxy, agreement,
assignment, tender, grant or otherwise, to exercise some or all of the
voting rights attributable thereto, whether or not the Grantor Person
shall have contributed or given voting rights that constitute all or less
(even substantially less) than all of the voting rights held by the voting
trust, voting Agent, proxy holder or other Person to whom or to which the
Grantor Person has given some or all of the voting rights attributable to
Common Shares otherwise beneficially owned by the Grantor Person;
provided, however, that nothing in this paragraph (d) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial Owner"
of or to "beneficially own" any securities acquired through such person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
(e) "Board" means the Board of Directors of the Company.
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(f) "Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
(g) "Close of business" on any given date shall mean 5:00
P.M., New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York time, on the next succeeding
Business Day.
(h) "Common Shares" when used with reference to the Company
shall mean shares of Common Stock, par value $0.01 per share, of the Company.
"Common Shares" or "common shares," when used with reference to any Person other
than the Company, shall mean the capital stock of such Person with the greatest
voting power or the equity securities or other equity interest having power to
control or direct the management of such Person.
(i) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity and shall include any
successor (by merger or otherwise) of such entity.
(j) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii).
(k) "Section 13(a) Event" shall mean any event described in
clause (x) or (y) or (z) of Section 13(a).
(l) "Series A Preferred Shares" shall mean shares of Series A
Preferred Stock, par value $1.00 a share, of the Company, including any
authorized fraction of a Series A Preferred Shares, unless the context otherwise
requires.
(m) "Shares Acquisition Date" shall mean the first date of
public announcement (including, without limitation, a report filed pursuant to
Section 13(d) or 14(d) under the Exchange Act) by the Company or an Acquiring
Person indicating that an Acquiring Person has become such.
(n) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which a majority of the voting power of the
voting securities or voting interests is owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
(o) "Triggering Event" shall mean any Section 11(a)(ii) Event
or Section 13(a) Event.
The following additional terms have the meanings indicated in the
specified Sections of this Agreement set forth below:
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(i) "Act" -- Section 9(c).
(ii) "Adjustment Shares" -- Section 11(a)(ii).
(iii) "Common Share equivalent" -- Section 11(a)(iii).
(iv) "Current Value" -- Section 11(a)(iii).
(v) "equivalent shares" -- Section 11(b).
(vi) "Exchange Act" -- Section 1(c).
(vii) "Final Expiration Date" -- Section 7(a). (viii)
"Grantor Person" -- Section 1(d)(iv).
(ix) "Non-Revocable Proxy" -- Section 1(d)(iv) (x)
"Principal Party" -- Section 13(b).
(xi) "Purchase Price" -- Sections 4(a), 11(a)(ii) and
13(a).
(xii) "Record Date" -- Preamble.
(xiii) "Redemption Date" -- Section 7(a).
(xiv) "Redemption Price" -- Section 23(a).
(xv) "Rules" -- Section 1(c).
(xvi) "Separation Date" -- Section 3(a).
(xvii) "Series A Preferred Stock" -- Preamble.
(xviii) "Spread" -- Section 11(a)(iii).
(xix) "Substitution Period" -- Section 11(a)(iii).
(xx) "Summary of Rights" -- Section 3(b).
(xxi) "Trading Day" -- Section 11(d)(i).
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 and agrees
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to act as Rights Agent under this Agreement. The Company may from time to time
appoint such co-rights agents as it may deem necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the close of business on the
tenth Business Day following the Shares Acquisition Date or (ii) the close of
business on the fifteenth (15th) Business Day (or such later date as may be
determined by action of the Board prior to the time as any Person becomes an
Acquiring Person) after the date on which a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first commenced within the meaning of Rule
14d-2(a) of the Rules, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the Common Shares then outstanding (the
earlier of (i) and (ii) being herein referred to as the "Separation Date"), (x)
the Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) 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 right to
receive Right Certificates will be transferable only in connection with the
transfer of Common Shares. The Company must promptly notify the Rights Agent in
writing and request the transfer agent to provide a shareholders list. As soon
as practicable after the Rights Agent receives such written notice and
shareholders list, the Rights Agent will send, by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Separation Date, at the address of such holder shown on the
records of the Company, one or more Right Certificates, in substantially the
form of Exhibit B hereto, evidencing one Right for each Common Share so held. In
the event that an adjustment in the number of Rights per Common Share has been
made pursuant to Section 11(p) hereof, at the time of distribution of the Right
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Right Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Rights. As of and after the Separation Date, the Rights
will be evidenced solely by such Right Certificates.
(b) As soon as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Series A Preferred
Stock, in substantially the form attached hereto as Exhibit C (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 Record Date, at the address of such
holder shown on the records of the Company. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Separation Date, the
Rights will be evidenced by such certificates registered in the names of the
holders thereof and the registered holders of the Common Shares shall also be
the registered holders of the associated Rights. Until the earliest of the
Separation Date, the Redemption Date or the Final Expiration Date, the surrender
for
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transfer of any certificate for Common Shares outstanding on the Record Date
shall also constitute the transfer of the Rights associated with the Common
Shares represented thereby.
(c) Certificates for Common Shares issued after the Record
Date but prior to the earliest of the Separation Date, the Redemption Date or
the Final Expiration Date shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN DAISYTEK
INTERNATIONAL CORPORATION AND CHASEMELLON SHAREHOLDERS SERVICES,
L.L.C. DATED AS OF OCTOBER 15, 1999 (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
DAISYTEK INTERNATIONAL CORPORATION 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. DAISYTEK INTERNATIONAL CORPORATION WILL MAIL TO THE
HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT
CHARGE PROMPTLY FOLLOWING RECEIPT OF A WRITTEN REQUEST THEREFOR.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD
BY OR ON BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY
BECOME NULL AND VOID.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to
purchase Series A Preferred Shares, exercise notice and of assignment to be
printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of
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identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate, which do not affect the
duties or responsibilities of the Rights Agent and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Right Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of one one-thousandth of a share of Series A Preferred
Stock as shall be set forth therein at the price per one one-thousandth of a
Series A Preferred Share set forth therein (the "Purchase Price"), but the
amount and type of the securities purchasable (or other consideration to be made
available) upon the exercise of each Right and the Purchase Price thereof 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 beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of
an Acquiring Person (or such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such (other than a bona fide purchaser for
value who has no knowledge that the transferor was an Acquiring Person or an
Associate or Affiliate of an Acquiring Person) or (iii) a transferee of an
Acquiring Person (or such Associate or Affiliate) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in such Acquiring Person or
to any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
that the Board has determined is part of a plan, arrangement or understanding
that has as a primary purpose or effect avoidance of Section 7(e) 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 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 MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
SUCH AGREEMENT.
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Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board or its President, Chief Executive Officer
or any Vice President, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal, attested by the Secretary, the Treasurer or
any Assistant Secretary or Assistant Treasurer of the Company, or shall bear a
facsimile thereof. The Right Certificates shall not be valid for any purpose
unless countersigned by the Rights Agent. 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.
(b) Following the Separation Date and receipt by the Rights
Agent of the written notice and list of record holders of Rights referred to in
Section 3(a), the Rights Agent will keep or cause to be kept, at its office
designated pursuant to Section 26 hereof or agency designated for such purpose,
books for registration and transfer of the Right Certificates issued or to be
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, the certificate number of each of
the Right Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14
hereof, at any time after the close of business on the Separation 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
Series A Preferred Shares (or, following a Section 11(a)(ii) Event or Section
13(a) Event, Common Shares, other securities or property, as the case may be) 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 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
principal 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
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any such surrendered Right Certificate until the registered holder shall have
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 shall reasonably request.
Thereupon the Rights Agent shall 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
not be required to process the transaction until it receives evidence in writing
that all taxes and governmental charges have been paid by the Company.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Right Certificate, and, in case of loss, theft or destruction,
of indemnity or security 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 make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of
any Right Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the Separation
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-thousandth of a Series A Preferred Share as
to which the Rights are exercised, at or prior to the close of business on the
earlier of (i) October 25, 2009 (the "Final Expiration Date"), (ii) the date on
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-thousandth of a Series
A Preferred Share pursuant to the exercise of a Right shall initially be $70,
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
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of the Purchase Price for the Series A Preferred Shares (or other shares,
securities or property, as the case may be) to be purchased and an amount equal
to any applicable tax or governmental charge required to be paid by the holder
of such Right Certificate in accordance with Section 9 hereof, in cash, or by
certified check or cashier's check payable to the order of the Company, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
either (A) requisition from any transfer agent of the Series A Preferred Shares
(or make available, if the Rights Agent is the transfer agent for such shares)
certificates for the number of Series A Preferred Shares (or fractions thereof)
to be purchased (and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests) or (B) if the Company shall have elected
to deposit the Series A Preferred Shares issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandth of a Series A
Preferred Share as are to be purchased (in which case certificates for the
Series A 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) if and when necessary to
comply with this Agreement, 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) promptly 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) after receipt, promptly 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 other securities (including Common
Shares) or assets pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities or assets are available for
distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Right Certificate
shall exercise less than all the rights evidenced thereby, 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 6 and Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee from an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (other than a bona fide purchaser for value who has no knowledge
that the transferor was an Acquiring Person or an Associate or Affiliate of an
Acquiring Person) or (iii) a transferee of an Acquiring Person (or such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights
12
or (B) a transfer that the Board has determined is part of a plan, arrangement
or understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action, and any
holder of such Rights shall thereupon have no rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise. The
Company shall use all reasonable efforts to insure that the provisions of this
Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of 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 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 purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, 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. Reservation and Availability of Series A Preferred
Shares; Registration.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Series A
Preferred Shares the number of Series A Preferred Shares that will be sufficient
to permit the exercise in full of all outstanding Rights. Prior to the
occurrence of a Triggering Event, the Company shall not be obliged to cause to
be reserved and kept available out of its authorized and unissued Common Shares
or shares of preferred stock (other than Series A Preferred Shares), any such
Common Shares or any shares of preferred stock (other than the Series A
Preferred Shares) to permit exercise of outstanding Rights.
13
(b) If the Series A Preferred Shares issuable upon the
exercise of Rights are listed on any national securities exchange, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed on such
exchange upon official notice of issuance upon such exercise.
(c) If then required by applicable law, the Company shall use
its best efforts to (i) file, as soon as practicable following the earliest date
after the occurrence of a Triggering Event as to which the consideration to be
delivered by the Company upon exercise of the Rights has been determined
pursuant to this Agreement, or as soon as is required by law following the
Separation Date, as the case may be, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities and (B) the
Final Expiration Date. If then required by applicable law, the Company will also
take such action as may be appropriate under the securities or "blue sky" laws
of the various states. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days after the date set forth in clause (i) of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Series A Preferred Shares
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the Purchase Price), be duly
and validly authorized and issued and fully paid and nonassessable shares.
(e) The Company covenants and agrees that it will pay when due
and payable any and all taxes and governmental charges that may be payable in
respect of the issuance or delivery of the Right Certificates or of any Series A
Preferred Shares (or Common Shares and/or other securities, as the case may be)
upon the exercise of Rights. The Company shall not, however, be required to pay
any transfer tax that 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 for the Series A Preferred Shares (or Common Shares and/or other
securities, as the case may be) in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered for exercise or to
issue or deliver any certificates for Series A Preferred Shares (or Common
Shares and/or other securities, as the case may be) upon the exercise of any
Rights until any such tax shall have been paid (any such tax being payable by
the holder of such
14
Right Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
Section 10. Series A Preferred Shares Record Date. Each person in
whose name any certificate for Series A Preferred Shares (or Common Shares
and/or other securities, as the case may be) is issued upon the exercise of
Rights shall for all purposes be deemed to have become the holder of record of
the Series A Preferred Shares (or Common Shares and/or other securities, as the
case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable taxes and
governmental charges) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Series A Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Series A Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Company are open.
Prior to the exercise of the Rights evidenced thereby, the holder of a Right
Certificate shall not be entitled (in such holder's capacity as such) to any
rights of a shareholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote
any shares, to receive dividends or other distributions with respect to any
shares or to exercise any preemptive rights with respect to any shares, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights. The Purchase Price, the number and kind of shares covered
by each Right, and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after
the date of this Agreement (A) declare a dividend on the Series A Preferred
Shares payable in Series A Preferred Shares, (B) subdivide the outstanding
Series A Preferred Shares, (C) combine the outstanding Series A Preferred Shares
into a smaller number of Series A Preferred Shares or (D) issue any shares of
its capital stock in a reclassification of the Series A 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) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of 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 that, if such Right had been exercised immediately prior to such
date and at a time when the Series A 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,
15
combination or reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right.
(ii) In the event that
(A) any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan),
alone or together with its Affiliates and Associates, shall become the
Beneficial Owner of 15% or more of the Common Shares then outstanding,
other than pursuant to (i) any transaction set forth in Section 13(a)
hereof or (ii) any transaction that, pursuant to the provisos of Section
1(a) hereof, does not cause such Person to be or become an Acquiring
Person; or
(B) a majority of the Board shall declare any
Person to be an Adverse Person, upon a determination that such Person,
alone or together with its Affiliates and Associates, has become the
Beneficial Owner of an amount of Common Shares which a majority of the
Board determines to be substantial (which amount shall in no event be less
than 10% of the Common Shares then outstanding) and a determination by a
majority of the Board after reasonable inquiry and investigation,
including consultation with such Person as such directors shall deem
appropriate, that (a) such Beneficial ownership by such Person is intended
to cause the Company to repurchase the Common Shares beneficially owned by
such Person or to cause pressure on the Company to take action or enter
into a transaction or series of transactions intended to provide such
Person with short-term financial gain under circumstances where the Board
determines that the best long-term interests of the Company and its
stockholders would not be served by taking such action or entering into
such transaction or series of transactions at that time or (b) such
Beneficial Ownership is causing or is reasonably likely to cause a
material adverse impact (including, but not limited to, impairment of
relationships with customers or suppliers, impairment of the Company's
ability to maintain its competitive position, adverse consequences to the
communities in which the Company is located and impairment of the
short-term and long-term interests of the Company (including benefits that
may accrue from the continued independence of the Company) on the business
or prospects of the Company;
then, and in each such case, proper provision shall be made so that each holder
of a Right, except as provided below and in Section 7(e) hereof, shall
thereafter have a right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of Series
A Preferred Shares, and subject to the provisions of Section 11(a)(iii) below,
such number of Common Shares as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of
16
one one-thousandth of a Series A Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of an event set forth in
Section 11(a)(ii) above, and dividing that product (which, following such first
occurrence, shall be referred to as the "Purchase Price" for all purposes of
this Agreement) by (y) fifty percent (50%) of the current per share market price
of the Common Shares (determined pursuant to Section 11(d) hereof), but not less
than the par value thereof, on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) In the event that (x) the total of the Common
Shares that are issued but not outstanding and authorized but unissued
(excluding Common Shares reserved for issuance pursuant to the specific terms of
any indenture, option plan or other agreement) is not sufficient to permit the
exercise in full of the Rights in accordance with Section 11(a)(ii) hereof or
(y) the total number of Common Shares available for exercise of the Rights in
accordance with Section 11(a)(ii) hereof is sufficient to permit the exercise in
full of the Rights in accordance with Section 11(a)(ii) but the Board determines
that such exercise of the Rights will not afford adequate protection to the
shareholders of the Company and that shareholders should be given an option to
acquire a substitute for the Adjustment Shares, and subject to such limitations
as are necessary to prevent a default under any agreement for money borrowed to
which the Company is a party and to comply with applicable law, then the Board
shall: (A) determine the excess of (1) the value, based upon the current per
share market price of the Common Shares (determined pursuant to Section 11(d)
hereof), of the Adjustment Shares issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess, the "Spread") and (B)
with respect to each Right, make adequate provision to substitute for, or
provide an election to acquire in lieu of, the Adjustment Shares, upon payment
of the applicable Purchase Price (which term shall include any reduced Purchase
Price) any combination of the following having an aggregate value equal to the
Current Value (such aggregate value to be determined by the Board based upon the
advice of a nationally recognized investment banking firm selected by the
Board): (1) a reduction in the Purchase Price, (2) Common Shares and/or other
equity securities of the Company (including, without limitation, shares or units
of shares of any series of preferred stock that the Board has deemed to have the
same value as Common Shares (such shares or units of share of preferred stock
hereinafter referred to as "Common Share equivalents")) and/or (3) debt
securities of the Company and/or cash and other assets; provided, however, that
if the Company shall not have made adequate provision to deliver value pursuant
to clause (B) above within thirty (30) days following the first occurrence of a
Triggering Event, then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the Purchase
Price, Common Shares (to the extent available) and then, if necessary, cash,
which securities and/or cash in the aggregate are equal to the Spread. If the
Board shall determine in good faith that it is likely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days following the first occurrence of
a Triggering Event, in order that the Company may seek shareholder approval for
the authorization of such additional shares (such
17
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action needs to be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Shares shall be the current per share market price (as
determined pursuant to Section 11(d) hereof) of the Common Shares on the date of
the first occurrence of a Triggering Event.
The provisions of this Section 11(a)(iii) shall apply only to Common
Shares of the Company and shall not apply to the securities of any other Person.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Series A Preferred
Shares entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Series A Preferred Shares (or shares
having the same rights, privileges and preferences as the Series A Preferred
Shares ("equivalent shares")) or securities convertible into Series A Preferred
Shares or equivalent shares at a price per Series A Preferred Share or
equivalent share (or having a conversion price per share, if a security
convertible into Series A Preferred Shares or equivalent shares) less than the
current per share market price of the Series A Preferred Shares (as defined in
Section 11(d) hereof) 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 Series A Preferred Shares outstanding on such
record date plus the number of Series A Preferred Shares that the aggregate
offering price of the total number of Series A Preferred Shares and/or
equivalent 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 Series
A Preferred Shares outstanding on such record date plus the number of additional
Series A Preferred Shares and/or equivalent shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
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,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the holders of the Rights. Series A 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 adjustments shall be
made successively whenever such a record date is fixed; and in the event that
such rights or warrants are not so issued, the Purchase
18
Price shall be adjusted to be the Purchase Price that 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
distribution to all holders of the Series A Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of any debt securities, cash or assets
(other than a regular quarterly cash dividend or a dividend payable in Series A
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 current per share market price of the Series A Preferred Shares (as
defined in Section 11(d) hereof) on such record date, less the fair market value
(as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and binding on the holders
of Rights) of the portion of the assets or debt securities so to be distributed
or of such subscription rights or warrants applicable to one Series A Preferred
Share and the denominator of which shall be such current per share market price
of the Series A Preferred Shares (as determined pursuant to Section 11(d)
hereof). 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 that 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 the Common Shares on any date shall be
deemed to be the lesser of (x) the average of the daily closing prices per
Common Share for the 30 consecutive Trading Days immediately prior to such date
or (y) the average of the daily closing prices per Common Share for the 30
consecutive Trading Days immediately following such date; provided, however,
that in the event that the current per share market price of the Common Shares
is determined during a period following the announcement by the issuer of such
Common Shares of a dividend or distribution on such Common Shares payable in
such Common Shares or securities convertible into such Common Shares (other than
the Rights), or any subdivision, combination or reclassification of such Common
Shares, and prior to the expiration of 20 Trading Days after the ex-dividend
date for such dividend or distribution, then, and in each such case, the current
market price shall be appropriately adjusted to reflect the current market price
per Common Share equivalent. 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 on the principal national securities exchange, if any, on
which the Common Shares are then listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use, or, if on any such date the Common Shares are
not
19
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Shares
selected by the Board. The term "Trading Day" shall mean a day on which the
principal national securities exchange or NASDAQ on which the Common Shares are
listed or traded or are admitted to trading is open for the transaction of
business or, if the Common Shares are not listed or admitted to trading on any
national securities exchange or NASDAQ, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Series A Preferred Shares shall be
determined in the same manner as set forth above for Common Shares in clause (i)
of this Section 11(d). If the current per share market price of the Series A
Preferred Shares cannot be determined in the manner provided above, the "current
per share market price" of the Series A Preferred Shares shall be conclusively
deemed to be the current per share market price of the Common Shares
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by 1,000. If neither
the Common Shares nor the Series A 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, whose determination shall be
described in a statement filed with the Rights Agent and binding on the holders
of Rights.
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least one
percent (1%) in the Purchase Price; provided, however, that any adjustments that
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 the nearest one
one-hundredth of a Common Share or other share or one one-ten thousandth of a
Series A Preferred Share, as the case may be. Notwithstanding the first sentence
of this Section 11(e), any adjustment provided for in this Section 11 shall be
made no later than the earlier of (i) three years from the date of the
transaction that requires such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any property, other securities (other than
shares of capital stock of the Company) or shares of capital stock of the
Company other than Series A Preferred Shares, thereafter the amount of such
property, other securities (other than shares of capital stock of the Company)
and the number of such other shares of capital stock so receivable upon exercise
of any Right (as well as any consideration to be paid therefor) 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 Series A Preferred Shares (and
the Purchase Price) contained in this Section 11, and the provisions of Sections
7, 9, 10 and 13 with respect to the Series A Preferred Shares shall apply on
like terms to any such property, other securities and other shares of capital
stock.
20
(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 Series A Preferred
Shares purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandth of a Series A Preferred Share (calculated to the nearest one
one-ten thousandth of a Series A Preferred Share) obtained by (i) multiplying
(x) the number of one one-thousandth of a 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 Series A Preferred Shares 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-thousandth
of a Series 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 the number of Rights (calculated to the
nearest one-ten thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights and
shall provide written notice of such election to the Rights Agent, 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
21
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 Series A Preferred Shares issuable upon the exercise of
the Rights, the Right Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one-thousandth of a share and the
number of shares that 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-thousandth of the then stated value,
if any, of the Series A Preferred Shares issuable upon exercise of the Rights,
the Company shall take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Series A Preferred Shares at such adjusted Purchase
Price.
(l) In any case in which this Section 11 requires that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Series A Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Series A
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. The Company shall provide the Rights Agent with written notice
of any adjustment in the Purchase Price.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Series A Preferred Shares, (ii) issuance wholly for cash of any of the
Series A Preferred Shares at less than the current market price, (iii) issuance
wholly for cash of Series A Preferred Shares or securities that by their terms
are convertible into or exchangeable for Series A Preferred Shares, (iv)
dividends on Series A Preferred Shares payable in Series A Preferred Shares or
(v) issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Series A Preferred Shares shall
not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, and
shall not permit any Subsidiary, at any time after the Separation Date, to (i)
consolidate with, (ii) merge with or into or (iii) sell or transfer, in one or
more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the
22
Company and its Subsidiaries (taken as a whole) to, any other Person if at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect that would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the
Separation Date, it will not, except as permitted by Section 23, Section 24,
Section 27 or Section 31 hereof, take (or permit any Subsidiary to take) any
action that at the time it is reasonably foreseeable will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights;
provided, however, that the issuance of additional Rights pursuant hereto,
including by action of the Board under Section 22 hereof, shall not be deemed to
violate this Section 11(o).
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Record Date (i) declare a dividend on the outstanding Common Shares payable in
Common Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, the number of Rights
associated with each Common Share then outstanding, or issued or delivered
thereafter, shall be proportionately adjusted so that the number of Rights
thereafter associated (whether before or after the Separation Date) with each
Common Share following any such event shall equal the result obtained by
multiplying the number of Rights associated with each Common Share immediately
prior to such event by a fraction the numerator of which shall be the total
number of Common Shares outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of Common Shares
outstanding immediately following the occurrence of such event. For purposes of
this Section 11(p), any Common Shares issued after the Separation Date that were
not issued together with a Right (pursuant to the Preamble hereto or by action
of the Board pursuant to Section 22 hereof) shall not be counted as outstanding.
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 (a) promptly prepare a certificate setting forth such
adjustment, and a brief, reasonably detailed statement of the facts,
computations and methodology of accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Shares or
the Series A Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate (or, if prior to the
Separation Date, to each holder of a certificate representing Common Shares) 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.
23
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company) and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company)
shall consolidate with, or merge with or into, the Company and the Company shall
be the continuing or surviving corporation of such consolidation or merger and,
in connection with such consolidation or merger, all or part of the Common
Shares shall be changed into or exchanged for stock or other securities of any
other Person or cash or any other property or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in a single transaction or a series of related transactions, assets
or earning power aggregating more than fifty percent (50%) of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company),
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right, except as provided in Section 7(e) hereof, shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
Common Shares of the Principal Party, not subject to any rights of first
refusal, redemption or repurchase, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number of one
one-thousandth of a Series A Preferred Share for which a Right is exercisable
immediately prior to the first occurrence of a Section 13(a) Event (or, if any
event set forth in Sections 11(a)(ii) has occurred prior to the Section 13(a)
Event, multiplying the number of such fractional shares for which a Right was
exercisable immediately prior to the first occurrence of an event set forth in
Sections 11(a)(ii) hereof by the Purchase Price immediately prior to such first
occurrence), and dividing that product (which, following the Section 13(a)
Event, shall thereafter be referred to as the "Purchase Price" for all purposes
of this Agreement) by (2) fifty percent (50%) of the current per share market
price (determined pursuant to Section 11(d) hereof) per Common Share (or other
securities or property as provided for herein) of such Principal Party 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 Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13(a) Event and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its Common Shares thereafter deliverable upon the exercise of
the Rights; and
24
(v) the provisions of Sections 11(a)(ii) and 11(a)(iii) hereof shall thereafter
be of no effect following the first occurrence of a Section 13(a) Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause
(x) or clause (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which Common Shares of the Company are converted
in such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in any
such case, (1) if the Common Shares of such Person are not at such time and have
not been continuously over the preceding twelve (12) month period registered
under Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common 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.
(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, which have not been issued or reserved for
issuance, to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of this
Section 13, the Principal Party will:
(i) prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Final Expiration Date; and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act. The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations
25
or sales or other transfers. In the event that one of the transactions described
in Section 13(a) hereof shall occur at any time after the occurrence of a
transaction described in Section 11(a)(ii) hereof, the Rights that have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Separation Date as provided in Section 11(p) hereof,
or to distribute Right Certificates that 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 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 on the principal national securities exchange, if any, on
which the Rights are then listed or admitted to trading or, if the Rights are
not listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board.
If on any such date the Rights are not publicly held or so listed or traded, the
current market value of a whole Right shall mean the fair value of a whole Right
as determined in good faith by the Board, whose determination shall be described
in a statement filed with the Rights Agent and binding on the holders of Rights.
(b) The Company shall not be required to issue fractions of
Series A Preferred Shares (other than fractions that are integral multiples of
one one-thousandth of a Series A Preferred Share) upon exercise of the Rights or
to distribute certificates that evidence fractional Series A Preferred Shares
(other than fractions that are integral multiples of one one-thousandth of a
Series A Preferred Share). Fractions of Series A Preferred Shares in integral
multiples of one one-thousandth of a Series A Preferred Share may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Series A Preferred Shares. In lieu of
fractional Series A Preferred Shares that are not integral multiples of one
one-thousandth of a Series 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
26
same fraction of the current market value of one Series A Preferred Share. For
purposes of this Section 14(b), the current market value of a Series A Preferred
Share shall be the closing price of a Series A Preferred Share (as determined
pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to
the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of Common Shares upon exercise
of the Rights or to distribute certificates that evidence fractional Common
Shares. In lieu of fractional Common Shares, the Company may 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. For purposes of this Section 14(c), the
current market value of one Common Share shall be the closing price of one
Common Share (as determined pursuant to Section 11(d)(i) hereof) for the Trading
Day immediately prior to the date of such exercise.
(d) The holder of a Right, by the acceptance of the Rights,
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as otherwise set forth herein.
Section 15. Rights of Action. All rights of action in respect of
this Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Separation Date, the registered holders of any
certificate representing Common Shares); and any registered holder of any Right
Certificate (or, prior to the Separation Date, of any other certificate
representing Common Shares), without the consent of the Rights Agent or of the
holder of any other Right Certificate (or, prior to the Separation 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 Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this 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 Separation Date, the Rights will be
transferable only in connection with the transfer of the Common Shares;
(b) after the Separation Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office
27
of the Rights Agent designated for such purpose, duly endorsed or accompanied by
a proper instrument of transfer and with appropriate forms and certificates
fully executed; and
(c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Separation 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
certificates made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
(d) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Shareholder. 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 Series A Preferred
Shares, or any other securities of the Company, that 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 shareholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Right Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the preparation, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, damage, judgment,
ruling (interlocutory or final), fine, penalty, claim, demand, settlement (but
with respect to any settlement only with the Company's prior consent, which
shall not be unreasonably withheld), cost or expense,
28
incurred without gross negligence, bad faith or willful misconduct on the part
of the Rights Agent, for any action taken, suffered or omitted by the Rights
Agent in connection with the acceptance and administration of this Agreement,
including, without limitation the costs and expenses of defending against any
claim of liability in the premises. The indemnity provided herein shall survive
the termination of this Agreement and the termination and expiration of the
Rights. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company. Anything to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, consequential or incidental 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 will be limited to the amount of fees
paid by the Company to the Rights Agent hereunder.
(b) The Rights Agent shall be fully indemnified against, shall
be protected from, and shall incur no liability or expense (including without
limitation attorneys' fees and expenses) for, or in respect of, any action
taken, suffered or omitted by it in connection with, the acceptance and
administration of this Agreement in reliance upon any Right Certificate or
certificate for the Series A 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, instruction,
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
its counsel as set forth in Section 20 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained. The Rights Agent shall not be deemed to have any duty or notice
unless and until the Company has provided the Rights Agent with written notice.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) 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 of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such 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
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
29
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
Agreement.
(b) 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 Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations expressly imposed by this Agreement 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 (who may
be legal counsel for the Company), and the written 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, suffered, or omitted by it in good faith and in accordance with
such written advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking, suffering or
omitting 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, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization and protection to
the Rights Agent and the Rights Agent shall incur no liability for, or in
respect of, for any action taken, suffered or omitted in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company
and any other Person only for its own gross negligence, bad faith or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Right 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.
30
(e) The Rights Agent shall not be under any responsibility or
liability in respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any 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 Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or Section 13 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Series
A Preferred Shares to be issued pursuant to this Agreement or any Right
Certificate or as to whether any Series A 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
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, 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 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
instructions of any such officer. The Rights Agent may conclusively rely on the
most recent instructions given by any such officer.
(h) The Rights Agent and any shareholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other Person
or legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or
31
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any 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 either
not been completed or indicates an affirmative response to clause 1 and/or 2 on
such certificate attached to the form of assignment or form of election to
purchase, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and Series A Preferred Shares by registered
or certified mail. In such event, the Company shall give written notice of such
resignation 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 of the Common Shares and Series A
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 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 a Person organized and doing business under the laws of the United
States or of any state of the United States, in good standing, that is subject
to supervision or examination by federal or state authority and that has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50,000,000. 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
32
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Series A 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 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 the Board to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement. In addition, the Company may,
if deemed necessary or appropriate by the Board, issue Right Certificates in
connection with the issuance or sale of Common Shares following the Separation
Date.
Section 23. Redemption.
(a) The Board may, at its option, at any time prior to the
earlier of (A) the date a 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 One Tenth of One Cent ($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").
(b) In the case of a redemption permitted under Section 23(a),
immediately upon the action of the Board ordering the redemption of the Rights,
evidence of which shall have been filed with the Rights Agent and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. Within ten days after the action of the Board
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the holders of the then outstanding Rights (in case of notice to
holders) by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Separation Date, on the registry books of the Transfer Agent for the Common
Shares; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such redemption. Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made.
33
Section 24. Exchange.
(a) The Board may, at its option, at any time after the right
of the Company to redeem the Rights has expired or terminated, 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 7(e)
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 shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary or the Company, any employee
benefit plan of the Company or any such Subsidiary, or Person organized,
appointed or established by the Company for or pursuant to the terms of any such
plan), together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of fifty percent (50%) or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and without
any further action and without any notice, the right to exercise such Rights
shall terminate and the only right thereafter of the holders 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 written notice to the Rights Agent and public notice of any such
exchange; provided, however, that 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. Any notice that 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 Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights that will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights that have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute Series A Preferred Shares for Common Shares at the
rate of one one-thousandth of a Series A Preferred Share for each Right.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates that evidence fractional Series A
Preferred Shares (except as hereinafter provided) or fractional Common Shares,
but if the exchange is for Series A Preferred Shares, the Company shall be
obligated to issue fractional shares so long as any fraction of a Series A
Preferred Share so to be issued is at least equal to one one-thousandth of a
Series A Preferred Share. In lieu of such fractional shares, the Company shall
pay to the registered holders of the Rights Certificates with
34
regard to which such fractional shares would otherwise be issuable an amount in
cash equal to the same fraction of the current market value of a whole share.
For the purposes of this Section 24(d), (i) the current market value of a whole
Common Share shall be the per share market price determined as of the day
immediately following the day of the public announcement by the Company that an
exchange is to be effected pursuant to this Section 24 and (ii) the current
market value of a Series A Preferred Share or fraction of a Series A Preferred
Share shall be the current market value on such day of a Series A Preferred
Share (or fraction of a Series A Preferred Share) as determined in accordance
with Section 11(d)(ii) hereof.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Separation Date, (i) to pay any dividend payable in stock of any class to the
holders of Series A Preferred Shares or to make any other distribution to the
holders of Series A Preferred Shares (other than a regular quarterly cash
dividend), (ii) to offer to the holders of its Series A Preferred Shares rights
or warrants to subscribe for or to purchase any additional Series A Preferred
Shares or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of Series A Preferred Shares
(other than a reclassification involving only the subdivision of outstanding
Series A 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 more than fifty percent (50%) of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Right Certificate, to the extent
feasible and in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, 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 Series A 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 20 days prior to the record
date for determining holders of the Series A Preferred Shares for purposes of
such action, and in the case of any such other action, at least 20 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 Series A Preferred Shares,
whichever shall be the earlier.
(b) In case of the occurrence of a Section 11(a)(ii) Event,
then, in any such case, (i) the Company shall as soon as practicable thereafter
give to each holder of a Right Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii), and (ii) all references in the preceding
paragraph to Series A Preferred Shares shall be deemed thereafter to refer to
Common Shares and/or, if appropriate, other securities.
35
Section 26. Notices. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Daisytek International Corporation
000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx, Xxxxx 00000
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this 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 first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
00 Xxxxxxxxxx Xxxx
Xxxxxxxxxx Xxxx, Xxx Xxxxxx 00000-0000
Attention: General Counsel
Notices or demands authorized by this 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 first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Rights Agent.
Section 27. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Right Certificates in order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, or to make any other provisions with respect to the Rights
which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that (i) the Rights Agent cannot be required to change
or amend its duties and obligations under this Agreement, and (ii) from and
after such time as any Person becomes an Acquiring Person, this Agreement shall
not be amended in any manner which would adversely affect the interests of the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company, which states that the proposed supplement or amendment
is in compliance with the terms of this Section 27, the Rights Agent shall
execute such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
36
Section 29. Determinations and Actions by the Board of Directors.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time and any determination of the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner shall be made in accordance with the provisions of Rule
13d-3(d)(1)(i) of the Rules as in effect as of the date hereof. The Board shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or the Company,
or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (ii) below, all omissions with respect to the foregoing) that are done or
made by the Board, in good faith, shall (i) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Right Certificates and all
other parties and (ii) not subject the Board or the Independent Directors to any
liability to the holders of the Right Certificates.
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Separation Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Separation Date, the Common
Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth day following the date of
such determination by the Board.
Section 32. Governing Law. This 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 made and to be
performed entirely within such State; and any provision of this Agreement and
each such Right Certificate relating to the internal corporate governance or
other affairs of the Company shall be governed by and construed in accordance
with the laws of the State of Delaware.
37
Section 33. Consequential Damages. Neither party to this Agreement
shall be liable to the other party or any other Person for consequential
damages.
Section 34. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together constitute but
one and the same instrument.
Section 35. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience of reference
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
DAISYTEK INTERNATIONAL CORPORATION
By:
Name:
Title:
CHASEMELLON SHAREHOLDER SERVICES, LLC
By:
Name:
Title:
EXHIBIT A
DAISYTEK INTERNATIONAL CORPORATION
CERTIFICATE OF DESIGNATIONS
in respect of
SERIES A PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
The undersigned, being ______________________ of DAISYTEK
INTERNATIONAL CORPORATION (the "Corporation"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, hereby
certifies that, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors of the
Corporation duly adopted the following resolution at a meeting of said Board of
Directors duly called and held on October 15, 1999, which resolution remains in
full force and effect as of the date hereof:
RESOLVED, that the Board of Directors of the Corporation, pursuant
to authority expressly vested in it by the provisions of the Corporation's
Certificate of Incorporation, as amended (the "Charter"), hereby
establishes a series of the preferred stock, par value $1.00 per share, of
the Corporation and fixes the number of shares of such series and the
powers, designations, preferences and relative, participating, optional or
other rights of such series, and the qualifications, limitations or
restrictions thereof, as follows:
This series of preferred stock, par value $1.00 per share, of the
Corporation shall be, and hereby is, designated "Series A Preferred Stock"
(the
A-2
"Series A Shares"), and the number of shares constituting such series
shall be one hundred thousand (100,000). The relative rights and
preferences of the Series A Shares shall be as follows:
Section A. Dividends and Distributions.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of stock ranking prior and superior to the Series A Shares
with respect to dividends, the holders of Series A Shares, in preference to the
holders of Common Stock, par value $0.01 per share, of the Corporation (the
"Common Stock") and of any other junior stock, shall be entitled to receive,
when and as declared by the Board of Directors, out of any funds lawfully
available therefor, cash dividends thereon, payable quarterly, from the date of
issuance thereof, upon the last days of June, September, December and March in
each year (each such date being referred to herein as a "Dividend Payment
Date"), commencing on the first Dividend Payment Date after the first issuance
of a Series A Share, in an amount per share (rounded to the nearest cent) equal
to the greater of (a) $0.05 or (b) subject to the provisions for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend or
distribution 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 Dividend Payment Date or,
with respect to the first Dividend Payment Date, since the first issuance of any
Series A Share. In the event the Corporation shall at any time after October 25,
1999 (i) declare any dividend on Common Stock payable in shares
A-3
of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the amounts to which holders of Series A Shares were entitled immediately
prior to such event under clause (a) and clause (b) of the preceding sentence
shall be adjusted by multiplying each such amount by a fraction the numerator of
which is the number of shares of Common Shares 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.
(2) The Corporation shall declare a dividend or distribution on the
Series A Shares as provided in paragraph (1) of this Section A immediately after
it declares a dividend or distribution on the Common Stock (other than a
dividend or distribution 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 Dividend Payment Date and the next
subsequent Dividend Payment Date, a dividend of $0.05 per share of the Series A
Shares shall nevertheless be payable on such subsequent Dividend Payment Date;
and provided, further that nothing contained in this paragraph (2) shall be
construed so as to conflict with any provision relating to the declaration of
dividends contained in the Charter.
(3) Dividends shall begin to accrue and be cumulative on outstanding
Series A Shares from the Dividend Payment Date next preceding the date of issue
of such Series A Shares, unless (a) the date of issue of such shares is prior to
the record date for the first Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or (b)
the date of issue is a Dividend
A-4
Payment Date or is a date after the record date for the determination of holders
of Series A Shares entitled to receive a quarterly dividend and before such
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the Series A Shares 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 Series A Shares entitled to
receive payment of a dividend or distribution declared thereon.
Section B. Redemption. The Series A Shares are not redeemable.
Section C. Liquidation, Dissolution or Winding Up. In the event of
the voluntary or involuntary liquidation of the Corporation the "preferential
amount" which the holders of the Series A Shares shall be entitled to receive
out of the assets of the Corporation shall be $1,000 per share plus all accrued
and unpaid dividends and distribution thereon.
(1) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (upon liquidation, dissolution or winding up) to the Series A
Shares unless, prior thereto, the holders of Series A Shares shall have received
$1,000 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional
A-5
distributions shall be made to the holders of Series A Shares unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as
set forth in paragraph (3) of this Section C to reflect such events as stock
splits, stock dividends and recapitalization with respect to the Common Stock)
(such number in clause (ii), the "Adjustment Number"). Following the payment of
the full amount of the Series A Liquidation Preference and the Common Adjustment
in respect of all outstanding Series A Shares and Common Stock, respectively,
holders of Series A Shares and holders of shares of Common Stock shall receive
their ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to one with respect to the Series A Shares
and Common Stock, on a per share basis, respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of preferred stock, if any,
which rank on a parity with the Series A Shares, then all such available assets
shall be distributed ratably to the holders of the Series A Shares and the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not sufficient assets
available to permit payment in full of the Common Adjustment, then any such
remaining assets shall be distributed ratably to the holders of Common Stock.
(3) In the event the Corporation shall at any time after October 25,
1999 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common
A-6
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section D. Sinking Fund. The Series A Shares shall not be entitled
to the benefit of any sinking fund for the redemption or purchase of such
shares.
Section E. Conversion.
(1) Subject to paragraph (2) of this Section E, the Series A Shares
shall not be convertible.
(2) In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the Series A Shares shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence
A-7
with respect to the exchange or change of Series A Shares 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 F. Voting Rights.
(1) The holders of Series A Shares shall have no voting rights
except as provided by Delaware statutes or by paragraph (2) of this Section F.
(2) So long as any Series A Shares shall be outstanding, and in
addition to any other approvals or consents required by law, without the consent
of the holders of 66 2/3% of the Series A Shares outstanding as of a record date
fixed by the Board of Directors, given either by their affirmative vote at a
special meeting called for that purpose, or, if permitted by law, in writing
without a meeting:
(i) The Corporation shall not sell, transfer or lease all or
substantially all the properties and assets of the Corporation; provided,
however, that nothing herein shall require the consent of the holders of
Series A Shares for or in respect of the creation of any mortgage, pledge,
or other lien upon all or any part of the assets of the Corporation.
(ii) The Corporation shall not effect a merger or
consolidation with any other corporation or corporations unless as a
result of such merger or consolidation and after giving effect thereto
holders of Series A Shares are entitled to receive a per share amount and
type of consideration equal to the product arrived at by multiplying the
Adjustment Number by the per share
A-8
amount and type of consideration received by holders of shares of Common
Stock, or (1) either (A) the Corporation shall be the surviving
corporation or (B) if the Corporation is not the surviving corporation,
the successor corporation shall be a corporation duly organized and
existing under the laws of any state of the United States of America or
the District of Columbia, and all obligations of the Corporation with
respect to the Series A Shares shall be assumed by successor corporation,
(2) the Series A Shares then outstanding shall continue to be outstanding,
and (3) there shall be no alteration or change in the designation or the
preferences, relative rights or limitations applicable to outstanding
Series A Shares prejudicial to the holders thereof.
(iii) The Corporation shall not amend, alter or repeal any of
the provisions of its Certificate of Incorporation in any manner which
adversely affects the relative rights, preferences or limitations of the
Series A Shares or the holders thereof.
Section G. Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Shares as provided in Section A are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on Series A Shares outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (as to dividends) to the Series A Shares;
A-9
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (as to dividends)
with the Series A Shares, except dividends paid ratably on the Series A
Shares 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 (as to dividends) to the
Series A Shares, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in exchange
for shares of any stock of the Corporation, ranking junior (as to
dividends) to the Series A Shares; and
(iv) purchase or otherwise acquire for consideration any
Series A Shares, or any shares of stock ranking on a parity (as to
dividends) with the Series A Shares, 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
the 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.
(2) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (1) of
this Section G, purchase or otherwise acquire such shares at such time and in
such manner.
A-10
Section H. Fractional Shares. The Corporation may issue fractions
and certificates representing fractions of Series A Shares in integral multiples
of 1/1000th of a Series A Share, or in lieu thereof, at the election of the
Board of Directors of the Corporation at the time of the first issue of any
Series A Shares, evidence such fractions by depositary receipts, pursuant to an
appropriate agreement between the Corporation and a depository selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all rights, privileges and preferences to which they would
be entitled as beneficial owners of Series A Shares. In the event that
fractional Series A Shares are issued, the holders thereof shall have all the
rights provided herein of holders of full Series A Shares in the proportion
which such fraction bears to a full share.
IN TESTIMONY WHEREOF, DAISYTEK INTERNATIONAL CORPORATION has caused
this Statement to be signed under its corporate seal by its __________________
and its Secretary as of the ____ day of October, 1999.
DAISYTEK INTERNATIONAL CORPORATION
By: ______________________________
Name:
Title:
ATTEST:
--------------------------------
Name:
Title:
EXHIBIT B
[Form of Right Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER OCTOBER 25, 2009 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT (AS HEREINAFTER DEFINED)) AND
ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO
WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS
RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR BECOME VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE AGREEMENT.] 1/
Right Certificate
DAISYTEK INTERNATIONAL CORPORATION
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 October 15, 1999 (the "Rights Agreement"), between
DAISYTEK INTERNATIONAL CORPORATION, a Delaware corporation (the "Company"), and
CHASEMELLON SHAREHOLDER SERVICES, LLC, a New Jersey limited liability company
(the "Rights Agent"), to purchase from the Company at any time after the
Separation Date (as such term is defined in the Rights Agreement) and prior to
the close of business (5:00 PM New York time) on October 25, 2009, at the office
or offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully paid, nonassessable share of Series
A Preferred Stock, par value $1.00 per share ("Series A Share") of the Company,
at a purchase price of $70 one one-thousandth of a share (the "Purchase Price"),
upon presentation and surrender of this Right Certificate with the Form of
Election to Purchase and related Certificate duly executed. The number of rights
evidenced by this Right Certificate (and the number of shares that may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of October 15, 1999
based on the Series A Shares as constituted at such date.
--------
1/ The portion of the legend in brackets shall be inserted if applicable and
shall replace the preceding sentence.
B-2
Upon the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (a) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(b) a transferee of any such Acquiring Person, Associate or Affiliate (other
than a bona fide purchaser for value who has no knowledge that the transferor
was an Acquiring Person or an Associate or Affiliate of an Acquiring Person) or
(c) under certain circumstances specified in the Rights Agreement, a transferee
of a person or entity who, after such transfer, became an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such rights from and after the occurrence of any such Triggering
Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of Series A Shares or other securities or other property that
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.
The Board may, at its option, at any time after the right of the
Company to redeem the Rights has expired or terminated, exchange all or part of
the then outstanding and exercisable Rights (other than those held by the
Acquiring Person and Affiliates and Associates of the Acquiring Person) for
Common Shares (as such term is defined in the Rights Agreement) at an exchange
ratio of one Common Share per Right, as adjusted. Immediately upon the action of
the Board ordering an exchange of the Rights, the Rights affected by such order
will no longer be exercisable and thereafter the only right of the holders of
such Rights will be to receive the Common Shares issuable by the Company in
exchange for such Rights.
This Right Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
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, which
limitations of rights include the temporary suspension of the exercisability of
such Rights for not more than ninety (90) days at the election of the Company
and under certain circumstances specified in such Rights Agreement. Copies of
the Rights Agreement are on file at the office of the Rights Agent and are also
available upon written request to the Company.
B-3
This Right Certificate, with or without other Right Certificates,
upon surrender at the office or offices 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 Series A Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If the Rights evidenced by 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 may be redeemed at a redemption price of One Tenth
of One Cent ($0.001) per Right at any time prior to the earlier of (A) the date
that a Person becomes an Acquiring Person (as such term is defined in the Rights
Agreement) or (B) the Final Expiration Date (as such term is defined in the
Rights Agreement). Immediately upon the action of the Board ordering redemption
of the Rights, the Rights will no longer be exercisable; and, thereafter the
only right of the holders of the Rights evidenced hereby will be to receive the
Redemption Price.
The terms of the Rights evidenced by this Certificate may be
supplemented or amended without the approval of any holder of the Rights (or the
Common Shares) as set forth in the Rights Agreement.
No fractional Series A Shares will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions that are integral
multiples of one one-thousandth of a Series A 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, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Series A
Shares or of any other securities of the Company that 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 Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
B-4
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 signatures of the proper officers of the
Company.
Dated: ___________, 19__
DAISYTEK INTERNATIONAL CORPORATION
By________________________________
Name:
Title:
Attest___________________
Name:
Title:
(Corporate Seal)
Countersigned
CHASEMELLON SHAREHOLDER
SERVICES, LLC
as Rights Agent
By___________________
B-5
[Form of Reverse Side of Right Certificate]
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: _______________, 19__
-------------------------
Signature
Signature Guaranteed:
B-6
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(i) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(ii) to the best knowledge of the undersigned, it [ ] did [ ] did
not acquire the Rights evidenced by this Right Certificate from any Person who
is, was or subsequently became an Acquiring Person or an Affiliate or Associate
of an Acquiring Person.
Dated: _____________, 19__ _________________________
Signature
NOTICE
The signature(s) to the foregoing Assignment and Certificate must
correspond to the name(s) as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-7
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: DAISYTEK INTERNATIONAL CORPORATION
The undersigned hereby irrevocably elects to exercise _________
Rights represented by this Right Certificate to purchase the Series A Shares (or
fractions thereof) issuable upon the exercise of such Rights (or such other
securities of the Company or of any other entity that may be issuable upon the
exercise of the Rights) and requests that certificates for such 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 of such Rights
shall be registered in the name of and delivered to:
B-8
Please insert social security
or other identifying number: _______________________________________________
(Please print name and address)
--------------------------------------------------------------------------------
Dated: __________________, 19__
-------------------------
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined in the Rights Agreement);
(2) to the best knowledge of the undersigned, it [ ] did [ ] not
acquire the Rights evidenced by this Right Certificate from any Person who is,
was or became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated: ________________, 19__
-------------------------
Signature
B-9
NOTICE
The signature(s) to the foregoing Election to Purchase and
Certificate must correspond to the name(s) as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
EXHIBIT C
DAISYTEK INTERNATIONAL CORPORATION
Summary of Rights to Purchase Series A Preferred Stock
On October 15, 1999, the Board of Directors (the "Board") of
DAISYTEK INTERNATIONAL CORPORATION (the "Company") declared a dividend
distribution of one Right for each outstanding share of Common Stock, par value
$0.01 per share (a "Common Share"), of the Company to stockholders of record at
the close of business on October 25, 1999 (the "Record Date"). Except as set
forth below, each Right entitles the registered holder to purchase from the
Company one one-thousandth of a share of Series A Preferred Stock, par value
$1.00 per share ("Series A Shares"), at a price of $70 (the "Purchase Price"),
subject to adjustment. The Purchase Price shall be paid in cash. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Company and CHASEMELLON SHAREHOLDER SERVICES, LLC, as
Rights Agent.
Initially, no separate Right Certificates will be distributed. Until
the earlier to occur of (a) 10 business days following a public announcement
that a person or group of affiliated or associated persons (collectively, an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding Common Shares or (b) 15 business
days (or such later date as may be determined by the action of the Board before
any person becomes an Acquiring Person) following the commencement of a tender
offer or exchange offer if, upon consummation thereof, such person or group
would be the beneficial owner of 15% or more of such outstanding Common Shares
(the earlier of such dates being called the "Separation Date"), the Rights will
be evidenced, with respect to any Common Shares outstanding as of the Record
Date, by the certificates representing such Common Shares. The Rights Agreement
provides that, until the Separation Date, the Rights will be transferred with,
and only with, Common Share certificates. From as soon as practicable after the
Record Date and until the Separation Date (or earlier redemption or expiration
of the Rights), new Common Share certificates issued after the Record Date upon
transfer or new issuance of Common Shares will contain a notation incorporating
the Rights Agreement by reference. Until the Separation Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Common Shares outstanding as of the Record Date will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificates. As soon as practicable following the
Separation 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 Separation Date and, thereafter, such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Separation Date and will
expire on October 25, 2009 (the "Final Expiration Date"), unless earlier
redeemed by the Company as described below.
C-2
In the event that a person (other than the Company and its
affiliates) becomes the beneficial owner of 15% or more of the then outstanding
Common Shares (in any manner, except pursuant to (i) the exercise of stock
options granted pursuant to the Company's existing and future stock option
plans, and (ii) the exercise of conversion rights contained in specified stock
issues of the Company) or the Board declares any person to be an adverse person
upon a determination that such person has become the beneficial owner of a
substantial amount of Common Shares (which shall in no event be less than 10% of
the Common Shares then outstanding), the Rights Agreement provides that proper
provision shall be made so that each holder of a Right will thereafter be
entitled to receive, upon exercise, Common Shares (or, in certain circumstances,
cash, property or other securities of the Company) having a value equal to two
times the exercise price of the Right.
In the event that, at any time following the first date of public
announcement by the Company or an Acquiring Person indicating that an Acquiring
Person has become such (the "Shares Acquisition Date"), (a) the Company engages
in a merger or other business combination transaction in which the Company is
not the surviving corporation, (b) the Company engages in a merger or other
business combination transaction with another person in which the Company is the
surviving corporation, but in which its Common Shares are changed or exchanged
or (c) 50% or more of the Company's assets or earning power is sold or
transferred, the Rights Agreement provides that proper provision shall be made
so that each holder of a Right shall thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, common
shares of the acquiring company having a value equal to two times the exercise
price of the Right.
The Board may, at its option, at any time after the right of the
Board to redeem the Rights has expired or terminated, exchange all or part of
the then outstanding and exercisable Rights (other than those held by the
Acquiring Person) for Common Shares at a ratio of one Common Share per Right, as
adjusted; provided, however, that such Right cannot be exercised once a Person,
together with such Person's Affiliates and Associates, becomes the owner of 50%
or more of the outstanding Common Shares. If the Board authorizes such an
exchange, the Rights will immediately cease to be exercisable.
Notwithstanding any of the foregoing, following the occurrence of
any of the events set forth in the fourth and fifth paragraphs of this Summary,
any Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person shall immediately
become null and void. The Rights Agreement contains provisions intended to
prevent the utilization of voting trusts or similar arrangements (except for a
contemplated voting arrangement between two of the Company's principal
stockholders) that could have the effect of rendering ineffective or
circumventing the beneficial ownership rules set forth in the Rights Agreement.
C-3
The Purchase Price payable, and the number of Series A Shares or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (a) in the event of a
dividend of Series A Shares on, or a subdivision, combination or
reclassification of, the Series A Shares, (b) upon the grant to holders of the
Series A Shares of certain rights or warrants to subscribe for Series A Shares
or securities convertible into Series A Shares at less than the current market
price of the Series A Shares or (c) upon the distribution to holders of the
Series A Shares of debt securities or assets (excluding regular quarterly cash
dividends and dividends payable in Series A Shares) or of subscription rights or
warrants (other than those referred to above).
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 shares that are not integral multiples of one
one-thousandth of a Series A Share will be issued and, in lieu thereof, an
adjustment in cash will be made based on the closing price of the Series A
Shares on the last trading date prior to the date of exercise.
At any time after the date of the Rights Agreement until the earlier
of (A) the date a Person becomes an Acquiring Person or (B) the Final Expiration
Date, the Board, may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right, subject to adjustment (the "Redemption Price"). Immediately
upon the action of the Board ordering redemption of the Rights, the Rights will
no longer be exercisable. Thereafter the only right of the holders of Rights
will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders or to the Company, shareholders may, depending
upon the circumstances, recognize taxable income in the event that the Rights
become exercisable for Common Shares (or other consideration) of the Company or
for common shares of the Acquiring Person as set forth above.
The Rights Agreement may be amended by the Board without approval of
the holders of Rights; provided, however, that following the date on which a
person has become our Acquiring Person, no such amendment will adversely affect
the interests of holders of Rights.
A copy of the Rights Agreement will be filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
