EXHIBIT 4.1
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US DATAWORKS, INC.
a Nevada corporation
and
CORPORATE STOCK TRANSFER, INC.
a Colorado corporation
Rights Agent
____________
Rights Agreement
Dated as of July 24, 2003
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TABLE OF CONTENTS
Page
1. Certain Definitions........................................................1
2. Appointment of Rights Agent................................................5
3. Issue of Rights Certificates...............................................5
4. Form of Rights Certificates................................................6
5. Countersignature and Registration..........................................7
6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.....8
7. Exercise of Rights; Purchase Price; Expiration Date of Rights..............8
8. Cancellation and Destruction of Rights Certificates.......................10
9. Reservation and Availability of Preferred Stock...........................11
10. Preferred Stock Record Date...............................................12
11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights.................................................................12
12. Certificate of Adjusted Purchase Price or Number of Shares................19
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power......19
14. Additional Covenants......................................................22
15. Fractional Rights and Fractional Shares...................................22
16. Rights of Action..........................................................23
17. Agreement of Rights Holders...............................................24
18. Rights Certificate Holder Not Deemed a Stockholder........................24
19. Concerning the Rights Agent...............................................24
20. Merger or Consolidation or Change of Name of Rights Agent.................25
21. Duties of Rights Agent....................................................26
22. Change of Rights Agent....................................................28
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23. Issuance of New Rights Certificates.......................................28
24. Redemption, Termination and Exchange......................................29
25. Notice of Certain Events..................................................31
26. Notices...................................................................32
27. Supplements and Amendments................................................33
28. Determination and Actions by the Board....................................33
29. Successors................................................................33
30. Benefits of This Agreement................................................33
31. Severability..............................................................34
32. Governing Law.............................................................34
33. Counterparts..............................................................34
34. Descriptive Headings......................................................35
Exhibit A -- Certificate of Designation of Series X
Participating Preferred Stock.........................A-1
Exhibit B -- Form of Rights Certificate............................B-1
Exhibit C -- Form of Summary of Rights.............................C-1
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RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT (this "AGREEMENT") is dated as of July 24, 2003,
between US Dataworks, Inc., a Nevada corporation (the "COMPANY"), and Corporate
Stock Transfer, Inc., a Colorado corporation (the "RIGHTS AGENT").
W I T N E S S E T H:
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WHEREAS, on July 23, 2003, the Board of Directors of the Company (the
"BOARD") authorized and declared a dividend distribution of one Right (as
hereinafter defined) for each share of Common Stock, of the Company (the "COMMON
STOCK") outstanding as of the Close of Business (as hereinafter defined) on
September 2, 2003 (the "RECORD DATE"), and contemplates the issuance of one
Right (subject to adjustment as provided herein) for each share of Common Stock
issued between the Record Date and the earlier of the Distribution Date and the
Expiration Date, as such terms are hereinafter defined (with Rights also to be
issued in connection with certain issuances of Common Stock after the
Distribution Date, as provided more fully herein), each Right representing the
right to purchase one one-thousandth of a share of Series X Participating
Preferred Stock, par value $0.0001 per share, of the Company (the "PREFERRED
STOCK") having the rights, powers and preferences set forth in the form of
Certificate of Designation attached hereto as EXHIBIT A (the "CERTIFICATE OF
DESIGNATION"), upon the terms and subject to the conditions hereinafter set
forth (the "RIGHTS").
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of fifteen percent (15%) or more of the shares of Common Stock then outstanding
or who was such a Beneficial Owner at any time on or after the date hereof,
whether or not such Person continues to be the Beneficial Owner of fifteen
percent (15%) or more of the outstanding shares of Common Stock. Notwithstanding
the foregoing:
(i) in no event shall a Person who or which, together with all
Affiliates and Associates of such Person, is the Beneficial Owner of
less than fifteen percent (15%) of the outstanding shares of Common
Stock become an Acquiring Person solely as a result of a reduction of
the number of shares of outstanding Common Stock, including repurchases
of outstanding shares of Common Stock by the Company, which reduction
increases the percentage of outstanding shares of Common Stock
Beneficially Owned (as such term is hereinafter defined) by such
Person; PROVIDED, HOWEVER, that any subsequent increase in the amount
of Common Stock Beneficially Owned by such Person, together with all
Affiliates and Associates of such Person, without the prior written
approval of the Board shall cause such Person to be an Acquiring Person
(unless, measured at such time, such Person would not be an Acquiring
Person);
(ii) the term Acquiring Person shall not mean:
(A) the Company;
(B) any Subsidiary (as such term is hereinafter
defined) of the Company;
(C) any employee benefit plan of the Company or any
of its Subsidiaries;
(D) any entity holding securities of the Company
organized, appointed or established by the Company or any of its
Subsidiaries for or pursuant to the terms of any such plan;
(E) any underwriter acting in good faith in a firm
commitment underwriting of an offering of the Company's securities
pursuant to arrangements with the Company that have been approved by
the Board (HOWEVER, the exception provided by this CLAUSE (E) shall no
longer be available in the event that any such underwriter is otherwise
an Acquiring Person on or after the date which is forty (40) days after
the date of initial acquisition of the Company's securities by such
underwriter in connection with such offering); or
(F) Societe Financiere Privee, S.A. (referred to
collectively with its Affiliates and Associates as "SFP"), so long as
SFP is not the Beneficial Owner of a percentage of the outstanding
shares of Common Stock that is greater (by more than one percent (1%)
of the outstanding shares of Common Stock) than the percentage of the
outstanding shares of Common Stock as to which SFP has or is deemed to
have Beneficial Ownership, from time to time, by reason of its
ownership of (1) shares of Series A Preferred Stock acquired directly
from the Company; (2) shares of Common Stock issued to SFP directly
from the Company upon conversion by SFP of the Series A Preferred Stock
referred to in the foregoing clause (1); (3) any other securities
(whether convertible debt or equity and including, without limitation,
any warrants or similar derivative securities) of the Company purchased
by SFP, after the date hereof, directly from the Company in a
transaction approved by the Board; and (4) shares of Common Stock
issued to SFP directly from the Company upon conversion, exercise or
exchange by SFP of any securities referred to in the foregoing clause
(3); and
(iii) no Person shall be deemed to be an Acquiring
Person if: (A)(1) any Schedule 13D under the Exchange Act (as defined
below), as amended (the "EXCHANGE ACT"), or any comparable or successor
report, filed (or required to be filed) by such Person does not (or
would not) state any intention to or reserve the right to control or
influence the management or policies of the Company or engage in any of
the actions specified in Item 4 (or any comparable or successor Item)
of such Schedule 13D (other than the disposition of Common Stock), (2)
either (x) within two (2) Business Days of being requested by the
Company to advise the Company regarding the same, such Person certifies
in writing to the Company that such Person acquired Beneficial
Ownership of fifteen percent (15%) or more of the outstanding shares of
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Common Stock inadvertently or without knowledge of the terms of the
Rights, or (y) the Board determines in good faith that such Person has
become an Acquiring Person inadvertently, (3) such Person divests as
promptly as practicable (as determined in good faith by the Board) a
sufficient number of securities so that such Person would not be deemed
to be an Acquiring Person pursuant to the first sentence of this
SECTION 1(a), (or such other provisions of this SECTION 1(a) as may be
applicable) and (4) promptly following such Person's divestiture of
such securities, such Person certifies to the Board that such Person
would no longer be deemed an Acquiring Person as defined pursuant to
the first sentence of this SECTION 1(a) (or such other provisions of
this SECTION 1(a) as may be applicable); or (B) by reason of such
Person's Beneficial Ownership of fifteen percent (15%) or more of the
outstanding shares of Common Stock on the date hereof if prior to the
Record Date such Person notifies the Board that such Person is no
longer the Beneficial Owner of fifteen percent (15%) or more of the
then outstanding shares of Common Stock.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act as in effect on the date of this Agreement.
(c) A Person shall be deemed the "BENEFICIAL OWNER," and shall be
deemed to "BENEFICIALLY OWN" or have "BENEFICIAL OWNERSHIP," of any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to beneficially own (within the meaning of Rule
13d-3 of the General Rules and Regulations under the Exchange Act as in
effect on the date hereof);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right or obligation to acquire (whether such
right or obligation is exercisable or effective 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 (under this CLAUSE (A)) the "BENEFICIAL OWNER," and
shall not be deemed (under this CLAUSE (A)) to "BENEFICIALLY OWN" or
have "BENEFICIAL OWNERSHIP," of 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 payment or exchange; or (B) the right to vote or
dispose of pursuant to any agreement, arrangement or understanding
(whether or not in writing); PROVIDED, HOWEVER, that a Person shall not
be deemed the "BENEFICIAL OWNER," and shall not be deemed to
"BENEFICIALLY OWN" or have "BENEFICIAL OWNERSHIP," of any security
under this CLAUSE (B) if the agreement, arrangement or understanding to
vote such security (1) 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 rules and regulations of the
Exchange Act and (2) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are Beneficially Owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
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such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing)
(other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or with which such Person or any of such Person's
Affiliates or Associates have otherwise formed a group, for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in clause (B) of subparagraph (ii) of this paragraph (c)) or
disposing of any securities of the Company.
(d) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of California are
authorized or obligated by law or executive order to close.
(e) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
San Francisco time, on such date; PROVIDED, HOWEVER, that if such date is not a
Business Day it shall mean 5:00 p.m., San Francisco time, on the next succeeding
Business Day.
(f) "COMMON STOCK" shall mean the Common Stock, par value $0.0001
per share, of the Company or any other shares of capital stock of the Company
into which such Common Stock may be reclassified or exchanged, except that
"COMMON STOCK" when used with reference to stock issued by any Person other than
the Company shall mean the capital stock with the greatest Voting Power, or the
equity securities or other equity interest having power to control or direct the
management, of such Person or, if such Person is a Subsidiary of another Person,
of the Person which ultimately controls such first-mentioned Person and which
has issued and outstanding such capital stock, equity securities or equity
interests.
(g) "DISTRIBUTION DATE" shall have the meaning set forth in
SECTION 3(a) hereof.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "PERMITTED OFFER" shall mean a tender or exchange offer for
all outstanding shares of Common Stock at a price and on terms determined, prior
to the date of the first acceptance of payment for any of such shares, to be
fair to, and in the best interests of, the Company and its stockholders (other
than the offeror or any Affiliate or Associate thereof) by at least a majority
of the members of the Board who are not (i) officers of the Company, (ii) the
offeror, (iii) Acquiring Persons or (iv) Affiliates or Associates of the offeror
or any Acquiring Person.
(j) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company, joint venture, association, trust or
other entity.
(k) "PREFERRED STOCK" shall mean the Series X Participating
Preferred Stock, par value $0.0001 per share, of the Company.
(l) "SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock, par value $0.0001 per share, of the Company.
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(m) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(n) A "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or voting interests is owned, directly or indirectly, by such Person,
or which is otherwise controlled by such Person.
(o) "TRIGGERING EVENT" shall mean a Section 11 Event (as defined
in SECTION 11(a) hereof) or a Section 13 Event (as defined in SECTION 13(a)
hereof).
(p) "VOTING POWER" shall mean the voting power of all securities
of the Company then outstanding and generally entitled to vote for the election
of directors of the Company.
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon written notice to the Rights Agent. The Rights Agent
shall have no duty to supervise, and shall in no event be liable for, the acts
or omissions of any such co-Rights Agent. In the event the Company appoints one
or more co-Rights Agents, the respective duties of the Rights Agents and any
co-Rights Agents shall be as the Company shall determine.
3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the Stock Acquisition Date or (ii)
the Close of Business on the tenth (10th) Business Day (or such later date as
may be determined by action of the Board) after the date of the commencement
(determined in accordance with Rule 14d-2 of the General Rules and Regulations
under the Exchange Act as in effect as the date hereof or, if no longer
applicable, the intent of such Rule 14d-2 as in effect on the date hereof as
determined in good faith by the Board) by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or any
of its Subsidiaries, or any entity organized, appointed or established by the
Company or any of its Subsidiaries for or pursuant to the terms of any such
plan) of a tender or exchange offer (other than a Permitted Offer) the
consummation of which would result in such Person becoming an Acquiring Person
(including any such date which is on or after the date of this Agreement and
prior to the issuance of the Rights) (the earlier of such dates being herein
referred to as the "DISTRIBUTION DATE"), (x) the Rights shall be evidenced by
the certificates for Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates and (y) the Rights
(and the right to receive certificates therefor) shall be transferable only in
connection with the transfer of the underlying shares of Common Stock. As soon
as practicable after the Distribution Date, the Rights Agent shall send, by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a certificate for Rights, in
substantially the form of EXHIBIT B hereto (the "RIGHTS CERTIFICATES"),
evidencing one Right for each share of Common Stock so held (subject to
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adjustment as provided herein). As of and after the Distribution Date, the
Rights shall be evidenced solely by such Rights Certificates.
As soon as practicable following the Record Date, the Company shall
send a copy of a Summary of Rights, in substantially the form attached hereto as
EXHIBIT C (the "SUMMARY OF RIGHTS"), by first-class, postage prepaid mail, to
each record holder of the Common Stock as of the Close of Business on the Record
Date, at the address of such holder shown on the records of the Company. With
respect to certificates for the Common Stock outstanding as of the Record Date,
until the Distribution Date (or earlier redemption, expiration or termination of
the Rights), the Rights shall be evidenced by such certificates for the Common
Stock and the registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the Distribution Date (or
earlier redemption, expiration or termination of the Rights), the surrender for
transfer of any of the certificates for the Common Stock outstanding on the
Record Date shall also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
(b) Certificates issued for Common Stock (including, without
limitation, certificates issued upon transfer or exchange of Common Stock) after
the Record Date, but prior to the earlier of the Distribution Date or the
Expiration Date, shall be deemed also to be certificates for Rights, and shall
have impressed, printed, stamped, written or otherwise affixed onto them the
following legend:
This certificate also evidences and entitles the holder hereof to
certain "Rights" as set forth in a Rights Agreement between US
Dataworks, Inc. (the "Company") and Corporate Stock Transfer, Inc. (the
"RIGHTS AGENT") dated as of July 24, 2003 (the "RIGHTS AGREEMENT"), the
terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights Agreement, such
Rights may be redeemed, may expire, or may be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the
Rights Agreement without charge after receipt of a written request
therefor. Under certain circumstances, Rights "BENEFICIALLY OWNED" by
"ACQUIRING PERSONS" (as such terms are defined in the Rights Agreement)
or certain related parties, as well as subsequent holders of such
Rights, may become null and void.
With respect to such certificates containing the foregoing legend,
until the Distribution Date (or earlier redemption, expiration or termination of
the Rights), the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
shares and of assignment and certificates to be printed on the reverse thereof)
shall each be substantially in the form set forth in EXHIBIT B hereto and may
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have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or interdealer
quotation system on which the Rights may from time to time be listed or traded,
or to conform to usage. Subject to the provisions of SECTION 11 and SECTION 23
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date, and on their face shall entitle the holders thereof to purchase
such number of one one-thousandths of a share of Preferred Stock as shall be set
forth therein at the price per one one-thousandth of a share set forth therein
(the "PURCHASE PRICE"), such Purchase Price to be initially equal to the amount
set forth in SECTION 7(b) below but the number of one one-thousandths of a share
and the Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to SECTION 3(a) hereof
that represents Rights Beneficially Owned by an Acquiring Person or any
Associate or Affiliate thereof, any Rights Certificate issued at any time upon
the transfer of any Rights to such an Acquiring Person or any Associate or
Affiliate thereof or to any nominee of such Acquiring Person, Associate or
Affiliate, and any Rights Certificate issued pursuant to SECTION 6, SECTION 11
or SECTION 23 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain the
following legend:
The Rights represented by this Rights Certificate were issued to a
Person who was an Acquiring Person or an Affiliate or an Associate of
an Acquiring Person (as such terms are defined in the Rights
Agreement). This Rights Certificate and the Rights represented hereby
may become void under the circumstances specified in Section 7(e) of
the Rights Agreement.
The provisions of SECTION 7(e) hereof shall be operative whether or not the
foregoing legend is contained on any such Rights Certificate.
5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its President, its Chief Financial
Officer or any Vice President, either manually or by facsimile signature, and
shall have affixed thereto the Company's seal or a facsimile thereof which shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent, and issued and delivered
by the Company with the same force and effect as though the Person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any Person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such Person was not such an officer.
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(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of SECTIONS 7(e), 7(f) and 15
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Rights Certificates, entitling the registered holder to
purchase a like number of one one-thousandths of a share of Preferred Stock (or,
after the occurrence of a Triggering Event, shares of Common Stock or other
securities and property, as the case may be) as the Rights Certificate or Rights
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent. Subject to receipt by the
Company and the Rights Agent of evidence reasonably satisfactory to them (as the
Company may reasonably request) of the identity of the Beneficial Owner (or
former Beneficial Owner) of the Rights Certificate or the Affiliates or
Associates thereof, the Rights Agent shall (subject to SECTION 7(e) hereof)
thereupon countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Subject to the provisions of SECTIONS 7(e), 7(f) and 15
hereof, upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate and 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, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company shall execute and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to the provisions of SECTIONS 7(e) and 7(f) hereof,
the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date upon presentation of the Rights
Certificate, with the appropriate form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the principal office of the
Rights Agent, together with payment of the Purchase Price for each one
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one-thousandth of a share of Preferred Stock (or such other securities or
property as the case may be) as to which the Rights are exercised, at or prior
to the earliest of (i) the Close of Business on July 24, 2013 (the "FINAL
EXPIRATION DATE"), (ii) the time at which the Rights are redeemed as provided in
SECTION 24 hereof, (iii) the consummation of a transaction contemplated by
SECTION 13(d) hereof or (iv) the time at which the Rights are exchanged as
provided in SECTION 24(c) hereof (such earliest time being herein referred to as
the "EXPIRATION DATE"). Notwithstanding any other provision of this Agreement,
any Person who prior to the Distribution Date becomes a record holder of shares
of Common Stock may exercise all of the rights of a registered holder of a
Rights Certificate with respect to the Rights associated with such shares of
Common Stock in accordance with and subject to the provisions of this Agreement,
including the provisions of SECTION 7(e) hereof, as of the date such Person
becomes a record holder of shares of Common Stock.
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be Four
Dollars ($4.00), 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) of this SECTION 7 below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the appropriate form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the fractional interests in
shares of Preferred Stock (or other securities or property) to be purchased and
an amount equal to any applicable transfer tax (as determined by the Rights
Agent) in cash, or by certified check or bank draft payable to the order of the
Company, the Rights Agent shall, subject to SECTION 21(k) hereof, thereupon
promptly (i)(A) requisition from any transfer agent of the shares of Preferred
Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of one one-thousandths of a share of Preferred Stock
to be purchased, and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company, in its sole
discretion, shall have elected to deposit the fractional interests in shares of
Preferred Stock issuable upon exercise of the Rights hereunder into a
depositary, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock as
are to be purchased (in which case certificates for the one one-thousandths of a
share of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company shall direct the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash, if any, to be paid in lieu of issuance of
fractional shares in accordance with SECTION 15, (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 Rights Certificate, registered
in such name or names as may be designated by such holder and, (iv) when
appropriate, after receipt promptly deliver such cash to or upon the order of
the registered holder of such Rights Certificate. In the event that the Company
is obligated to issue other securities of the Company, or distribute other
property pursuant to SECTION 11(a), the Company shall make all arrangements
necessary so that such other securities or property are available for
distribution by the Rights Agent, if and when appropriate. In addition, in the
case of an exercise of the Rights by a holder pursuant to SECTION 11(a)(ii), the
Rights Agent shall return such Rights Certificate to the registered holder
thereof after imprinting, stamping or otherwise indicating thereon that the
rights represented by such Rights Certificate no longer include the rights
9
provided by SECTION 11(a)(ii) hereof; PROVIDED, HOWEVER, that if less than all
the Rights represented by such Rights Certificate were so exercised, the Rights
Agent shall indicate on the Rights Certificate the number of Rights represented
thereby which continue to include the rights provided by SECTION 11(a)(ii).
(d) In case the registered holder of any Rights Certificate shall
exercise (except pursuant to SECTION 11(a)(ii)) less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent and delivered
to the registered holder of such Rights Certificate or to such registered
holder's duly authorized assigns, subject to the provisions of SECTION 15
hereof.
(e) Notwithstanding anything in this Agreement to the contrary, if
there occurs any Triggering Event, then any Rights that are or were on or after
the Distribution Date Beneficially Owned by an Acquiring Person or any Associate
or Affiliate of an Acquiring Person shall become null and void, without any
further action, and any holder of such Rights shall thereafter have no rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. Without limiting the foregoing sentence, Rights held by
the following Persons shall be null and void without any further action: (i) any
direct or indirect transferee of any Rights that are or were on or after the
Distribution Date Beneficially Owned by an Acquiring Person or any Associate or
Affiliate of an Acquiring Person; (ii) any direct or indirect transferee of any
Rights that were on or before the Distribution Date Beneficially Owned by an
Acquiring Person or any Associate or Affiliate of an Acquiring Person if the
transferee received such Rights, directly or indirectly, (A) from an Acquiring
Person or any Associate or Affiliate of an Acquiring Person (x) as a result of a
distribution by such Acquiring Person or any Associate or Affiliate of an
Acquiring Person to holders of its equity securities or similar interests
(including, without limitation, partnership interests) or (y) pursuant to any
continuing agreement, arrangement or understanding with respect to the Rights or
(B) in a transfer (or series of transfers) which the Board determines is part of
a plan, arrangement or understanding which has the purpose or effect of avoiding
the provisions of this SECTION 7(e); and (iii) subsequent transferees of Persons
referred to in the foregoing clauses (i) and (ii) as well as this clause (iii).
The Company shall use all reasonable efforts to ensure that the provisions of
this SECTION 7(e) are complied with, but shall have no liability to any holder
of Rights or any Rights Certificate or to any other Person as a result of the
Company's failure to make any determination 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 the Certificate contained in the
appropriate form of Election to Purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise shall have been properly
completed and duly executed by the registered holder thereof and the Company
shall have been provided with 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.
8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
10
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 Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK.
(a) The Company covenants and agrees that it shall cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock, or any authorized and issued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and other
securities) held in its treasury, the number of shares of Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and other
securities) that will be sufficient (in accordance with the provisions of this
Agreement, including SECTION 11(a)(iii) hereof) to permit the exercise in full
of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, shares of Common Stock and other securities)
issuable upon the exercise of the Rights may be listed on any national
securities exchange or quoted on any national quotation system, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares (or other securities) reserved for such issuance
to be listed on such exchange or quoted on such system 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
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933, as amended (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, (B) the Expiration Date or (C) the date the Company receives an
opinion of counsel to the effect that the maintenance of such registration
statement in effect is no longer necessary. 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 or to comply with such
blue sky laws. 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.
11
(d) The Company covenants and agrees that it shall take all such
action as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock or other securities delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares or securities.
(e) The Company further covenants and agrees that it shall pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates or of any certificates for one one-thousandths of a share of
Preferred Stock or other securities upon the exercise of Rights. The Company
shall not, however, be required to (i) pay any transfer tax or charge which may
be payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or in respect of the issuance or delivery of the shares of
Preferred Stock or other securities in a name other than that of, the registered
holder of the Rights Certificates evidencing Rights surrendered for exercise or
(ii) issue or deliver any certificates for shares of Preferred Stock or other
securities in a name other than that of the registered holder upon the exercise
of any Rights until such tax or charge shall have been paid (any such tax or
charge being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax or charge is due.
10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for one one-thousandths of a share of Preferred Stock (or other
securities) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the fractional shares of Preferred
Stock (or other securities) represented thereby on, and such certificate shall
be dated, the date upon which the Rights Certificate evidencing such Rights was
duly presented and payment of the Purchase Price (and any applicable transfer
taxes or charges) was made; PROVIDED, HOWEVER, that if the date of such
presentation and payment is a date upon which the Preferred Stock (or other
securities) transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
(or other securities) transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Rights Certificate, as
such, shall not be entitled to any rights of a stockholder of the Company with
respect to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number of shares covered by each Right and
the number of Rights outstanding are subject to adjustment from time to time as
provided in this SECTION 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
12
as otherwise provided in this SECTION 11(a) and in 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 and other securities which, if such Right had been exercised
immediately prior to such date and at a time when the Preferred Stock transfer
books of the Company were open, such holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both this SECTION 11(a)(i) and SECTION 11(a)(ii) hereof the
adjustment provided for in this SECTION 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to SECTION 11(a)(ii)
hereof.
(ii) Subject to SECTION 24(c) hereof, in the event any Person,
alone or together with its Affiliates and Associates, shall become an Acquiring
Person other than pursuant to a Permitted Offer (such an event being a "SECTION
11 EVENT"), then, promptly following the first occurrence of such a Section 11
Event, proper provision shall be made so that each holder of a Right, except as
provided in SECTION 7(e) hereof, shall, for a period of sixty (60) days after
the later of the occurrence of any such Section 11 Event and the effective date
of an appropriate registration statement pursuant to SECTION 9 hereof, 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 fractional interests in
shares of Preferred Stock, such number of shares of Common Stock of the Company
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right was exercisable immediately prior to the Section 11 Event at issue
and (y) dividing that product by fifty percent (50%) of the current market price
per one share of Common Stock (determined pursuant to SECTION 11(d) hereof) on
the date of the occurrence of the Section 11 Event at issue (such number of
shares being referred to as the "NUMBER OF ADJUSTMENT SHARES"); PROVIDED,
HOWEVER, that if the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of SECTION 13 hereof, then only the
provisions of SECTION 13 hereof shall apply and no adjustment shall be made
pursuant to this SECTION 11(a)(ii); and PROVIDED, FURTHER, that such sixty (60)
day period shall not be deemed to run during any period in which the exercise of
the Rights or the fulfillment by the Company or the Rights Agent of its or their
obligations under this Agreement shall be enjoined or otherwise prohibited in
full or in part by any court or other governmental agency or body.
(iii) In lieu of issuing shares of Common Stock in accordance
with SECTION 11(a)(ii) hereof, the Company may, if a majority of the Board then
in office determines that such action is necessary or appropriate and not
contrary to the interests of holders of Rights, elect to (and, in the event that
the Board has not exercised the exchange right contained in SECTION 24(c) hereof
and there are not sufficient treasury shares and authorized but unissued shares
of Common Stock to permit the exercise in full of the Rights in accordance with
SECTION 11(a)(ii) hereof, the Company shall) take all such action as may be
necessary to authorize, issue or pay, upon the exercise of the Rights, cash
(including by way of a reduction of the Purchase Price), property, shares of
Common Stock, other securities (whether equity or debt securities of the
Company, any Subsidiary of the Company, or otherwise) or any combination thereof
having an aggregate value equal to the value of the shares of Common Stock which
13
otherwise would have been issuable pursuant to SECTION 11(a)(ii) hereof, which
aggregate value shall be determined by a nationally recognized investment
banking firm selected by a majority of the Board. For purposes of the preceding
sentence, the value of the Common Stock shall be determined pursuant to SECTION
11(d) hereof and the value of any fractional interests in preferred stock or
preference stock which a majority of the Board determines to be a "COMMON STOCK
EQUIVALENT" shall be deemed to have the same value as the Common Stock. Any such
election by the Board must be made and publicly announced within sixty (60) days
following the date on which the Section 11 Event at issue shall have occurred.
Following the occurrence of such Section 11 Event, a majority of the Board then
in office may suspend the exercisability of the Rights for a period of up to
sixty (60) days following the date on which such Section 11 Event shall have
occurred to the extent that such Directors have not determined whether to
exercise their rights of election under this SECTION 11(a)(iii). If the Board
shall determine in good faith that it is likely that sufficient additional
shares of Common Stock or common stock equivalents could be authorized for
issuance upon exercise in full of the Rights, the sixty (60) day period set
forth above may be extended to the extent necessary, but not more than ninety
(90) days following the occurrence of the Section 11 Event at issue, in order
that the Company may seek stockholder approval for the authorization of such
additional shares. 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.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of any interests in Preferred Stock
entitling them (for a period expiring within forty-five (45) calendar days after
such record date) to subscribe for or purchase any interests in Preferred Stock
(or securities having the same or more favorable rights, privileges and
preferences as the Preferred Stock ("EQUIVALENT PREFERRED STOCK")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the current market price (as defined in
SECTION 11(d)) per share of Preferred Stock on such record date, the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock or equivalent preferred stock to be offered (or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock or equivalent preferred stock to
be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid 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 reasonably and with good faith to the holders of Rights by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and conclusive for all purposes.
Shares of Preferred Stock owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
14
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of interests in Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights, options or warrants (excluding those referred to in SECTION
11(b) hereof), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the then current
market price (as defined in SECTION 11(d) hereof) per share of Preferred Stock
on such record date, less the fair market value (as determined reasonably and
with good faith to the holders of Rights by the Board, whose determination shall
be described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and conclusive for all purposes) of the portion of the cash,
assets or evidences of indebtedness so to be distributed or of such subscription
rights, options or warrants distributable in respect of one share of Preferred
Stock and the denominator of which shall be the then current market price (as
defined in SECTION 11(d) hereof) per share of the Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Purchase Price shall
again be adjusted to be the Purchase Price which would be in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than
as provided in SECTION 11(a)(iii) hereof, the "CURRENT MARKET PRICE" per share
of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; PROVIDED, HOWEVER, that in the event that the current per share market
price of the Common Stock is determined in whole or in part during a period
following the announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock or (B) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of thirty (30) Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the "CURRENT MARKET PRICE"
shall be properly adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange but
are listed or quoted on The Nasdaq Stock Market, the last reported sale price,
or, in case no such sale takes place on such day, the average of the closing bid
15
and asked prices as reported by Nasdaq, or, if the shares of Common Stock are
not listed or quoted on The Nasdaq Stock Market, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the OTC Bulletin Board or such other
system then in use, or, if on any such date the shares of Common Stock are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board. If on any such date no market maker is making a market in
the Common Stock, the fair value of such shares on such date as determined
reasonably and with good faith by the Board shall be used and shall be binding
on the Rights Agent and conclusive for all purposes. The term "TRADING DAY"
shall mean a day on which the principal national securities exchange or The
Nasdaq Stock Market, as the case may be, on which the shares of Common Stock are
principally listed or admitted to trading or quoted is open for the transaction
of business or, if the shares of Common Stock are not listed or admitted to
trading or quoted on any national securities exchange or The Nasdaq Stock
Market, a Business Day. If the Common Stock is not publicly held or not so
listed or traded, "CURRENT MARKET PRICE" per share shall mean the fair value per
share determined reasonably and with good faith to the holders of Rights by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and conclusive for all
purposes.
(ii) For the purpose of any computation hereunder, the
"CURRENT MARKET PRICE" per share (or one one-thousandth of a share) of Preferred
Stock shall be determined in the same manner as set forth above for the Common
Stock in SECTION 11(d)(i) (other than the last sentence thereof). If the current
market price per share (or one one-thousandth of a share) of Preferred Stock
cannot be determined in the manner provided above or if the Preferred Stock is
not publicly held or listed or traded in a manner described in SECTION 11(d)(i),
the "CURRENT MARKET PRICE" per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 1,000 (as such number may be appropriately
adjusted for such events as stock splits, stock dividends and recapitalization
with respect to the Common Stock occurring after the date of this Agreement)
multiplied by the current market price per share of the Common Stock and the
"CURRENT MARKET PRICE" per one one-thousandth of a share of Preferred Stock
shall be equal to the current market price per share of the Common Stock (as
appropriately adjusted). If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, "CURRENT MARKET PRICE" per share 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
shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
PROVIDED, HOWEVER, that any adjustments which by reason of this SECTION 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this SECTION 11 shall be made
to the nearest cent or to the nearest thousandth of a share of Common Stock or
other share or one-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this SECTION 11(e), any adjustment
required by this SECTION 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Expiration Date.
16
(f) If as a result of any provision of this SECTION 11, the holder
of any Right shall become entitled to receive any shares of capital stock of the
Company other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares (and the related Purchase Price) contained
in this SECTION 11, and the provisions of SECTIONs 7, 9, 10, 13 and 15 hereof
with respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in SECTION 11(i) hereof, upon each adjustment of the Purchase Price as
a result of the calculations made in SECTION 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths
of a share of Preferred Stock covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one millionth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this SECTION
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to SECTION 15 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
17
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandths of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the number of
one one-thousandths of a share of Preferred Stock or shares of Common Stock or
other securities issuable upon exercise of the Rights (aggregating, for this
purpose, an appropriate amount of the Purchase Price for fractional shares to
compare such aggregated amount to the par value for a whole share), the Company
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid and
nonassessable one one-thousandths of a share of Preferred Stock or shares of
Common Stock or other securities at such adjusted Purchase Price. If upon any
exercise of the Rights, a holder is to receive a combination of Common Stock and
common stock equivalents, or Preferred Stock and preferred stock equivalents, a
portion of the consideration paid upon such exercise, equal to at least the then
par value, if any, of a share of Common Stock or Preferred Stock of the Company,
as the case may be, shall be allocated as the payment for each share of Common
Stock or Preferred Stock of the Company, as the case may be, so received.
(l) In any case in which this SECTION 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; PROVIDED, HOWEVER, that the Company shall deliver to such
holder a due xxxx or other appropriate instrument evidencing such holder's right
to receive such additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything to the contrary in this SECTION 11 notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this SECTION 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price, issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, stock dividends or issuance of rights, options or warrants referred to
hereinabove in this SECTION 11, hereafter made by the Company to holders of
Preferred Stock shall not be taxable to such stockholders.
18
(n) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the date of this Agreement
and prior to the Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock, the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
(o) The exercise of Rights under SECTION 11(a)(ii) hereof shall
only result in the loss of rights under SECTION 11(a)(ii) hereof to the extent
so exercised and shall not otherwise affect the rights represented by the Rights
under this Agreement, including the rights represented by SECTION 13 hereof.
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in SECTIONs 11 or 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Preferred Stock
and the Common Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Rights Certificate in accordance with SECTION 26
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any adjustment unless and until it shall have received such
certificate. Notwithstanding the foregoing provisions of this SECTION 12, the
failure of the Company to make such certification or give such notice shall not
affect the validity, or the force or effect, of the requirement for such
adjustment.
13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person, (y) any Person shall consolidate with the Company,
or merge with and into the Company and the Company shall be the continuing or
surviving corporation of such merger (other than, in the case of any transaction
described in (x) or (y), a merger or consolidation which would result in all of
the Voting Power represented by the securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into securities of the surviving entity) all
of the Voting Power represented by the securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation and
the holders of such securities not having changed as a result of such merger or
consolidation), or (z) the Company shall sell, mortgage or otherwise transfer
(or one or more of its Subsidiaries shall sell, mortgage or otherwise transfer),
in one or more transactions, assets or earning power aggregating more than fifty
19
percent (50%) of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person (any of the events described in the
foregoing clauses (x), (y) or (z) being herein referred to as a "SECTION 13
Event"), then, and in each such case, proper provision shall be made so that (i)
each holder of a Right (other than as provided in SECTION 7(e) hereof) shall
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
shares of freely tradable Common Stock of the Principal Party (as hereinafter
defined), free and clear of liens, rights of call or first refusal, encumbrances
or other adverse claims, as shall be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-thousandths
of a share of Preferred Stock for which a Right is then exercisable (without
taking into account any adjustment previously made pursuant to SECTION 11(a)(ii)
hereof) and (y) dividing that product by fifty percent (50%) of the current
market price per share of the Common Stock of such Principal Party (determined
pursuant to SECTION 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "COMPANY" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
SECTION 11 hereof shall apply to such Principal Party; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock in accordance with SECTION 9
hereof) in connection with such consummation as may be necessary to ensure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable upon
the exercise of the Rights.
(b) "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in clauses (x) or
(y) of the first sentence of this SECTION 13, the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to the
merger or consolidation (including, if applicable, the Company, if it
is the surviving corporation); and
(ii) in the case of any transaction described in clause (z) of
the first sentence in this SECTION 13, 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, (A) if the Common Stock of
such Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary or
Affiliate of another Person the Common Stock of which is and has been
so registered, "PRINCIPAL PARTY" shall refer to such other Person; (B)
in case such Person is a Subsidiary, directly or indirectly, or
Affiliate of more than one Person, the Common Stock of two or more of
which are and have been so registered, "PRINCIPAL PARTY" shall refer to
whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value; and (C) in case such Person is owned,
directly or indirectly, by a joint venture formed by two or more
Persons that are not owned, directly or indirectly, by the same Person,
the rules set forth in clauses (A) and (B) above shall apply to each of
20
the chains of ownership having an interest in such joint venture as if
such joint venture were a Subsidiary of each such joint venturer and
the Principal Parties in each such chain shall bear the obligations set
forth in this SECTION 13 in the same ratio as their direct or indirect
interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless
the Principal Party shall have a sufficient number of authorized shares of its
Common Stock that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this SECTION 13 and unless
prior thereto the Company and each Principal Party and each other Person who may
become a Principal Party as a result of such Section 13 Event 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 such Section 13 Event,
the Principal Party at its own expense shall:
(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, will use its best efforts to
cause such registration statement to become effective as soon as
practicable after such filing and will use its best efforts to cause
such registration statement to remain effective (with a prospectus at
all times meeting the requirements of the Act) until the Expiration
Date;
(ii) use its best efforts to (x) qualify or register the
Rights and the securities purchasable upon exercise of the Rights under
the blue sky laws of such jurisdictions as may be necessary or
appropriate and (y) cause the Rights and the securities purchasable
upon exercise of the Rights to be listed on any national securities
exchange or national quotation system upon which its Common Stock is
listed, traded or quoted; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all material respects with the requirements for registration
on Form 10 under the Exchange Act.
The provisions of this SECTION 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. The rights under this SECTION 13
shall be in addition to the rights to exercise Rights and adjustments under
SECTION 11(a)(ii) hereof and shall survive any exercise thereunder.
(d) Notwithstanding anything in this Agreement to the contrary,
this SECTION 13 shall not be applicable to a transaction described in CLAUSES
(x) or (y) of SECTION 13(a) hereof if (i) such transaction is (x) consummated
with a Person or Persons who acquired shares of Common Stock pursuant to a
Permitted Offer (or a wholly owned Subsidiary of any such Person or Persons) and
(y) related to such Permitted Offer, (ii) the price per share of Common Stock
offered in such transaction is not less than the price per share of Common Stock
paid to all holders of Common Stock whose shares were purchased pursuant to such
Permitted Offer and (iii) the form of consideration being offered to the
remaining holders of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
21
consummation of any such transaction contemplated by this SUBSECTION (d), all
Rights hereunder shall expire.
14. ADDITIONAL COVENANTS.
(a) The Company covenants and agrees that after the Stock
Acquisition Date it shall not (i) consolidate with, (ii) merge with or into or
(iii) sell or transfer to any other Person, in one or more 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, if at the
time of or after such consolidation, merger or sale there are any charter or
by-law provisions or any rights, warrants or other instruments outstanding or
any other action taken which would diminish or otherwise eliminate the benefits
intended to be afforded by the Rights. The Company shall not consummate any such
consolidation, merger or sale unless prior thereto the Company and such other
Person shall have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this subsection.
(b) The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by SECTION 24 hereof, take
any action the purpose or effect of which is to diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.
15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in SECTION 11(n)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this SECTION 15(a),
the current market value of a whole Right shall be (except as otherwise provided
in the last sentence of this SECTION 15(a)) the closing price of the Rights for
the Trading Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable. The closing price of the Rights for any day
shall be the last sale price, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by The Nasdaq Stock Market 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 no such
market maker is making a market in the Rights, the fair value of the Rights on
such date as determined reasonably and with good faith to the holders of Rights
by the Board shall be used and shall be binding on the Rights Agent and
conclusive for all purposes.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
22
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 fractional interests in shares of Preferred
Stock represented by such depositary receipts. In lieu of fractional shares of
Preferred Stock that are not integral multiples of one one-thousandth of a share
of Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this SECTION
15(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be determined in the manner set forth in SECTION 11(d) hereof for
the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share of Common Stock. For purposes of this SECTION
15(c), the current market value shall be determined in the manner set forth in
SECTION 11(d) hereof for the Trading Day immediately prior to the date of such
exercise.
(d) Except as otherwise expressly provided herein, the holder of a
Right by the acceptance of the Right expressly waives such holder's right to
receive any fractional Rights or any fractional shares (other than, in the case
of Preferred Stock, fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock) upon exercise of a Right.
16. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, except those rights of action vested in the Rights Agent pursuant to
SECTION 21, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement. Holders of Rights shall be
entitled to recover the reasonable costs and expenses, including attorneys'
fees, incurred by them in any action to enforce the provisions of this
Agreement.
23
17. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent and only if
surrendered at the principal office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates attached;
(c) the Company and the Rights Agent may deem and treat the Person
in whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of the inability of the Company or the
Rights Agent to perform any of its or their obligations under this Agreement by
reason of any preliminary or permanent injunction or other order, decree,
judgment or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority prohibiting or otherwise restraining performance of such obligation;
PROVIDED, HOWEVER, that the Company must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
18. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Preferred Stock, Common
Stock or any other securities of the Company which may at any time be issuable
upon exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in SECTION 25 hereof), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions thereof.
19. 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,
24
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability arising therefrom, directly or
indirectly. The indemnification provided for hereunder shall survive the
expiration of the Rights and the termination of this Agreement. The costs and
expenses incurred in enforcing this right of indemnification shall be paid by
the Company.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged by the proper Person or Persons.
20. 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
corporate trust or stockholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such Person would be eligible
for appointment as a successor Rights Agent under the provisions of SECTION 22
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
25
21. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of current market price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chief Executive Officer, the President, any Vice President, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct. In no case will the Rights Agent be
liable for special, indirect, incidental or consequential loss or damages of any
kind whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the possibility of such damages.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except as to the fact that it has countersigned the Rights
Certificates) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any change in the exercisability of
Rights (including Rights becoming void pursuant to SECTION 7(e) hereof) except
with respect to the exercise of Rights evidenced by Rights Certificates after
actual notice of such change; nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of SECTION 11 or 13 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after receipt of a
certificate pursuant to SECTION 12 describing any such adjustment); nor shall it
be responsible for any determination by the Board of the current market value of
the Rights or Preferred Stock or Common Stock pursuant to the provisions of
SECTION 15 hereof; nor shall it by any act hereunder be deemed to make any
26
representation or warranty as to the authorization or reservation of any shares
of Preferred Stock or other securities to be issued pursuant to this Agreement
or any Rights Certificate or as to whether any shares of Preferred Stock or
other securities will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performance 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 and
certificates delivered pursuant to any provision hereof from the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and is authorized to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
written instructions of any such officer. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent with respect to its duties or obligations under this Agreement and
the date on or after which such action shall be taken or omitted and the Rights
Agent shall not be liable for any action taken or omitted in accordance with a
proposal included in any such application on or after the date specified therein
(which date shall not be less than three (3) Business Days after the date any
such officer actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking or
omitting any such action, the Rights Agent has received written instructions in
response to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company or to the holders of the
Rights resulting from any such act, omission, default, neglect or 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.
27
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause l or 2 thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
22. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (a) a Person organized and doing
business under the laws of the United States or of the State of New York or the
State of Texas (or of any other state of the United States so long as such
Person is authorized to do business in the State of New York or the State of
Texas), in good standing, having a principal office in the State of New York or
the State of Texas, which is authorized under such laws to exercise corporate
trust or stockholder services powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000.00 or (b) an Affiliate of a Person described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall mail notice thereof in writing to
the predecessor Rights Agent and each transfer agent of the Common Stock and
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
SECTION 22, 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.
23. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board 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 Rights Certificates made in
28
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or otherwise under any employee plan or arrangement,
which plan or arrangement is existing as of the Distribution Date, or upon the
exercise, conversion or exchange of shares of Series A Preferred Stock or any
other securities issued by the Company on or prior to the Distribution Date, and
(b) may, in any other case, if deemed necessary or appropriate by the Board,
issue Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no such
Rights Certificates shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificates would be issued, and (ii) no such Rights Certificates shall
be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.
24. REDEMPTION, TERMINATION AND EXCHANGE.
(a) (i) The Board may, at its option, at any time prior to the
earlier of (x) the Stock Acquisition Date or (y) the Close of Business on the
Final Expiration Date, redeem all but not less than all of the then outstanding
Rights at a redemption price of $0.001 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"REDEMPTION PRICE"). The Company may, at its option, pay the Redemption Price in
any form of consideration deemed appropriate by the Board.
(ii) In addition, and notwithstanding the provisions of
SECTION 24(a)(i) hereof, the Board may redeem all but not less than all of the
then outstanding Rights at the Redemption Price on or after the Stock
Acquisition Date but prior to any Section 13 Event either (x) in connection with
any Section 13 Event in which all holders of Common Stock are treated alike and
not involving (other than as a holder of Common Stock being treated like all
other such holders) an Acquiring Person or an Affiliate or Associate thereof or
any other Person in which such Acquiring Person or Affiliate or Associate
thereof has any interest, or any other Person acting directly or indirectly on
behalf of or in association with any such Acquiring Person or Affiliate or
Associate thereof, or (y) following the occurrence of a Section 11 Event, and
the expiration of any period during which the holder of Rights may exercise the
rights under SECTION 11(a)(ii) hereof as a result thereof, if and for as long as
any Acquiring Person having triggered the Section 11 Event at issue is not
thereafter the Beneficial Owner of fifteen percent (15%) or more of the
outstanding shares of Common Stock, and at the time of redemption there are no
other Persons who are Acquiring Persons.
(b) (i) In the case of a redemption permitted under SECTION
24(a)(i) hereof, 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. In the case of a redemption
permitted only under SECTION 24(a)(ii) hereof, evidence of which shall have been
29
filed with the Rights Agent, the right to exercise the Rights will terminate and
represent only the right to receive the Redemption Price only after ten (10)
Business Days following the giving of notice of such redemption to the holders
of such Rights if no Section 11 Event shall have occurred, and, if a Section 11
Event shall have occurred, upon the later of ten (10) Business Days following
the giving of such notice or the expiration of any period during which the
rights under SECTION 11(a)(ii) hereof may be exercised as a result thereof.
Within ten (10) days after the action of the Board ordering any such redemption
of the Rights, the Company shall give notice of such redemption to the Rights
Agent and the holders of the then outstanding Rights by mailing such notice to
the Rights Agent and to all such holders at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Stock. Any notice
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 will state
the method by which the payment of the Redemption Price will be made.
(ii) In the case of a redemption permitted under SECTION
24(a)(i) or (ii), the Company may, at its option, discharge all of its
obligations with respect to the Rights by (i) issuing a press release announcing
the manner of redemption of the Rights and (ii) mailing payment of the
Redemption Price to the registered holders of the Rights at their last addresses
as they appear on the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent of the Common
Stock, and upon such action, all outstanding Rights Certificates shall be null
and void without any further action by the Company.
(c) (i) Subject to the limitations of applicable laws, the Board
may, at its option and at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of SECTION
7(e) hereof) for (A) shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (the "EXCHANGE
SHARES"), or (B) Substitute Consideration (as that term is defined below). The
Board may determine, in its sole discretion, whether to deliver Exchange Shares
or Substitute Consideration. 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 of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common Stock 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 Stock then outstanding.
(ii) In the event the Board shall determine to deliver
Substitute Consideration in exchange for Rights, the Company shall (1) determine
the value of the Exchange Shares (the "EXCHANGE VALUE"), and (2) with respect to
each Right to be exchanged, make adequate provision to substitute for Exchange
Shares the following (the "SUBSTITUTE CONSIDERATION"): (v) cash, (w) Common
Stock or common stock equivalents (as that term is defined in SECTION 11(a)(iii)
hereof) or Preferred Stock or equivalent preferred stock (as that term is
defined in SECTION 11(b) hereof), (x) debt securities of the Company, (y) other
assets, or (z) any combination of the foregoing, having an aggregate value equal
to the Exchange Value, where such aggregate value has been determined by the
Board based upon the advice of a nationally recognized investment banking firm
selected by the Board. For purposes of this SECTION 24(c), the value of a share
30
of Common Stock shall be the current market price (as determined pursuant to
SECTION 11(d) hereof) per share of Common Stock on the day that is the later of
(x) the first occurrence of a Section 11 Event or (y) the date on which the
Company's right of redemption pursuant to SECTION 24(a)(i) hereof expires; and
the value of any common stock equivalent shall be deemed to have the same value
as the Common Stock on such date.
(iii) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to this SECTION 24(c), and without any further
action and without any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall be to receive
Exchange Shares or Substitute Consideration for each Right exchanged by such
holder. The Company shall promptly give public notice of any such exchange;
PROVIDED, HOWEVER, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to 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 Stock (or Substitute Consideration) for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of SECTION 7(e) hereof) held by each holder of Rights.
(iv) In the event that there shall not be sufficient shares of
Common Stock or Preferred Stock issued but not outstanding or authorized but
unissued to permit any exchange of Rights as contemplated in accordance with
this SECTION 24(c), the Company shall take all such action as may be necessary
to authorize additional shares of Common Stock or Preferred Stock for issuance
upon exchange of the Rights.
(v) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the Rights Certificates with
regard to which such fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole share of Common Stock. For the purposes of this SECTION
24(c)(v), the current market value of a whole share of Common Stock shall be
determined in the manner set forth in SECTION 11(d) hereof for the Trading Day
immediately prior to the date of exchange pursuant to this SECTION 24(c).
25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company),
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or shares of stock
of any class or any other securities, rights or options, (iii) to effect any
reclassification of Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), (iv) to effect
31
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 Rights Certificate, in accordance with SECTION 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock,
whichever shall be the earlier.
(b) In case any Triggering Event shall occur, then, in any such
case, the Company or the Principal Party, as the case may be, shall as soon as
practicable thereafter give to each holder of a Rights Certificate, in
accordance with SECTION 26 hereof, a notice of the occurrence of such Triggering
Event, which shall specify the event and the consequences of the Triggering
Event to holders of Rights under SECTION 11(a)(ii) or 13(a) hereof, as the case
may be.
(c) The failure to give notice required by this SECTION 25 or any
defect therein shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.
26. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, or sent by nationwide overnight delivery, addressed
(until another address is filed in writing with the Rights Agent) as follows:
US Dataworks, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Subject to the provisions of SECTION 22, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, or sent by nationwide overnight
delivery, addressed (until another address is filed in writing with the Company)
as follows:
Corporate Stock Transfer, Inc.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
32
Attention: Xxxxxxxx Xxxx
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid, or sent
by nationwide overnight delivery, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
27. SUPPLEMENTS AND AMENDMENTS. The Company and the Rights Agent may
from time to time supplement or amend this Agreement without approval of any
holders of Rights or Rights Certificates in order (i) to cure any ambiguity,
(ii) to correct or supplement any provision contained herein which may be
defective or inconsistent with any other provisions herein, (iii) prior to the
Distribution Date, to change or supplement any provision hereunder in any manner
which the Company may deem necessary or desirable or (iv) on or following the
Distribution Date, to change or supplement any provision hereunder in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates. 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 unless the
Rights Agent shall have determined in good faith that such supplement or
amendment would adversely affect its interests under this Agreement. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
28. DETERMINATION AND ACTIONS BY THE BOARD. For all purposes of
this Agreement, any calculation of the number of shares of Common Stock
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock or any other
securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act as in effect on the date of this
Agreement. Except as otherwise provided herein, 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 to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates and all other parties and
(y) not subject the Board to any liability to the holders of the Rights
Certificates.
29. 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.
30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
33
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, the Common Stock).
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.
32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Nevada and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts to
be made and to be performed entirely within such state.
33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
34
34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
US DATAWORKS, INC.
By: /s/ XXXXXXX X. XXXXX
----------------------------
Title: Chief Executive Officer
--------------------------
CORPORATE STOCK TRANSFER, INC., as
Rights Agent
By: /s/ XXXXXX XXXXXXXXX
----------------------------
Title: Secretary
--------------------------
35
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION
--------------------------
OF SERIES X PARTICIPATING PREFERRED STOCK
-----------------------------------------
OF
--
US DATAWORKS, INC.
------------------
We, Xxxxxxx X. Xxxxx, the Chief Executive Officer, and Xxxxx Xxxxxxxx,
the Secretary, of US Dataworks, Inc., a corporation organized and existing under
the General Corporation Law of the State of Nevada, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors on
July 23, 2003, adopted the following resolution creating a series of One Million
(1,000,000) shares of Preferred Stock, par value $0.0001 per share, designated
as Series X Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "SERIES X PARTICIPATING PREFERRED STOCK," par value $0.0001 per
share, and the number of shares constituting such series shall be One Million
(1,000,000). Such number of shares may be increased or decreased by resolution
of the Board of Directors; PROVIDED, that no decrease shall reduce the number of
shares of Series X Participating Preferred Stock to a number less than that of
the shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series X Participating Preferred Stock with respect to dividends (including,
without limitation, the Corporation's Series A Preferred Stock, par value
$0.0001 per share (the "SERIES A PREFERRED STOCK"), and Series B Preferred
Stock, par value $0.0001 per share (the "SERIES B PREFERRED STOCK"), as
designated prior to the date hereof), the holders of shares of Series X
Participating Preferred Stock in preference to the holders of shares of Common
Stock, par value $0.0001 per share (the "COMMON STOCK"), of the Corporation and
any other junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
A-1
quarterly dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein as a
"QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series X Participating Preferred Stock in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $25.00 or, (b) subject to the
provision for adjustment hereinafter set forth, 1,000 times the aggregate per
share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock, since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series X Participating
Preferred Stock. In the event the Corporation shall at any time after the close
of business on July 23, 2003 (the "RIGHTS DECLARATION DATE") (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 Stock into a
smaller number of shares, by reclassification or otherwise, then in each such
case the amount to which holders of shares of Series X Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
Series X Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); PROVIDED that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $25.00 per share on
the Series X Participating Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series X Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series X
Participating Preferred Stock unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
X Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series X Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series X Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
A-2
3. VOTING RIGHTS. The holders of shares of Series X Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series X Participating Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a greater number
of shares or (iii) combine the outstanding Common Stock into a smaller number of
shares, by reclassification or otherwise, then in each such case the number of
votes per share to which holders of shares of Series X Participating Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Series X Participating
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein or as otherwise provided by law, holders
of Series X Participating Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock and any other capital stock of the
Corporation having general voting rights as set forth herein) for taking any
corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series X Participating Preferred Stock as provided in SECTION 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series X Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not (noting, for this purpose, that shares of Series A Preferred Stock and
Series B Preferred Stock rank senior to the Series X Participating Preferred
Stock):
(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 (either as to dividends or upon liquidation, dissolution or
winding up) to the Series X Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series X Participating
Preferred Stock except dividends paid ratably on the Series X Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
A-3
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series X Participating
Preferred Stock provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series X Participating Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series X Participating Preferred Stock or any shares of stock ranking on a
parity with the Series X Participating Preferred Stock except in accordance with
a purchase offer made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The 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 (A) of this SECTION 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. REACQUIRED SHARES. Any shares of Series X Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series X Participating Preferred Stock
(noting, for this purpose, that shares of Series A Preferred Stock and Series B
Preferred Stock rank senior to the Series X Participating Preferred Stock)
unless, prior thereto, the holders of shares of Series X Participating Preferred
Stock shall have received per share, the greater of $1,000.00 or 1,000 times the
payment made per share of Common Stock, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment (the "SERIES X LIQUIDATION PREFERENCE"). Following the payment
of the full amount of the Series X Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series X Participating
Preferred Stock 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 X Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph (C) below 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 X Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of
Series X Participating Preferred Stock and Common Stock, respectively, holders
A-4
of Series X Participating Preferred Stock 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 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series X Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series X Participating Preferred Stock (noting, for this
purpose, that shares of Series A Preferred Stock and Series B Preferred Stock
rank senior to the Series X Participating Preferred Stock), then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, following
payment in full of all liquidation preferences of all shares senior to Common
Stock (including the Series X Participating Preferred Stock), there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then the remaining assets shall be distributed ratably to the holders of Common
Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (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 Stock into a smaller number of shares, by reclassification or
otherwise, 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.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash or any other property, then in any such case the shares of Series X
Participating Preferred Stock 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 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 after the Rights Declaration Date
(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
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series X Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior to
such event.
8. REDEMPTION. The shares of Series X Participating Preferred Stock
shall not be redeemable.
A-5
9. RANKING. The Series X Participating Preferred Stock shall rank
junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
10. AMENDMENT. The Certificate of Incorporation and the By-Laws of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series X
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least 66-2/3% of the outstanding shares of
Series X Participating Preferred Stock voting separately as a class.
11. FRACTIONAL SHARES. Series X Participating Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series X Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury as of the
24th day of July, 2003.
__________________________________
Xxxxxxx X. Xxxxx
Chief Executive Officer
Attest:
__________________________________
Xxxxx Xxxxxxxx
Secretary
A-6
EXHIBIT B
[FORM OF RIGHTS CERTIFICATE]
----------------------------
Certificate No. R-______________ _____________ Rights
NOT EXERCISABLE AFTER JULY 24, 2013, OR EARLIER IF NOTICE OF REDEMPTION
OR EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON
OR AN ASSOCIATE OR AN AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME VOID UNDER THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
Rights Certificate
------------------
US DATAWORKS, INC.
------------------
This certifies that ____________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of July 24, 2003 (the "RIGHTS AGREEMENT") between US
Dataworks, Inc., a Nevada corporation (the "COMPANY"), and Corporate Stock
Transfer, Inc., a Colorado corporation (the "RIGHTS AGENT"), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 p.m. (San Francisco time) on July 24,
2013, unless earlier redeemed or exchanged by the Company as set forth in the
Rights Agreement, at the office of the Rights Agent designated for such purpose,
one one-thousandth of a fully paid, nonassessable share of Series X
Participating Preferred Stock (the "PREFERRED STOCK") of the Company, at a
purchase price of [____] Dollars ($[__].00) per one one-thousandth of a share
(the "PURCHASE PRICE"), upon presentation and surrender of this Rights
Certificate with the appropriate Form of Election to Purchase and Certificate
duly executed.
The number of Rights evidenced by this Rights Certificate (and the
number of one one-thousandths of a share which may be purchased upon exercise
thereof) set forth above, and the Purchase Price set forth above, are the number
and Purchase Price as of the close of business on the record date relating to
the initial distribution of the Rights, based on the Preferred Stock as
constituted at such date.
Upon the occurrence of a Triggering Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Rights Certificate are
---------------
* The portion of the legend in brackets shall be inserted only if applicable.
B-1
Beneficially Owned (as such term is defined in the Rights Agreement) by (i) an
Acquiring Person (as such term is defined in the Rights Agreement) or an
Associate or Affiliate thereof (as such terms are defined in the Rights
Agreement) or, (ii) under certain circumstances specified in the Rights
Agreement, a transferee of an Acquiring Person, or an Affiliate or Associate of
an Acquiring Person, such Rights shall become null and void and no holder hereof
shall have any rights 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
of one one-thousandths of a share of Preferred Stock or other securities which
may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one one-thousandths of a share of Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised (other than pursuant to SECTION 11(a)(ii) of the Rights Agreement) in
part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised. If this Rights Certificate shall be exercised in whole or in part
pursuant to SECTION 11(a)(ii) of the Rights Agreement, the holder shall be
entitled to receive this Rights Certificate duly marked to indicate that such
exercise has occurred as set forth in the Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may, in certain instances, be (i) redeemed by the Company at
its option at a redemption price of $0.001 per Right or (ii) exchanged in whole
or in part for shares of the Company's Common Stock or substitute consideration.
Subject to the provisions of the Rights Agreement, the Company, at its option,
may elect to mail payment of the redemption price to the registered holder of
the Rights at the time of redemption, in which event this Certificate may become
void without any further action by the Company.
The Company may elect not to issue fractional shares of Preferred Stock
or other securities upon the exercise of any Right or Rights evidenced hereby
(other than fractions, in the instance of Preferred Stock, which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), in which event a
cash payment will be made, in lieu thereof, as provided in the Rights Agreement.
B-2
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of one
one-thousandths of a share of Preferred Stock or of any other securities of the
Company which may at any time be issuable on the exercise hereof, nor shall
anything contained in the Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated: ____________, 20__.
Attest: US DATAWORKS, INC.
By: ___________________________
_________________________________
Title: _______________________
Title: _________________________
Countersigned:
CORPORATE STOCK TRANSFER, INC.
as Rights Agent
By: ____________________________
B-3
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and transfers unto _____________________________________________________
________________________________________________________________________________
(please print name, address and social security or other identifying number
of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ____________, 20___.
__________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an Eligible Guarantor Institution, as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.
B-4
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are 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); and
(2) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 20__.
__________________________________
Signature
NOTICE
------
The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
In the event the Certificate set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and will affix a legend to that effect on any
Rights Certificate issued in exchange for this Rights Certificate.
B-5
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate pursuant to
SECTION 11(a)(ii) of the Rights Agreement.)
To: US Dataworks, Inc.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
(or such other securities of the Company) 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)
________________________________________________________________________________
The Rights Certificate indicating the balance, if any, of such Rights
which may still be exercised pursuant to SECTION 11(a)(ii) of the Rights
Agreement shall be returned to the undersigned unless the undersigned requests
that the Rights Certificate be registered in the name of and delivered to:
________________________________________________________________________________
Please insert social security or other identifying number (complete only if
Rights Certificate is to be registered in a name other than the undersigned)
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ____________, 20__.
__________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an Eligible Guarantor Institution, as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.
B-6
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) 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); and
(3) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 20__.
__________________________________
Signature
NOTICE
------
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the Certificate set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
B-7
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
the Rights Certificate other than pursuant to
SECTION 11(a)(ii) of the Rights Agreement.)
To: US Dataworks, Inc.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the one one-thousandths of a
share of Preferred Stock (or such other securities of the Company or any other
Person) 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 applicable, the Rights Certificate indicating the balance, if any,
of such Rights which may still be exercised pursuant to SECTION 11(a)(ii) of the
Rights Agreement shall be returned to the undersigned unless such Person
requests that the Rights Certificate be registered in the name of and delivered
to:
________________________________________________________________________________
Please insert social security or other identifying number (complete only if
Rights Certificate is to be registered in a name other than the undersigned)
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: ____________, 20__.
__________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an Eligible Guarantor Institution, as
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934.
B-8
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ]
are not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement);
(2) the Rights evidenced by this Rights Certificate [ ] are [ ]
are 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); and
(3) after due inquiry and to the best knowledge of the
undersigned, the undersigned [ ] did [ ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ____________, 20__.
__________________________________
Signature
NOTICE
------
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the fact of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the Certificate set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
B-9
EXHIBIT C
---------
SUMMARY OF RIGHTS
-----------------
On July 23, 2003, the Board of Directors of US Dataworks, Inc. (the
"COMPANY") declared a dividend distribution of one "RIGHT" for each outstanding
share of common stock (the "COMMON STOCK") of the Company to stockholders of
record at the close of business on September 2, 2003 (the "RECORD DATE"). Except
as set forth below, each Right, when exercisable, entitles the registered holder
to purchase from the Company one one-thousandth of a share of a new series of
preferred stock, designated as Series X Participating Preferred Stock (the
"PREFERRED STOCK"), at a price of Four Dollars ($4.00) per one one-thousandth of
a share (the "PURCHASE PRICE"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement (the "RIGHTS AGREEMENT")
between the Company and Corporate Stock Transfer, Inc., as "RIGHTS AGENT."
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights certificates will
be distributed. The Rights will separate from the Common Stock and a
"DISTRIBUTION DATE" will occur upon the earliest of the following: (i) a public
announcement that a person, entity or group of affiliated or associated persons
or entities (an "ACQUIRING PERSON") has acquired, or obtained the right to
acquire, beneficial ownership of fifteen percent (15%) or more of the
outstanding shares of Common Stock (other than (A) as a result of repurchases of
stock by the Company or certain inadvertent actions by institutional or certain
other stockholders, (B) the Company, any subsidiary of the Company or any
employee benefit plan of the Company or any subsidiary, (C) Societe Financiere
Privee, S.A. (together with its affiliated and associated persons and entities
"SFP"), currently the sole owner of all of the Company's outstanding Series A
Preferred Stock which is convertible into Common Stock, so long as SFP does not
increase its beneficial ownership by more than one percent (1%) of the
outstanding shares of Common Stock above the percentage it holds or is deemed to
hold from time to time by reason of its ownership of the Company's Series A
Preferred Stock (as well as Common Stock issued or issuable upon conversion of
the Series A Preferred Stock) or any other securities that SFP may purchase
directly from the Company in a transaction approved by the Board (as well as
Common Stock issued or issuable upon conversion of such securities) and (D)
certain other instances set forth in the Rights Agreement); or (ii) ten (10)
business days (unless such date is extended by the Board of Directors) following
the commencement of a tender offer or exchange offer which would result in any
person, entity or group of affiliated or associated persons or entities becoming
an Acquiring Person (unless such tender offer or exchange offer is a Permitted
Offer (defined below)).
Until the Distribution Date (or earlier redemption or expiration of the
Rights, if applicable), (i) the Rights will be evidenced by certificates for
Common Stock and will be transferred only with such Common Stock certificates,
(ii) new Common Stock certificates issued after the Record Date upon transfers
or new issuances of the Common Stock will contain a notation incorporating the
Rights Agreement by reference and (iii) the surrender for transfer of any
certificates for outstanding Common Stock will also constitute the transfer of
the Rights associated with such Common Stock. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("RIGHTS
C-1
CERTIFICATES") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date, and the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable unless and until a Distribution Date
occurs. The Rights will expire on the earliest of (i) July 24, 2013, (ii)
consummation of a merger transaction with a person, entity or group who (x)
acquired Common Stock pursuant to a Permitted Offer and (y) is offering in the
merger the same price per share and form of consideration paid in the Permitted
Offer or (iii) redemption or exchange of the Rights by the Company as described
below.
The number of Rights associated with each share of Common Stock shall
be proportionately adjusted in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Stock. The Purchase
Price payable, and the number of one one-thousandths of a share of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of the Preferred Stock, (ii)
upon the grant to holders of the Preferred Stock of certain rights, options or
warrants to subscribe for Preferred Stock, certain convertible securities or
securities having the same or more favorable rights, privileges and preferences
as the Preferred Stock at less than the current market price of the Preferred
Stock or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends
out of earnings or retained earnings) or of subscription rights, options or
warrants (other than those referred to above). With certain exceptions, no
adjustments in the Purchase Price will be required until cumulative adjustments
require an adjustment of at least one percent (1%) in such Purchase Price.
In the event that, after the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such, the
Company is involved in a merger or other business combination transaction
(whether or not the Company is the surviving corporation) or fifty percent (50%)
or more of the Company's assets or earning power are sold (in one transaction or
a series of transactions), proper provision shall be made so that each holder of
a Right (other than an Acquiring Person) shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price, that
number of shares of common stock of either the Company, in the event that it is
the surviving corporation of a merger or consolidation, or the acquiring company
(or, in the event there is more than one acquiring company, the acquiring
company receiving the greatest portion of the assets or earning power
transferred) which at the time of such transaction would have a market value of
two (2) times the Purchase Price (such right being called the "MERGER RIGHT").
In the event that a person, entity or group becomes an Acquiring Person (unless
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock at a price and on terms determined prior to the date of the first
acceptance of payment for any of such shares by at least a majority of the
members of the Board of Directors who are not officers of the Company and are
not Acquiring Persons (or affiliated or associated persons or entities thereof)
to be fair to, and in the best interests of, the Company and its stockholders (a
"PERMITTED OFFER")), then proper provision shall be made so that each holder of
a Right will, for a sixty (60) day period (subject to extension under certain
circumstances) thereafter, have the right to receive upon exercise that number
of shares of Common Stock (or, at the election of the Company, which election
may be obligatory if sufficient authorized shares of Common Stock are not
available, a combination of Common Stock, property, other securities (e.g.,
Preferred Stock) or cash (including by way of a reduction in the Purchase
C-2
Price)) having a market value of two (2) times the Purchase Price (such right
being called the "SUBSCRIPTION RIGHT"). The holder of a Right will continue to
have the Merger Right whether or not such holder exercises the Subscription
Right. Notwithstanding the foregoing, upon the occurrence of any of the events
giving rise to the exercisability of the Merger Right or the Subscription Right,
any Rights that are or were at any time after the Distribution Date owned by an
Acquiring Person (or affiliated or associated persons or entities thereof) shall
immediately become null and void.
At any time prior to the earlier to occur of (i) a person, entity or
group becoming an Acquiring Person or (ii) the expiration of the Rights, the
Company may redeem the Rights in whole, but not in part, at a price of $0.001
per Right (the "REDEMPTION PRICE"), which redemption shall be effective upon the
action of the Board of Directors. Additionally, the Company may, following a
person, entity or group becoming an Acquiring Person, redeem the then
outstanding Rights in whole, but not in part, at the Redemption Price (i) if
such redemption is incidental to a merger or other business combination
transaction or series of transactions involving the Company but not involving an
Acquiring Person (or certain related persons or entities) or (ii) following an
event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as the Acquiring Person triggering the
Subscription Right beneficially owns securities representing less than fifteen
percent (15%) of the outstanding shares of Common Stock and at the time of
redemption there are no other Acquiring Persons. The redemption of Rights
described in the preceding sentence shall be effective only as of such time when
the Subscription Right is not exercisable. Upon the effective date of the
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
Subject to applicable law, the Board of Directors, at its option, may
at any time after a person, group or entity becomes an Acquiring Person (but not
after the acquisition by such Acquiring Person of fifty percent (50%) or more of
the outstanding shares of Common Stock), exchange all or part of the then
outstanding and exercisable Rights (except for Rights which have become void)
for shares of Common Stock at a rate of one share of Common Stock per Right
(subject to adjustment) or, alternatively, for substitute consideration
consisting of cash, securities of the Company or other assets (or any
combination thereof).
The Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable and junior to any other series of preferred stock the Company may
issue (unless otherwise provided in the terms of such stock). Each share of
Preferred Stock will have a preferential quarterly dividend in an amount equal
to 1,000 times the dividend declared on each share of Common Stock, but in no
event less than $25.00. In the event of liquidation, the holders of shares of
Preferred Stock will receive a preferred liquidation payment equal, per share,
to the greater of $1,000.00 or 1,000 times the payment made per share of Common
Stock. Each share of Preferred Stock will have 1,000 votes, voting together with
the shares of Common Stock. In the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitled to receive 1,000 times the amount and type of
consideration received per share of Common Stock. The rights of the Preferred
Stock as to dividends, liquidation and voting, and in the event of mergers and
consolidations, are protected by customary antidilution provisions. Fractional
shares of Preferred Stock will be issuable; HOWEVER, the Company may elect to
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(i) distribute depositary receipts in lieu of such fractional shares and (ii)
make an adjustment in cash, in lieu of fractional shares other than fractions
that are multiples of one one-thousandth of a share, based on the market price
of the Preferred Stock prior to the date of exercise.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights should not
be taxable to stockholders or to the Company, holders of Rights may, depending
upon the circumstances, recognize taxable income in the event (i) that the
Rights become exercisable for (x) Common Stock or Preferred Stock (or other
consideration) or (y) common stock of an acquiring company in the instance of
the Merger Right as set forth above or (ii) of any redemption or exchange of the
Rights as set forth above.
The Company and the Rights Agent retain broad authority to amend the
Rights Agreement; HOWEVER, following any Distribution Date any amendment may not
adversely affect the interests of holders of Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. THIS
SUMMARY DESCRIPTION OF THE RIGHTS DOES NOT PURPORT TO BE COMPLETE AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE RIGHTS AGREEMENT, WHICH IS
INCORPORATED HEREIN BY REFERENCE.
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