RIGHTS AGREEMENT
dated as of December 2, 2010
between
COMPETITIVE TECHNOLOGIES, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
as Rights Agent
Table of Contents
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Page
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SECTION 1. Certain Definitions 1
SECTION 2. Appointment of Rights Agent 11
SECTION 3. Issue of Rights and Right Certificates 12
SECTION 4. Form of Right Certificates 15
SECTION 5. Execution, Countersignature and Xxxxxxxxxxxx 00
Xxxxxxxx, Xxxxx-Xx, Combination and Exchange of Right
SECTION 6. Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates; Uncertificated Rights 16
SECTION 7. Exercise of Rights; Expiration Date of Rights 18
SECTION 8. Cancelation and Destruction of Right Certificates 21
SECTION 9. Reservation and Availability of Preferred Shares 21
SECTION 10. Preferred Shares Record Date 23
SECTION 11. Adjustments in Rights After There Is an Acquiring Person;
Exchange of Rights for Shares; Business Combinations 24
SECTION 12. Certain Adjustments 30
SECTION 13. Certificate of Adjustment 31
SECTION 14. Additional Covenants 33
SECTION 15. Fractional Rights and Fractional Shares 33
SECTION 16. Rights of Action 35
SECTION 17. Transfer and Ownership of Rights and Right Certificates 37
SECTION 18. Right Certificate Holder Not Deemed a Stockholder 37
SECTION 19. Concerning the Rights Agent 38
SECTION 20. Merger or Consolidation or Change of Rights Agent 38
SECTION 21. Duties of Rights Agent 39
SECTION 22. Change of Rights Agent 44
SECTION 23. Issuance of Additional Rights and Right Certificates 46
SECTION 24. Redemption and Termination 47
SECTION 25. Notices 47
SECTION 26. Supplements and Amendments 49
SECTION 27. Successors 50
SECTION 28. Benefits of Rights Agreement; Determinations and Actions
by the Board, etc 50
SECTION 29. Severability 51
SECTION 30. Governing Law 51
SECTION 31. Counterparts; Effectiveness 51
SECTION 32. Descriptive Headings 51
Exhibits
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A Certificate of Designation
B Form of Right Certificate
C Summary of Rights
RIGHTS AGREEMENT dated as of December 2, 2010 (the "Rights Agreement"),
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between COMPETITIVE TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
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and AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC as Rights Agent (the "Rights
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Agent").
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The Board of Directors of the Company (the "Board") has authorized and
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declared a dividend of one Right (as hereinafter defined) for each share of
Common Stock, par value $0.001 per share, of the Company (the "Common Stock")
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outstanding at the Close of Business (as hereinafter defined) on December 2,
2010 (the "Record Date"), and has authorized the issuance of one Right (as such
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number may hereafter be adjusted pursuant to the provisions of this Rights
Agreement) with respect to each share of Common Stock that shall become
outstanding (whether originally issued or delivered from the Company's treasury)
between the Record Date and the earliest of the Distribution Date, the
Redemption Date or the Expiration Date (as such terms are hereinafter defined);
provided, however, that Rights may be issued with respect to shares of Common
Stock that shall become outstanding after the Distribution Date (whether
originally issued or delivered from the Company's treasury) and prior to the
earlier of the Redemption Date or the Expiration Date only in accordance with
the provisions of Section 23. Each Right shall initially represent the right to
purchase one one-thousandth (1/1,000th) of a share of Series B Preferred Stock,
par value $0.001 per share, of the Company (the "Preferred Shares"), having the
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powers, rights and preferences set forth in the Certificate of Designation
attached hereto as Exhibit A.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Rights Agreement,
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the following terms have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, alone or together
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with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of more than 20% of the Common Shares then outstanding, but not including (a)
the Company, any Subsidiary of the Company, any employee benefit or compensation
plan of the Company or of any of its Subsidiaries or any Person organized,
appointed or established by the Company and holding Common Shares for or
pursuant to the terms of any such employee benefit or compensation plan, (b) any
such Person who or which, alone or together with all Affiliates and Associates
of such Person, has become and is the Beneficial Owner of more than 20% of the
Common Shares at the time outstanding solely as the result of (i) a change in
the aggregate number of Common Shares outstanding since the last date on which
such Person acquired Beneficial Ownership of any Common Shares or (ii) the
acquisition by such Person or one or more of its Affiliates or Associates of
Beneficial Ownership of additional Common Shares if the Board determines that
such acquisition was made in good faith without the knowledge by such Person or
one or more of its Affiliates or Associates that such Person would thereby
become an Acquiring Person, which determination of the Board shall be conclusive
and binding on such Person, the Rights Agent, the holders of the Rights and all
other Persons, (c) any such Person who would, as of the Close of Business on the
date hereof, be an "Acquiring Person" pursuant to the foregoing provisions of
this definition (an "Excluded Person"), unless and until such Excluded Person
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shall acquire after the date hereof, without the prior approval of the Board,
Beneficial Ownership of any additional Common Shares (other than any such
ownership resulting from the exercise of any options or the vesting of any
restricted shares, in each case, granted prior to or after the date hereof to
such Excluded Person under any employee benefit or compensation plan of the
Company or any of its Subsidiaries) and (d) (i) any Person who is an immediate
family member of an Excluded Person and any trust for the benefit of (or the
trustees of which include) such immediate family member or such Excluded Person,
which Person or trust acquires from such Excluded Person Common Shares (such
shares, "Excluded Shares") and (ii) any executor or trustee for the estate of an
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Excluded Person or of such immediate family member, unless and until, in the
case of clause (i) and (ii), such Person, trust, executor or trustee, together
with all Affiliates and Associates of such Person, trust, executor or trustee,
shall become the Beneficial Owner of 20% or more of the Common Shares not
including Excluded Shares.
Notwithstanding clause (b)(ii) of the prior sentence, if any Person that is not
an Acquiring Person due to such clause (b)(ii) does not reduce its percentage of
Beneficial Ownership of Common Shares to 20% or less by the Close of Business on
the tenth calendar day after notice from the Company (the date of notice being
the first day) that such Person's Beneficial Ownership of Common Shares would
make it an Acquiring Person, such Person shall, at the end
of such ten calendar day period, become an Acquiring Person (and such clause
(b)(ii) shall no longer apply to such Person).
"Affiliate" and "Associate", when used with reference to any Person, shall
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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
Rights Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
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"beneficially own", and shall be deemed to have "Beneficial Ownership" of, any
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securities:
(a) 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
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Rules and Regulations under the Exchange Act, as in effect on the date of this
Rights Agreement;
(b) which such Person or any of such Person's Affiliates or Associates
has, directly or indirectly: (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (written or oral), 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 (i) to be the Beneficial Owner of, or to beneficially own, or
to have Beneficial Ownership of, any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange thereunder or cease to be subject to withdrawal by the
tendering security holder; or (ii) the right to vote or dispose of, including
pursuant to any agreement, arrangement or understanding (written or oral);
provided, however, that a Person shall not be deemed under this clause (ii) to
be the Beneficial Owner of, or to beneficially own, or to have Beneficial
Ownership of, any security if (A) the agreement, arrangement or understanding
(written or oral) to vote such security arises solely from a revocable proxy or
consent given to such Person in response to a public proxy or consent
solicitation made generally to all holders of Common Shares of the Company
pursuant to, and in accordance with, the applicable rules and regulations under
the Exchange Act and (B) the beneficial ownership of such security is not also
then reportable on Schedule 13D or 13G under the Exchange Act (or any comparable
or successor report);
(c) which are beneficially owned, directly or indirectly, by any other
Person (or an Affiliate or Associate thereof) with which such Person (or any of
such Person's Affiliates or Associates) has (i) any agreement, arrangement or
understanding (written or oral) for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to clause
(b)(ii) of this definition) or disposing of any voting securities of the Company
or (ii) any agreement, arrangement or understanding (written or oral) to
cooperate in obtaining, changing or influencing the control of the Company; or
(d) which are the subject of, or the reference securities for, or that
underlie, any Derivative Interest of such Person or any of such Person's
Affiliates or Associates, with the number of Common Shares deemed Beneficially
Owned being the notional or other number of Common Shares specified in the
documentation evidencing the Derivative Interest as being subject to be acquired
upon the exercise or settlement of the Derivative Interest or as the basis upon
which the value or settlement amount of such Derivative Interest is to be
calculated in whole or in part or, if no such number of Common Shares is
specified in such documentation, as determined by the Board in its sole
discretion to be the number of Common Shares to which the Derivative Interest
relates.
Notwithstanding the foregoing, nothing contained in this definition shall cause
a Person ordinarily engaged in business as an underwriter of securities to be
deemed the "Beneficial Owner" of, or to "beneficially own", or to have
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"Beneficial Ownership" of, any securities acquired in a bona fide firm
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commitment underwriting pursuant to an underwriting agreement with the Company.
"Board" shall have the meaning set forth in the introductory paragraph of
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this Rights Agreement.
"Book Value", when used with reference to Common Shares issued by any
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Person, shall mean the amount of equity of such Person applicable to each Common
Share, determined (a) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (b) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (c) after giving effect
to (i) the exercise of all rights, options and warrants to purchase such Common
Shares (other than the Rights), and the conversion of all securities convertible
into such Common Shares, at an exercise or conversion price, per Common Share,
which is less than such Book Value before giving effect to such exercise or
conversion (whether or not exercisability or convertibility is conditioned upon
occurrence of a future event), (ii) all dividends and other distributions on the
capital stock of such Person declared prior to the date as of which such Book
Value is to be determined and to be paid or made after such date, and (iii) any
other agreement, arrangement or understanding (written or oral), or transaction
or other action contemplated prior to the date as of which such Book Value is to
be determined that would have the effect of thereafter reducing such Book Value.
"Business Combination" shall have the meaning set forth in Section
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11(c)(i).
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
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Friday that is not a day on which banking institutions in the Borough of
Manhattan, the City of New York, are authorized or obligated by law or executive
order to close.
"Certificate of Designation" shall mean the Certificate of Designation of
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the Preferred Shares, a copy of which is attached hereto as Exhibit A.
"Close of Business" on any given date shall mean 5:00 p.m., New York City
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time, on such date; provided, however, that, if such date is not a Business Day,
"Close of Business" shall mean 5:00 p.m., New York City time, on the next
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succeeding Business Day.
"Common Shares", when used with reference to the Company prior to a
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Business Combination, shall mean the shares of Common Stock or any other shares
of capital stock of the Company into which the Common Stock shall be
reclassified or changed. "Common Shares", when used with reference to any
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Person (other than the Company prior to a Business Combination), shall mean
shares of capital stock of such Person (if such Person is a corporation) of any
class or series, or units of equity interests in such Person (if such Person is
not a corporation) of any class or series, the terms of which do not limit (as a
maximum amount and not merely in proportional terms) the amount of dividends or
income payable or distributable on such class or series or the amount of assets
distributable on such class or series upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide that
such class or series is subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed, and if there shall be more than one
class or series of such shares of capital stock or units of equity interests of
such Person, then "Common Shares" of such Person shall mean the class or series
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of capital stock of such Person or units of equity interests in such Person
having voting power (being the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation)), or
in the case of multiple classes or series having voting power, having the
greatest voting power.
"Common Stock" shall have the meaning set forth in the introductory
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paragraph of this Rights Agreement.
"Company" shall have the meaning set forth in the heading of this Rights
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Agreement; provided, however, that if there is a Business Combination, "Company"
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shall have the meaning set forth in Section 11(c)(iii).
The term "control" with respect to any Person shall mean the power to
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direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by
or through stock ownership, agency or otherwise; and the terms "controlling" and
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"controlled" shall have meanings correlative to the foregoing.
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"Distribution Date" shall have the meaning set forth in Section 3(b).
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"Derivative Interest" shall mean any derivative securities (as defined
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under Rule 16a-1 under the Exchange Act) that increase in value as the value of
the underlying equity increases, including, but not limited to, a long
convertible security, a long call option and a short put option position, in
each case, regardless of whether (x) such interest conveys any voting rights in
such security, (y) such interest is required to be, or is capable of being,
settled through delivery of such security or (z) transactions hedge the economic
effect of such interest.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in effect
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on the date in question, unless otherwise specifically provided.
"Exchange Consideration" shall have the meaning set forth in Section
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11(b)(i).
"Expiration Date" shall mean the Close of Business on the third anniversary
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of the date of this Rights Agreement.
"including" shall mean including, without limitation.
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"Major Part", when used with reference to the assets of the Company and its
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Subsidiaries as of any date, shall mean assets (a) having a fair market value
aggregating 50% or more of the total fair market value of all the assets of the
Company and its Subsidiaries (taken as a whole) as of the date in question, (b)
accounting for 50% or more of the total value (net of depreciation and
amortization) of all the assets of the Company and its Subsidiaries (taken as a
whole) as would be shown on a consolidated or combined balance sheet of the
Company and its Subsidiaries as of the date in question, prepared in accordance
with generally accepted accounting principles then in effect, or (c) accounting
for 50% or more of the total amount of earnings before interest, taxes,
depreciation and amortization or of the revenues of the Company and its
Subsidiaries (taken as a whole) as would be shown on, or derived from, a
consolidated or combined statement of income or net earnings of the Company and
its Subsidiaries for the period of 12 months ending on the last day of the
Company's monthly accounting period next preceding the date in question,
prepared in accordance with generally accepted accounting principles then in
effect.
"Market Value", when used with reference to Common Shares on any date,
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shall mean the average of the daily closing prices, per share, of such Common
Shares for the period which is the shorter of (a) 30 consecutive Trading Days
ending on the Trading Day immediately prior to the date in question or (b) the
number of consecutive Trading Days beginning on the Trading Day immediately
after the date of the first public announcement of the event requiring a
determination of the Market Value of Common Shares and ending on the Trading Day
immediately prior to the record date of such event. The closing price for each
Trading Day shall be the closing price quoted on the composite tape for
securities listed on the OTCQX, or, if such securities are not quoted on such
composite tape or if such securities are not listed on such exchange, on the
principal United States securities exchange registered under the Exchange Act
(or any recognized foreign stock exchange) on which such securities are listed,
or, if such securities are not listed on any such exchange, the closing price
(or, if no sale takes place on such Trading Day, the average of the closing bid
and asked prices on such Trading Day) as quoted on any reputable quotations
system specified by the Board, or if no such quotations are available, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such securities selected by the Board, or if on
any such Trading Day no market maker is making a market in such securities, the
closing price of such securities on such Trading Day shall be deemed to be the
fair value of such securities as determined in good faith by the Board (whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent, the holders of Rights and all other
Persons); provided, however, that if a Trading Day occurs during a period
following an announcement of any action of the type described in Section 12(a)
that would require an adjustment thereunder by the issuer of the securities the
closing price of which is to be determined, then, and in each such case, the
closing price of such securities shall be appropriately adjusted to reflect the
effect of such action on the market price of such securities; and provided
further, however, that for the purpose of determining the closing
price of the Preferred Shares for any Trading Day on which there is no market
maker for the Preferred Shares, the closing price on such Trading Day shall be
deemed to be the Formula Number (as defined in the Certificate of Designation)
multiplied by the closing price of the Common Shares of the Company on such
Trading Day.
"Person" shall mean an individual, firm, corporation, partnership, limited
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liability company, joint venture, association, trust, unincorporated
organization or other entity, and shall include any successor (by merger or
otherwise) thereof or thereto.
"Post Transferee" shall have the meaning set forth in Section 7(e).
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"Preferred Shares" shall have the meaning set forth in the introductory
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paragraph of this Rights Agreement. Any reference in this Rights Agreement to
Preferred Shares shall be deemed to include any authorized fraction of a
Preferred Share, unless the context otherwise requires.
"Principal Party" shall mean the Surviving Person in a Business
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Combination; provided, however, that, (i) if such Surviving Person is a direct
or indirect Subsidiary of any other Person, "Principal Party" shall mean the
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Person which is the ultimate parent of such Surviving Person, and (ii) in the
event ultimate control of such Surviving Person is shared by two or more
Persons, "Principal Party" shall mean that Person that is immediately controlled
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by such two or more Persons.
"Prior Transferee" shall have the meaning set forth in Section 7(e).
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"Purchase Price" with respect to each Right shall mean $100.00, as such
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amount may from time to time be adjusted as provided in this Rights Agreement,
and shall be payable in lawful money of the United States of America. All
references herein to the Purchase Price shall mean the Purchase Price as in
effect at the time in question.
"Record Date" shall have the meaning set forth in the introductory
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paragraph of this Rights Agreement.
"Redemption Date" shall have the meaning set forth in Section 24(a).
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"Redemption Price" with respect to each Right shall mean $0.001, as such
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amount may from time to time be adjusted in accordance with Section 12. All
references herein to the Redemption Price shall mean the Redemption Price as in
effect at the time in question.
"Registered Common Shares" shall mean Common Shares that are, as of the
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date of consummation of a Business Combination, and have continuously been for
the 12 months immediately preceding such date, registered under Section 12 of
the Exchange Act, and if a Person has multiple classes or series of Registered
Common Shares outstanding, "Registered Common Shares" of such Person shall mean
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the class or series of Registered Common Shares of such Person having voting
power (being the power under ordinary circumstances (and not merely upon the
happening of a contingency) to vote in the election of directors of such Person
(if such Person is a corporation) or to participate in the management and
control of such Person (if such Person is not a corporation)), or in the case of
multiple classes or series having voting power, having the greatest voting
power.
"Right Certificate" shall mean a certificate evidencing a Right in
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substantially the form attached hereto as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or other
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securities) as provided in this Rights Agreement.
"Securities Act" shall mean the Securities Act of 1933, as in effect on
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the date in question, unless otherwise specifically provided.
"Subsidiary" shall mean a Person, at least a majority of the total
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outstanding voting power (being the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation)) of
which is owned, directly or indirectly, by another Person or by one or more
other Subsidiaries of such other Person or by such other Person and one or more
other Subsidiaries of such other Person.
"Surviving Person" shall mean (a) the Person which is the continuing or
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surviving Person in a consolidation or merger specified in Section 11(c)(i)(A)
or 11(c)(i)(B) or (b) the Person to which the Major Part of the assets of the
Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred
or disposed of in a transaction specified in Section 11(c)(i)(C); provided,
however, that, if the Major Part of the assets of the Company and its
Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of
in one or more related transactions specified in Section 11(c)(i)(C) to more
than one Person, the "Surviving Person" in such case shall mean the Person that
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acquired assets of the Company and/or its Subsidiaries with the greatest fair
market value in such transaction or transactions.
"Trading Day" shall mean a day on which the principal national securities
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exchange (or principal recognized foreign stock exchange, as the case may be) on
which any securities or Rights, as the case may be, are listed or admitted to
trading is open for the transaction of business or, if the securities or Rights
in question are not listed or admitted to trading on any national securities
exchange (or recognized foreign stock exchange, as the case may be), a Business
Day.
SECTION 2. Appointment of Rights Agent. The Company hereby appoints the
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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 one or more co-Rights Agents as it may
deem necessary or desirable (the term "Rights Agent" being used herein to refer,
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collectively, to the Rights Agent together with any such co-Rights Agents). In
the event the Company appoints one or more co-Rights Agents, the respective
duties of the Rights Agent and any co-Rights Agents shall be as the Company
shall determine, and shall be provided in writing to the Rights Agent and any
such co-Rights Agent. Subject to Section 21(c), the Rights Agent shall have no
duty to supervise and shall not be liable for the acts or omissions of any such
co-Rights Agents.
SECTION 3. Issue of Rights and Right Certificates. (a) One Right shall
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be associated with each Common Share outstanding on the Record Date, each
additional Common Share that shall become outstanding between the Record Date
and the earliest of the Distribution Date, the Redemption Date or the Expiration
Date and each additional Common Share with which Rights are issued after the
Distribution Date but prior to the earlier of the Redemption Date or the
Expiration Date as provided in Section 23, subject to adjustment as provided in
this Rights Agreement.
(b) Until the earlier of (i) such date on which the Company learns that a
Person has become an Acquiring Person and (ii) such date, if any, as may be
designated by the Board following the commencement of, or first public
disclosure of an intent to commence, a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit or
compensation plan of the Company or of any of its Subsidiaries, or any Person
organized, appointed or established by the Company and holding Common Shares for
or pursuant to the terms of any such employee benefit or compensation plan) for
outstanding Common Shares, if upon consummation of such tender or exchange offer
such Person could be the Beneficial Owner of more than 20% of the outstanding
Common Shares (the Close of Business on the earlier of such dates being the
"Distribution Date"), (x) the Rights shall, except as otherwise provided in
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Section 3(c), be evidenced by the certificates for Common Shares registered in
the names of the holders thereof, or, in the case of Common Shares held in
uncertificated form, by the transaction statement or other record of ownership
of such Common Shares, and not by separate Right Certificates, and (y) the
Rights, including the right to receive Right Certificates, shall be transferable
only in connection with the transfer of the underlying Common Shares. As soon
as practicable after the Distribution Date, the Company shall prepare and
execute, the Rights Agent shall countersign, and the Company will send or cause
to be sent (and the Rights Agent shall, if requested and provided with all
necessary information, send) by first-class, postage-prepaid mail, to each
record holder of Common Shares as of the Close of Business on the Distribution
Date,
at the address of such holder shown on the records of the Company or the
transfer agent or registrar for the Common Shares, one or more Right
Certificates evidencing one whole Right for each Common Share held by such
record holder, subject to the provisions of Section 15 and to adjustment as
provided in this Rights Agreement. As of and after the Distribution Date, the
Rights shall be evidenced solely by such Right Certificates. The Company shall,
as promptly as practicable, notify the Rights Agent in writing upon the
occurrence of the Distribution Date and, if such notification is given orally,
the Company shall confirm same in writing on or prior to the Business Day next
following. Until such notice is received by the Rights Agent, the Rights Agent
may presume conclusively for all purposes that the Distribution Date has not
occurred.
(c) With respect to any Common Shares outstanding as of the Record Date,
and until the earliest of the Distribution Date, the Redemption Date or the
Expiration Date, (i) in the case of certificated shares, (A) the Rights
associated with the Common Shares represented by any certificate shall be
evidenced by such certificate for the Common Shares with a copy of the Summary
of Rights attached thereto and the registered holders of the Common Shares shall
also be the registered holders of the associated Rights and (B) the surrender
for transfer of any such certificate, even without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby, and (ii) in the case of
Common Shares held in uncertificated form, (A) the Rights associated with the
Common Shares shall be evidenced by the balances indicated in the book-entry
account system of the transfer agent for such Common Shares and the registered
holders of the Common Shares shall also be the registered holders of the
associated Rights and (B) the transfer of any Common Shares in the book-entry
account system of the transfer agent for such Common Shares shall also
constitute the transfer of the Rights associated with such Common Shares.
(d) In the case of certificated Common Shares, certificates issued for
Common Shares after the Record Date (including upon transfer or exchange of
outstanding Common Shares), but prior to the earliest of the Distribution Date,
the Redemption Date or the Expiration Date, shall have printed on, written on or
otherwise affixed to them a legend in substantially the following form:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in a Rights Agreement dated as of December 2, 2010 (as it
may be amended from time to time (the "Rights Agreement")), between COMPETITIVE
TECHNOLOGIES, INC. (the "Company") and AMERICAN STOCK TRANSFER & TRUST COMPANY,
LLC as Rights Agent (the "Rights Agent"), the terms of which (including
restrictions on the transfer of such Rights) are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights shall be evidenced by separate certificates and shall no longer be
evidenced by this certificate. The Company shall mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of a
written request therefor. RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR
THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND
NONTRANSFERABLE.
Notwithstanding this Section 3(d), neither the omission of a legend nor the
inclusion of a legend that makes reference to a rights agreement other than the
Rights Agreement shall affect the enforceability of any part of this Rights
Agreement or the rights of any holder of Rights.
(e) In the case of Common Shares held in uncertificated form, the Company
shall cause the confirmation and account statements sent to holders of Common
Shares in book-entry form (including upon transfer or exchange of outstanding
Common Shares) prior to the earliest of the Distribution Date, the Redemption
Date or the Expiration Date to bear a legend in substantially the following
form:
Each share of Common Stock, par value $0.001 per share, of COMPETITIVE
TECHNOLOGIES, INC. (the "Company") entitles the holder thereof to certain Rights
as set forth in a Rights Agreement dated as of December 2, 2010 (as it may be
amended from time to time (the "Rights Agreement")), between the Company and
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC as Rights Agent (the "Rights
Agent"), the terms of which (including restrictions on the transfer of such
Rights) are hereby incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights shall be
evidenced by separate certificates and shall no longer be evidenced by
the shares to which this statement relates. The Company shall mail to the
holder of shares to which this statement relates a copy of the Rights Agreement
without charge after receipt of a written request therefor. RIGHTS BENEFICIALLY
OWNED BY ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE
NULL AND VOID AND NONTRANSFERABLE.
Notwithstanding this Section 3(e), neither the omission of a legend nor the
inclusion of a legend that makes reference to a rights agreement other than the
Rights Agreement shall affect the enforceability of any part of this Rights
Agreement or the rights of any holder of Rights.
SECTION 4. Form of Right Certificates. The Right Certificates (and the
---------------------------
form of election to purchase and form of assignment to be printed on the reverse
side thereof) shall be in substantially the form set forth as Exhibit B hereto
and may have such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Company may deem appropriate
(but which do not affect the rights, duties or responsibilities of the Rights
Agent) and as are not inconsistent with the provisions of this Rights Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the other provisions of this Rights Agreement (including
Sections 7, 11 and 23), the Right Certificates, whenever issued, shall be dated
as of the Distribution Date and shall entitle the holders thereof to purchase
such number of Preferred Shares as shall be set forth therein for the Purchase
Price set forth therein, subject to adjustment as provided in this Rights
Agreement.
SECTION 5. Execution, Countersignature and Registration. (a) The Right
---------------------------------------------
Certificates shall be executed on behalf of the Company by (x) the Chairman, or
any Vice President, and by the Secretary, any Assistant Secretary, the Treasurer
or any Assistant Treasurer or (y) any two officers designated by the Board,
either manually or by facsimile signature, and may have affixed thereto the
Company's seal or a facsimile thereof. The Right Certificates shall be
countersigned by the Rights Agent either manually or, at the Company's option,
by facsimile signature, and shall not be valid or obligatory for any purpose
unless so countersigned. In the event that any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such an officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Right Certificates may nevertheless be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Right
Certificates had not ceased to be such an officer of the Company; and any Right
Certificate may be signed on behalf of the Company by any person who, at the
actual date of execution of such Right Certificate, shall be a proper officer of
the Company to sign such Right Certificate, although at the date of execution of
this Rights Agreement any such person was not such an officer of the Company.
(b) Following the Distribution Date, the Rights Agent shall keep or cause
to be kept, at its office designated for such purpose, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. Transfer, Split-Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates;
----------------------------------------------------------------------
Uncertificated Rights. (a) Subject to Sections 7(e) and 15, at any time after
----------------------
the Distribution Date, and at or prior to the Close of Business on the earlier
of the Redemption Date or the Expiration Date, any Right Certificate or Right
Certificates (other than Right Certificates representing Rights that have become
null and void pursuant to Section 7(e)) may be transferred, split-up, combined
or exchanged for another Right Certificate or Right Certificates representing,
in the aggregate, the same number of Rights as the Right Certificate or Right
Certificates surrendered then represented. The Right Certificates are
transferable only on the registry books of the Rights Agent. Any registered
holder desiring to transfer, split-up, combine or exchange any Right Certificate
or Right Certificates shall make such request in writing delivered to the Rights
Agent and shall surrender the Right Certificate or Right Certificates to be
transferred, split-up, combined or exchanged at the office of the Rights Agent
designated for such purpose; provided, however, that neither the Rights Agent
nor the Company shall be obligated to take any action whatsoever with respect to
the transfer of any Right Certificate surrendered for transfer until the
registered holder shall have properly completed and duly signed the
certification contained in the
form of assignment on the reverse side of such Right Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to Sections 7(e) and 15, countersign and deliver to the Person entitled
thereto a Right Certificate or Right Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split-up, combination or exchange of Right Certificates. If and to the extent
the Company does require payment of any such taxes or charges, the Company shall
give the Rights Agent prompt written notice thereof and the Rights Agent shall
not deliver any Right Certificate unless and until it is satisfied that all such
payments have been made, and the Rights Agent shall promptly forward any such
sum collected by it to the Company or to such Persons as the Company may specify
by written notice.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a valid Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancelation of the Right Certificate if mutilated, the Company shall execute a
new Right Certificate of like tenor and deliver such new Right Certificate to
the Rights Agent for countersignature and delivery to the registered owner in
lieu of the Right Certificate so lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision hereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. Exercise of Rights; Expiration Date of Rights. (a) Subject to
----------------------------------------------
the other provisions of this Rights Agreement (including Section 7(e) and
Section 11), each Right shall entitle the registered holder thereof, upon
exercise thereof as provided in this Rights Agreement, to purchase for the
Purchase Price, at any time after the Distribution Date and at or prior to the
earlier of (i) the Expiration Date and (ii) the Redemption Date, one
one-thousandth (1/1,000th) of a Preferred Share, subject to adjustment as
provided in this Rights Agreement.
(b) Subject to the other provisions of this Rights Agreement (including
Section 7(e)), the registered holder of any Right Certificate may exercise the
Rights evidenced thereby (except as otherwise provided in this Rights Agreement)
in whole or in part at any time after the Distribution Date, upon surrender of
the Right Certificate, with the form of election to purchase on the reverse side
thereof properly completed and duly executed, to the Rights Agent at the office
of the Rights Agent designated for such purpose, together with payment of the
Purchase Price for each one one-thousandth (1/1,000th) of a Preferred Share (as
such fraction may be adjusted as provided in this Rights Agreement) as to which
the Rights are exercised, at or prior to the earlier of (i) the Expiration Date
and (ii) the Redemption Date.
(c) Subject to the other provisions of this Rights Agreement (including
Section 7(e)), upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase properly completed and duly
executed, accompanied by payment of the Purchase Price for the Preferred Shares
to be purchased together with an amount equal to any applicable transfer tax, in
lawful money of the United States of America, in cash or by certified check or
money order payable to the order of the Company, the Rights Agent shall
thereupon promptly (i) either (A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests or (B) if the Company shall have elected to
deposit the Preferred Shares with a depositary agent under a depositary
arrangement, requisition from the depositary agent depositary receipts
representing the number of one one-thousandths (1/1,000ths) of a Preferred Share
(as such fraction may be adjusted as provided in this Rights Agreement) to be
purchased (in which case certificates for the Preferred Shares to be 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 all such
requests, (ii) when necessary to comply with this Rights Agreement (or otherwise
when appropriate, as determined by the Company with notice to the Rights Agent),
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) after receipt
of such certificates or depositary receipts, cause the same to be delivered to
or, upon the order of the registered holder of such Right Certificate,
registered in such name
or names as may be designated by such holder and (iv) when necessary to comply
with this Rights Agreement (or otherwise when appropriate, as determined by the
Company with notice to the Rights Agent), after receipt thereof, deliver such
cash, if any, to or upon the order of the registered holder of such Right
Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
fewer than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Right Certificate or
to such holder's duly authorized assigns, subject to the provisions of Section
15.
(e) Notwithstanding anything in this Rights Agreement to the contrary, any
Rights that are at any time beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any Associate or Affiliate of such Acquiring Person) who becomes a
transferee after the Acquiring Person becomes such (a "Post Transferee"), (iii)
---------------
a transferee of an Acquiring Person (or of any Associate or Affiliate of such
Acquiring Person) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person (or from
such Affiliate or Associate) to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person (or such Affiliate or
Associate) has any continuing agreement, arrangement or understanding regarding
the transferred Rights or (B) a transfer which the Board has determined is part
of a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 7(e) (a "Prior Transferee"), or (iv) any
----------------
subsequent transferee receiving transferred Rights from a Post Transferee or a
Prior Transferee, either directly or through one or more intermediate
transferees, shall become null and void without any further action and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Rights Agreement or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(e) are complied with, but shall have no liability to any holder of any Right
Certificate or any other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliate or
Associate, or any transferee thereof, hereunder. The Company shall give the
Rights Agent written notice of the identity of any Acquiring Person, Associate
or Affiliate known to it, or the nominee of any of the foregoing, and the Rights
Agent may rely on such notice in carrying out its duties under this Agreement
and shall be deemed not to have any knowledge of the identity of any such
Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing
unless and until it shall have received such notice.
(f) Notwithstanding anything in this Rights Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Right Certificates upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) properly completed and duly signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
SECTION 8. Cancelation and Destruction of Right Certificates. All Right
--------------------------------------------------
Certificates surrendered or presented for the purpose of exercise, transfer,
split-up, combination or exchange shall, and any Right Certificate representing
Rights that have become null and void and nontransferable pursuant to Section
7(e) surrendered or presented for any purpose shall, if surrendered or presented
to the Company or to any of its agents, be delivered to the Rights Agent for
cancelation or in canceled form, or, if surrendered or presented to the Rights
Agent, shall be canceled by it, and no Right Certificates shall be issued in
lieu thereof except as expressly permitted by this Rights Agreement. The
Company shall deliver to the Rights Agent for cancelation and retirement, and
the Rights Agent shall so cancel and retire, any Right Certificate purchased or
acquired by the Company. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Preferred Shares. (a) The
-------------------------------------------------
Company shall cause to be reserved and kept available out of its authorized and
unissued Preferred Shares or any authorized and issued Preferred Shares held in
its treasury, free from preemptive rights or any right of first refusal, a
number of Preferred Shares sufficient to permit the exercise in full of all
outstanding Rights.
(b) If there are not sufficient Preferred Shares issued but not
outstanding or authorized but unissued to permit the exercise or exchange of
Rights in accordance with this Rights Agreement, the Company shall take all such
action as may be necessary to authorize additional Preferred Shares for issuance
upon the exercise or exchange of Rights pursuant to this Rights Agreement;
provided, however, that if the Company is unable to cause the authorization of
additional Preferred Shares, then the Company shall, or, if action by the
Company's stockholders is necessary to cause such authorization, in lieu of
seeking any such authorization, the Company may, to the extent necessary and
permitted by applicable law and any agreements or instruments in effect prior to
the Distribution Date to which it is a party, (i) upon surrender of a Right, pay
cash equal to the Purchase Price in lieu of issuing Preferred Shares and
requiring payment therefor, (ii) upon due exercise of a Right and payment of the
Purchase Price for each Preferred Share as to which such Right is exercised,
issue common stock or other equity and/or debt securities having a value equal
to the value of the Preferred Shares that otherwise would have been issuable
pursuant to this Rights Agreement, which value shall be determined by a
nationally recognized investment banking firm selected by the Board, or (iii)
upon due exercise of a Right and payment of the Purchase Price for each
Preferred Share as to which such Right is exercised, distribute a combination of
Preferred Shares, cash and/or other equity and/or debt securities having an
aggregate value equal to the value of the Preferred Shares that otherwise would
have been issuable pursuant to this Rights Agreement, which value shall be
determined by a nationally recognized investment banking firm selected by the
Board. To the extent that any legal or contractual restrictions (pursuant to
agreements or instruments in effect prior to the Distribution Date to which it
is party) prevent the Company from paying the full amount payable in accordance
with the foregoing sentence, the Company shall pay to holders of the Rights as
to which such payments are being made all amounts that are not then restricted
on a pro rata basis as such payments become permissible under such legal or
contractual restrictions until such payments have been paid in full.
(c) The Company shall take all actions as may be necessary to ensure that
all Preferred Shares delivered upon exercise or exchange of Rights shall, at the
time of delivery of the certificates for such Preferred Shares (subject to
payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
(d) The Company 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 Right Certificates or of any Preferred Shares or Common Shares or
other securities upon the exercise or exchange of the Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a Person other
than, or in respect of the issuance or delivery of certificates or depositary
receipts for the Preferred Shares or Common Shares or other securities, as the
case may be, in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or exchange or to issue
or deliver any certificates or depositary receipts for Preferred Shares or
Common Shares or other securities, as the case may be, upon the exercise or
exchange of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
SECTION 10. Preferred Shares Record Date. Each Person in whose name any
----------------------------
certificate for Preferred Shares or Common Shares or other securities is issued
upon the exercise or exchange of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares or Common Shares or other
securities, as the case may be, represented thereby on, and such certificate
shall be dated, the date on which the Right Certificate evidencing such Rights
was duly surrendered and payment of any Purchase Price (and any applicable
transfer taxes) was made; provided, however, that, if the date of such surrender
and payment is a date upon which the transfer books of the Company for the
Preferred Shares or Common Shares or other securities, as the case may be, are
closed, such Person shall be deemed to have become the record holder of such
Preferred Shares or Common Shares or other securities, as the case may be, on,
and such certificate shall be dated, the next succeeding Business Day on which
the transfer books of the Company for the Preferred Shares or Common Shares or
other securities, as the case may be, are open.
SECTION 11. Adjustments in Rights After There Is an Acquiring Person;
---------------------------------------------------------
Exchange of Rights for Shares; Business Combinations. (a) Subject to the other
-----------------------------------------------------
provisions of this Rights Agreement (including the definition of Acquired Person
and Section 7(e)), upon a Person becoming an Acquiring Person, each holder of a
Right shall thereafter have a right to receive, upon exercise thereof for the
Purchase Price in accordance with the
terms of this Rights Agreement, such number of one one-thousandths
(1/1,000ths) of a Preferred Share (as such fraction may be adjusted as provided
in this Rights Agreement) as shall equal the result obtained by multiplying the
Purchase Price by a fraction, the numerator of which is the number of one
one-thousandths (1/1,000ths) of a Preferred Share (as such fraction may be
adjusted as provided in this Rights Agreement) for which such Right is then
exercisable and the denominator of which is 50% of the Market Value of the
Common Shares on the date on which such Person became an Acquiring Person.
(b) (i) The Board may, at its option, at any time after a Person becomes
an Acquiring Person, mandatorily exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that shall have become
null and void and nontransferable pursuant to Section 7(e)) for consideration
per Right consisting of either (A) one-half of the securities that would be
issuable at such time upon the exercise of one Right in accordance with Section
11(a) or, if applicable, Section 9(b)(ii) or 9(b)(iii) or (B) if applicable, the
cash consideration specified in Section 9(b)(i) (the consideration issuable per
Right pursuant to this Section 11(b)(i) being the "Exchange Consideration"),
----------------------
provided that the Board shall, subject to applicable law, elect to exchange all
the Rights for Exchange Consideration (payable in the form of Common Shares) if
and to the extent necessary to avoid any default under any agreements or
instruments in effect prior to the Distribution Date. The Board may, at its
option, issue a number of Common Shares in lieu of each Preferred Share equal to
the Formula Number (as defined in the Certificate of Designation) if there are
sufficient Common Shares issued but not outstanding or authorized but unissued.
If the Board elects to exchange all the Rights for Exchange Consideration
pursuant to this Section 11(b)(i) prior to the physical distribution of the
Right Certificates, the Company may distribute the Exchange Consideration in
lieu of distributing Right Certificates, in which case for purposes of this
Rights Agreement holders of Rights shall be deemed to have simultaneously
received and surrendered for exchange Right Certificates on the date of such
distribution. Notwithstanding the foregoing, the Board may not effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company or any employee benefit plan of the Company or any of its
Subsidiaries or any Person holding Common Shares for or pursuant to the terms of
any such employee benefit or compensation plan), together with all Affiliates
and Associates of such Person, becomes the Beneficial Owner of more than 50% of
the Common Shares then outstanding.
(ii) Any action of the Board ordering the exchange of any Rights pursuant
to Section 11(b)(i) shall be irrevocable and, immediately upon the taking of
such action and without any further action and without any notice, the right to
exercise any such Right so exchanged pursuant to Section 11(a) shall terminate
and the only right thereafter of a holder of such Right shall be to receive the
Exchange Consideration in exchange for each such Right held by such holder or,
if the Exchange Consideration shall not have been paid or issued, to exercise
any such Right pursuant to Section 11(c)(i). The Company shall promptly give
public notice of any such exchange (with prompt written notice thereof to the
Rights Agent); provided, however, that the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company shall
promptly mail a notice of any such exchange to all holders of the Rights to be
exchanged at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange shall state the method by which the exchange of the Rights for the
Exchange Consideration 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 shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e)) held by each holder of Rights.
(c) (i) In the event that, directly or indirectly, any transactions
specified in the following clause (A), (B) or (C) of this Section 11(c)(i) (each
such transaction being a "Business Combination") shall be consummated:
--------------------
(A) the Company shall consolidate with, or merge with and into, any
Acquiring Person or any Affiliate or Associate of an Acquiring Person;
(B) any Acquiring Person or any Affiliate or Associate of an Acquiring
Person shall merge with and into the Company and, in connection with such
merger, all or part of the outstanding Common Shares of the Company shall be
changed into or exchanged for capital stock or other securities of the Company
or of any Acquiring Person or Affiliate or Associate of an Acquiring Person or
cash or any other property; or
(C) the Company shall sell, lease, exchange or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall sell, lease, exchange or
otherwise transfer or dispose of), in one or more transactions, the Major Part
of the assets of the Company and its Subsidiaries to any Acquiring Person or any
Affiliate or Associate of an Acquiring Person,
then, in each such case, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, the securities specified below (or, at such
holder's option, the securities specified in Section 11(a) if the Company is the
surviving corporation in such Business Combination):
(1) if the Principal Party in such Business Combination has Registered
Common Shares outstanding, each Right shall thereafter represent the right to
receive, upon the exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, such number of Registered Common Shares of such
Principal Party, free and clear of all liens, encumbrances or other adverse
claims, as shall have an aggregate Market Value as of the time of exercise
thereof equal to the result obtained by multiplying the Purchase Price by two;
(2) if the Principal Party involved in such Business Combination does not
have Registered Common Shares outstanding, each Right shall thereafter represent
the right to receive, upon the exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, at the election of the
holder of such Right at the time of the exercise thereof, any of:
(i) such number of Common Shares of the Surviving Person in such Business
Combination (if the Principal Party is also the Surviving Person in such
Business Combination) as shall have an aggregate Book Value immediately after
giving effect to such Business Combination equal to the result obtained by
multiplying the Purchase Price by two;
(ii) such number of Common Shares of the Principal Party in such Business
Combination (if the Principal Party is not also the Surviving Person in such
Business Combination) as shall have an aggregate Book Value immediately after
giving effect to such Business Combination equal to the result obtained by
multiplying the Purchase Price by two; or
(iii) if the Principal Party in such Business Combination is an Affiliate
of one or more Persons that has Registered Common Shares outstanding, such
number of Registered Common Shares of whichever of such Affiliates of the
Principal Party has Registered Common Shares with the greatest aggregate Market
Value on the date of consummation of such Business Combination as shall have an
aggregate Market Value on the date of such Business Combination equal to the
result obtained by multiplying the Purchase Price by two.
(ii) The Company shall not consummate any Business Combination unless each
issuer of Common Shares for which Rights may be exercised, as set forth in this
Section 11(c), shall have sufficient authorized Common Shares that have not been
issued or reserved for issuance (and which shall, when issued upon exercise
thereof in accordance with this Rights Agreement, be validly issued, fully paid
and nonassessable and free of preemptive rights, rights of first refusal or any
other restrictions or limitations on the transfer or ownership thereof) to
permit the exercise in full of the Rights in accordance with this Section 11(c)
and unless prior thereto:
(A) a registration statement under the Securities Act on an appropriate
form, with respect to the Rights and the Common Shares of such issuer
purchasable upon exercise of the Rights, shall be effective under the Securities
Act; and
(B) the Company and each such issuer shall have:
(1) executed and delivered to the Rights Agent a supplemental agreement
providing for the assumption by such issuer of the obligations set forth in this
Section 11(c) (including the obligation of such issuer to issue Common Shares
upon the exercise of Rights in accordance with the terms set forth in Sections
11(c)(i) and 11(c)(iii)) and further providing that such issuer, at its own
expense, shall use its best efforts to:
(i) cause a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date;
(ii) qualify or register the Rights and the Common Shares of such issuer
purchasable upon exercise of the Rights under the blue sky or securities laws of
such jurisdictions as may be necessary or appropriate; and
(iii) list the Rights and the Common Shares of such issuer purchasable
upon exercise of the Rights on each national securities exchange on which the
Common Shares were listed prior to the consummation of the Business Combination
or, if the Common Shares were not listed on a national securities exchange prior
to the consummation of the Business Combination, on a national securities
exchange;
(2) furnished to the Rights Agent a written opinion of independent
counsel stating that such supplemental agreement is a valid, binding and
enforceable agreement of such issuer; and
(3) filed with the Rights Agent a certificate of a nationally recognized
firm of independent accountants setting forth the number of Common Shares of
such issuer that may be purchased upon the exercise of each Right after the
consummation of such Business Combination.
(iii) After consummation of any Business Combination and subject to the
provisions of Section 11(c)(ii), (A) each issuer of Common Shares for which
Rights may be exercised as set forth in this Section 11(c) shall be liable for,
and shall assume, by virtue of such Business Combination, all the obligations
and duties of the Company pursuant to this Rights Agreement, (B) the term
"Company" shall thereafter be deemed to refer to such issuer, (C) each such
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issuer shall take such steps in connection with such consummation as may be
necessary to assure that the provisions of this Rights Agreement (including
Sections 11(a) and 11(c)) shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights, (D) the number of Common Shares of each such issuer
thereafter 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 of Sections 11 and 12 and (E) the other provisions of this
Rights Agreement (including Sections 7, 9 and 10) with respect to the Preferred
Shares shall apply, as nearly as reasonably may be, on like terms to any such
Common Shares.
SECTION 12. Certain Adjustments. (a) To preserve the actual or potential
--------------------
economic value of the Rights, if at any time after the date of this Rights
Agreement there shall be any change in the Common Shares or the Preferred
Shares, whether by reason of stock dividends, stock splits, reclassifications,
recapitalizations, mergers, consolidations, combinations or exchanges of
securities, split-ups, split-offs, spin-offs, liquidations, other similar
changes in capitalization, any distribution or issuance of cash, assets,
evidences of indebtedness or subscription rights, options or warrants to holders
of Common Shares, or Preferred Shares, as the case may be (other than
distribution of the Rights or regular quarterly cash dividends), or otherwise,
then, in each such event the Board shall make such appropriate adjustments in
the number of Preferred Shares (or the number and kind of other securities)
issuable upon exercise of each Right, the Purchase Price and Redemption Price in
effect at such time and the number of Rights outstanding at such time (including
the number of Rights or fractional Rights associated with each Common Share)
such that following such adjustment such event shall not have had the effect of
reducing or limiting the benefits the holders of the Rights would have had
absent such event.
(b) If, as a result of an adjustment made pursuant to Section 12(a), the
holder of any Right thereafter exercised shall become entitled to receive any
securities other than Preferred Shares, thereafter the number of such securities
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 of Sections 11 and 12 and the other provisions of this Rights
Agreement (including Sections 7, 9 and 10) with respect to the Preferred Shares
shall apply, as nearly as reasonably may be, on like terms to any such other
securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities relating
to a Right shall evidence the right to purchase, for the Purchase Price,
the adjusted number and kind of securities purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided in this Rights Agreement.
(d) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares or number or kind of other securities issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the terms that were expressed in the initial
Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section 12(a) requires
that an adjustment be made effective as of a record date for a specified event,
the Company may elect to defer (with prompt written notice thereof to the Rights
Agent) until the occurrence of such event the issuing to the holder of any Right
exercised after such record date the Preferred Shares and/or other securities,
if any, issuable upon such exercise over and above the Preferred Shares and/or
other securities, if any, issuable before giving effect 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 securities upon the occurrence of the event requiring such
adjustment.
SECTION 13. Certificate of Adjustment. Whenever an adjustment is made or
--------------------------
any event occurs affecting the Rights or their exercisability (including an
event which causes the Rights to become null and void) as provided in Section 11
or 12, the Company shall (a) promptly prepare a certificate setting forth such
adjustment or describing such event and a brief, reasonably detailed statement
of the facts, computations and methodology accounting for such adjustment, (b)
promptly file with the Rights Agent and with each transfer agent for the
Preferred Shares, a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate (or, if prior to the Distribution
Date, to each holder of Common Shares) in accordance with Section 25, provided
that the failure to prepare, file or mail such certificate or summary shall not
affect the validity of such adjustment. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment or statement
therein contained and, subject to Section 21(c) shall have no duty or liability
with respect to, and shall not be deemed to have knowledge of, any adjustment or
any such event unless it shall have received such a certificate.
SECTION 14. Additional Covenants. (a) Notwithstanding any other
---------------------
provision of this Rights Agreement, no adjustment to the number of Preferred
Shares (or fractions of a share) or other securities for which a Right is
exercisable or the number of Rights outstanding or associated with each Common
Share or any similar or other adjustment shall be made or be effective if such
adjustment would have the effect of reducing or limiting the benefits the
holders of the Rights would have had absent such adjustment, including the
benefits under Sections 11 and 12, unless the terms of this Rights Agreement are
amended so as to preserve such benefits.
(b) The Company covenants and agrees that, after the Distribution Date,
except as permitted by Section 26, it shall not take (or permit any Subsidiary
of the Company to take) any action if at the time such action is taken it is
intended or reasonably foreseeable that such action will reduce or otherwise
limit the benefits the holders of Rights would have had absent such action,
including the benefits under Sections 11 and 12. Any action taken by the
Company during any period after any Person becomes an Acquiring Person but prior
to the Distribution Date shall be null and void unless such action could be
taken under this Section 14(b) from and after the Distribution Date. The
Company shall not consummate any Business Combination if any issuer of Common
Shares for which Rights may be exercised after such Business Combination in
accordance with Section 11(c) shall have taken any action that reduces or
otherwise limits the benefits the holders of Rights would have had absent such
action, including the benefits under Sections 11 and 12.
SECTION 15. Fractional Rights and Fractional Shares. (a) The Company
----------------------------------------
may, but shall not be required to, issue fractions of Rights or distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, the Company may pay to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole
Right. For purposes of this Section 15(a), the current market value of a whole
Right shall be the closing price of the Rights (as determined pursuant to the
second sentence of the definition of Market Value contained in Section 1) for
the Trading Day immediately prior to the date on which such fractional Rights
would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue fractions of
Preferred Shares upon exercise of the Rights or distribute certificates that
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one one-thousandths (1/1,000ths) of a Preferred Share (as such
fraction may adjusted as provided in this Rights Agreement) or any integral
multiple thereof), pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one Preferred Share, if any are
outstanding and publicly traded (or the same fraction of the current market
value of one Common Share times the Formula Number (as defined in the
Certificate of Designation) if the Preferred Shares are not outstanding and
publicly traded). For purposes of this Section 15(b), the current market value
of a Preferred Share (or Common Share) shall be the closing price of a Preferred
Share (or Common Share) (as determined pursuant to the second sentence of the
definition of Market Value contained in Section 1) for the Trading Day
immediately prior to the date of such exercise. If, as a result of an
adjustment made pursuant to Section 12(a), the holder of any Right thereafter
exercised shall become entitled to receive any securities other than Preferred
Shares, the provisions of this Section 15(b) shall apply, as nearly as
reasonably practicable, on like terms to such other securities.
(c) The Company may, but shall not be required to, issue fractions of
Common Shares upon exchange of Rights pursuant to Section 11(b), or to
distribute certificates that evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company may pay to the registered holders of the
Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current Market Value of one Common Share as of the date on which a Person became
an Acquiring Person.
(d) Each holder of Rights by the acceptance of such Rights expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right except as provided in this Section 15.
(e) Whenever a payment for fractional Rights or fractional shares is to be
made by the Rights Agent, the Company shall (i) promptly prepare and deliver to
the Rights Agent a certificate setting forth in reasonable detail the facts
related to such payments and the prices and/or formulas utilized in calculating
such payments, and (ii) provide sufficient monies to the Rights Agent in the
form of fully collected funds to make such payments. The Rights Agent shall be
fully protected in relying upon such a certificate and shall have no duty with
respect to, and shall not be deemed to have knowledge of any payment for
fractional Rights or fractional shares under any Section of this Agreement
relating to the payment of fractional Rights or fractional shares unless and
until the Rights Agent shall have received such a certificate and sufficient
monies.
SECTION 16. Rights of Action. (a) All rights of action in respect of
-----------------
this Rights Agreement, excepting the rights of action given to the Rights Agent
under Sections 19 and 21, are vested in the respective registered holders of the
Right Certificates (and, prior to the Distribution Date, the registered holders
of the Common Shares); and any registered holder of any Right Certificate (or,
prior to the Distribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Shares) may, in 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 Right
Certificate in the manner provided in such Right Certificate and in this Rights
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Rights Agreement
and shall be entitled to specific performance of the obligations of any Person
under, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to, this Rights Agreement. Notwithstanding
anything in this Rights Agreement to the contrary, neither the Company nor the
Rights Agent shall have any liability to any holder of a Right or other Person
as a result of its inability to perform any of its obligations under this Rights
Agreement by reason of any preliminary or permanent injunction or other order,
judgment decree or ruling (whether interlocutory or final) issued by a court of
competent jurisdiction or by a governmental, regulatory, self-regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Company must use reasonable efforts to have any such injunction,
order, judgment, decree or ruling lifted or otherwise overturned as soon as
possible.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the reasonable
costs and expenses, including attorneys' fees, incurred in such action.
SECTION 17. Transfer and Ownership of Rights and Right Certificates. (a)
--------------------------------------------------------
Prior to the Distribution Date, the Rights shall be transferable only in
connection with the transfer of the Common Shares and the Right associated with
each such Common Share shall be automatically transferred upon the transfer of
each such Common Share.
(b) After the Distribution Date, the Right Certificates shall be
transferable, subject to Section 7(e), only on the registry books of the Rights
Agent 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 properly completed and duly executed.
(c) The Company and the Rights Agent may deem and treat the Person in
whose name a Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated certificate for
Common Shares 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.
SECTION 18. Right Certificate Holder Not Deemed a Stockholder. No holder,
--------------------------------------------------
as such, of any Right Certificate shall be entitled to vote or receive dividends
or other distributions or be deemed, for any purpose, the holder of the
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be construed to confer
upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company, including 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, or to receive dividends or
other distributions or subscription rights, or otherwise, until the Right or
Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 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, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the preparation,
negotiation, delivery, amendment, administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder, including
any taxes or governmental charges imposed as a result of the action taken by it
hereunder (other than any taxes on the fees payable to it). The provisions of
this Section 19 and Section 21 below shall survive the termination of this
Agreement, the exercise or expiration of the Rights and the resignation,
replacement or removal of the Rights Agent.
(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 acceptance and administration of this Rights Agreement and the exercise and
performance of its duties hereunder (other than matters arising out of or
resulting from a conflict of interest of the Rights Agent or other business
interests of the Rights Agent) in reliance upon any Right Certificate or
certificate for the Common Shares, or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons, or upon
the written advice or opinion of counsel as set forth in Section 21. The Rights
Agent shall not be deemed to have knowledge of any event of which it was
supposed to receive notice thereof hereunder and, subject to Section 21(c), the
Rights Agent shall be fully protected and incur no liability for failing to take
action in connection therewith unless and until it has received such notice in
writing.
SECTION 20. Merger or Consolidation or Change of Rights Agent.
--------------------------------------------------
(a) Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the shareholder services or
stock transfer or corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Rights
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such Person would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 22. In case, at the time such successor Rights Agent shall succeed to
the agency created by this Rights Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Rights Agreement.
SECTION 21. Duties of Rights Agent. The Rights Agent undertakes to
-----------------------
perform only the duties and obligations expressly imposed by this Rights
Agreement (and no implied duties) upon the following terms and conditions, by
all of which the Company and the holders of Right Certificates (or, prior to the
Distribution Date, of the Common Shares), by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company or legal counsel for the Rights Agent), and the written
advice or opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent and, subject to Section 21(c), the Rights Agent
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in accordance with such written advice or opinion.
(b) Whenever in the performance of its duties under this Rights Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including the identity of any Acquiring Person and the determination of the
current per share market price of any security) be proved or established by the
Company prior to taking, suffering or omitting to take any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any corporate officer of the Company having the rank
of Vice President or above and delivered to the Rights Agent; and such
certificate shall be full and complete authorization and protection to the
Rights Agent and, subject to Section 21(c), the Rights Agent shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or intentional
misconduct (which gross negligence, bad faith or willful misconduct must be
determined by a final, non-appealable judgment of a court of competent
jurisdiction). Anything to the contrary notwithstanding, in no event shall the
Rights Agent be liable for special, punitive, indirect, consequential or
incidental loss or damage of any kind whatsoever (including but not limited to
lost profits), even if the Rights Agent has been advised of the likelihood of
such loss or damage.
(d) Subject to Section 21(c), the Rights Agent shall not be liable for or
by reason of any of the statements of fact or recitals contained in this Rights
Agreement or in the Right Certificates (except as to its countersignature
thereof) or be required to verify the same, and 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 Rights Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof) and, subject to Section 21(c), shall have no liability therefor; nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Rights Agreement or in any Right Certificate; nor
shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming null and void pursuant to Section 7(e)) or any
change or adjustment in the terms of Rights as required under the provisions of
Section 11 or 12 or responsible for the manner, method or amount of any such
change or adjustment or the ascertaining of the existence of facts that would
require any such change or adjustment (except with respect to the exercise of
Rights evidenced by Right Certificates after actual notice of any such
adjustment pursuant to Section 13); nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization or reservation of
any Preferred Shares or Common Shares to be issued pursuant to this Rights
Agreement or any Right Certificate or as to whether any Preferred Shares or
Common Shares will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it shall perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
corporate officer of the Company having the rank of Vice President or above in
connection with its duties and such instructions shall be full authorization and
protection to the Rights Agent and, subject to Section 21(c), the Rights Agent
shall not be liable for or in respect of any action taken, suffered or omitted
by it in accordance with any such instructions or for any delay in acting while
waiting for such instructions. In the event of any conflict or inconsistency
between or among any such instructions, the later in time shall govern. 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, suffered or omitted by the Rights Agent under this Agreement and the
date on and/or after which such action shall be taken or suffered or such
omission shall be effective. Subject to Section 21(c), the Rights Agent shall
not be liable for any action taken or suffered by, or omission of, the Rights
Agent in accordance with a proposal included in any such application on or after
the date specified in such application (which date shall not be less than five
Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to the later of (i) the expiry of such five Business
Day period and (ii) the Right's Agent taking any such action (or the effective
date in the case of an omission), the Rights Agent shall have received either a
written instructions in response to such application specifying the action to be
taken, suffered or omitted, or a written or oral objection by the Company to
such proposal.
(h) The Rights Agent and any stockholder, affiliate, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company or its Subsidiaries may be interested, or contract with or
lend money to the Company or its Subsidiaries or otherwise act as fully and
freely as though it were not the Rights Agent under this Rights Agreement.
Nothing herein shall preclude the Rights Agent or any stockholder, affiliate,
director, officer or employee from acting in any other capacity for the Company
or for any other Person.
(i) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has either not been properly completed or indicates an
affirmative response to any clause thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer without first
consulting with the Company.
(j) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself (through its
directors, officers and employees) or by or through its attorneys or agents, and
the Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct, provided
that reasonable care was exercised in the selection and continued employment
thereof.
(k) The Company shall indemnify the Rights Agent for, and hold the Rights
Agent harmless against, any loss, liability, damage, claim or expense (including
reasonable fees and expenses of legal counsel) that the Rights Agent may incur
resulting from any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance, administration, exercise and performance of its
duties under this Rights Agreement (other than matters arising out of or
resulting from a conflict of interest of the Rights Agent or other business
interests of the Rights Agent); provided, however, that the Rights Agent shall
not be indemnified or held harmless with respect to any such loss, liability,
damage or expense incurred by the Rights Agent as a result of, or arising out
of, its own gross negligence, bad faith or intentional misconduct. In no case
shall the Company be liable with respect to any action, proceeding, suit or
claim against the Rights Agent unless the Rights Agent shall have notified the
Company, by letter or by facsimile confirmed by letter, of the assertion of any
action, proceeding, suit or claim against the Rights Agent, promptly after the
Rights Agent shall have notice of any such assertion of an action, proceeding,
suit or claim provided that the Company shall only be relieved of its
obligations to indemnify the Rights Agent to the extent that any prejudice is
suffered, or have been served with the summons or other first legal process
giving information as to the nature and basis of the action, proceeding, suit or
claim. The Company shall be entitled to participate at its own expense in the
defense of any such action, proceeding, suit or claim, and, if the Company so
elects, the Company shall assume the defense of any such action, proceeding,
suit or claim. In the event that the Company assumes such defense, the Company
shall not thereafter be liable for the fees and expenses of any additional
counsel retained by the Rights Agent, so long as the Company shall retain
counsel satisfactory to the Rights Agent, in the exercise of its reasonable
judgment, to defend such action, proceeding, suit or claim. The Rights Agent
agrees not to settle any litigation in connection with any action, proceeding,
suit or claim with respect to which it may seek indemnification from the Company
without the prior written consent of the Company. If a final, non-appealable
judgment of a court of competent jurisdiction shall be issued in favor of the
Rights Agent in respect of an action by the Rights Agent to enforce the
indemnification provisions of this Section 21(k), then the Company shall
reimburse the Rights Agent's for its costs and expenses in enforcing such
indemnification provisions.
(l) 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
it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
SECTION 22. Change of Rights Agent. The Rights Agent or any successor
-----------------------
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and the Preferred Shares known to the Rights
Agent, after due inquiry, by registered or certified mail, and to the holders of
the Right Certificates (or, prior to the Distribution Date, of the Common
Shares) by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Shares and the Preferred Shares by registered or certified mail,
and to the holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares) by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to
make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (or, prior to the Distribution Date, of the Common Shares)
(who shall, with such notice, submit such holder's Right Certificate or, prior
to the Distribution Date, the certificate representing such holder's Common
Shares, for inspection by the Company), then the registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares) may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such
a court, shall be a Person organized and doing business under the laws of the
United States or of the State of New York (or of any other state of the United
States so long as such entity is authorized to conduct a stock transfer or
corporate trust business in the State of New York), in good
standing, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by Federal
or state authority; provided, however, that the principal transfer agent for the
Common Shares shall in any event be qualified to be the Rights Agent. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any
such appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and the
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates (or, prior to the Distribution Date, of the Common
Shares). 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.
SECTION 23. Issuance of Additional Rights and Right Certificates.
-----------------------------------------------------
Notwithstanding any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board to reflect any
adjustment or change made in accordance with the provisions of this Rights
Agreement. In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the earlier of the
Redemption Date and the Expiration Date, the Company (a) shall, with respect to
Common Shares so issued, granted or sold pursuant to the exercise of stock
options or under any employee plan or arrangement (whether or not subject to
vesting or other restrictions), or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Right Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Right Certificate would be issued, (ii)
no such Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof and (iii) no such Right Certificate shall be issued to an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
SECTION 24. Redemption and Termination. (a) The Board may, at its
---------------------------
option, at any time prior to the earlier of (i) the Distribution Date and (ii)
the Expiration Date, order the redemption of all, but not fewer than all, the
then outstanding Rights at the Redemption Price (the date of such redemption
being the "Redemption Date"), and the Company, at its option, may pay the
---------------
Redemption Price either in cash or Common Shares or other securities of the
Company deemed by the Board, in the exercise of its sole discretion, to be at
least equivalent in value to the Redemption Price.
(b) Immediately upon the action of the Board ordering the redemption of
the Rights, 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. Promptly after the action
of the Board ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Each such notice of redemption shall state the method by which
payment of the Redemption Price will be made. The notice, if mailed in the
manner herein provided, shall be conclusively presumed to have been duly given,
whether or not the holder of Rights receives such notice. In any case, failure
to give such notice by mail, or any defect in the notice, to any particular
holder of Rights shall not affect the sufficiency of the notice to other holders
of Rights. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner
except as specifically set forth in this Section or in Section 11(b) or in
connection with the purchase of Common Shares prior to the Distribution Date.
SECTION 25. Notices. Notices or demands authorized by this Rights
--------
Agreement to be given or made by the Rights Agent or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage-prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Competitive Technologies, Inc.
000 Xxxxxxxx Xx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
With a copy to:
Xxxxxx Law Group
0000 X Xxxxxxx, Xxx 0000
Xxxxxxx, XX 00000
Attention: M. Xxxxxxx Xxxxxx
Subject to the provisions of Section 22, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage-prepaid, addressed (until another address is filed in writing with
the Company) as follows:
American Stock Transfer & Trust Company, LLC
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Mr. Xxx Xxxxxx
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Right Certificate (or, prior
to the Distribution Date, of the Common Shares) shall be sufficiently given or
made if sent by first-class mail, postage-prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Shares.
SECTION 26. Supplements and Amendments. At any time prior to the time any
---------------------------
Person becomes an Acquiring Person, and subject to the last sentence of this
Section 26, the Company may, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Rights Agreement in any
manner which the Company may deem necessary or desirable (including the date on
which the Distribution Date or Expiration Date shall occur, the amount of the
Purchase Price, the definition of "Acquiring Person" or the time during which
the Rights may be redeemed pursuant to Section 24) without the approval of any
holder of the Rights. From and after the Distribution Date, and subject to
applicable law, the Company may, and the Rights Agent shall if the Company so
directs, amend this Rights Agreement without the approval of any holders of
Right Certificates (a) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provision of this Rights Agreement or (b) to otherwise change or supplement any
other provisions in this Rights Agreement in any matter which the Company may
deem necessary or desirable and which does not adversely affect the interests of
the holders of Right Certificates (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person), any such supplement or amendment
to be evidenced in writing. Any supplement or amendment adopted during any
period after any Person has become an Acquiring Person but prior to the
Distribution Date shall be null and void unless such supplement or amendment
could have been adopted under the prior sentence from and after the Distribution
Date. Any supplement or amendment to this Rights Agreement duly approved by the
Company that does not affect the Rights Agent's own rights, duties, obligations
or immunities under this Rights Agreement shall become effective immediately
upon execution by the Company, whether or not also executed by the Rights Agent.
Upon delivery of a certificate from an appropriate officer of the Company that
states that the proposed supplement or amendment complies with this Section 26,
the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything to the contrary contained in this Rights Agreement, the Rights Agent
may, but shall not be obligated to, enter into any supplement or amendment that
affects the Rights Agent's own rights, duties, obligations or immunities under
this Rights Agreement. In addition, notwithstanding anything to the contrary
contained in this Rights Agreement, no supplement or amendment to this Rights
Agreement shall be made which extends the date on which the Expiration Date
shall occur or reduces the Redemption Price (except as required by Section
12(a)).
SECTION 27. Successors. All the covenants and provisions of this Rights
-----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 28. Benefits of Rights Agreement; Determinations and Actions by
-----------------------------------------------------------
the Board, etc. (a) Nothing in this Rights Agreement shall be construed to
---------------
give to any Person other than the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, of the
Common Shares) any legal or equitable right, remedy or claim under this Rights
Agreement; but this Rights Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, of the Common Shares).
(b) Except as explicitly otherwise provided in this Rights Agreement, the
Board shall have the exclusive power and authority to administer this Rights
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 Rights Agreement, including the right and power to (i)
interpret the provisions of this Rights Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including a determination to redeem or not redeem the Rights
or to amend this Rights Agreement and a determination of whether there is an
Acquiring Person).
(c) Nothing contained in this Rights Agreement shall be deemed to be in
derogation of the obligation of the Board to exercise its fiduciary duty.
Without limiting the foregoing, nothing contained herein shall be construed to
suggest or imply that the Board shall not be entitled to reject any tender offer
or other acquisition proposal, or to recommend that holders of Common Shares
reject any tender offer, or to take any other action (including the
commencement, prosecution, defense or settlement of any litigation and the
submission of additional or alternative offers or other proposals) with respect
to any tender offer or other acquisition proposal that the Board believes is
necessary or appropriate in the exercise of such fiduciary duty.
SECTION 29. Severability. If any term, provision, covenant or restriction
-------------
of this Rights Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that if the absence of such excluded provision shall, in the
-------- -------
reasonable judgment of the Rights Agent, materially and adversely its rights,
immunities, duties or obligations under this Rights Agreement, the Rights Agent
shall be entitled to resign on the next Business Day.
SECTION 30. Governing Law. This Rights Agreement and each Right
--------------
Certificate issued hereunder shall be deemed to be a contract made under the law
of the State of Delaware and for all purposes shall be governed by and construed
in accordance with the law of such State applicable to contracts to be made and
performed entirely within such State; provided, however, that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
governed by and construed in accordance with the laws of the State of
Connecticut applicable to contracts made to be performed entirely within such
State.
SECTION 31. Counterparts; Effectiveness. This Rights 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. This Rights Agreement
shall be effective as of the Close of Business on the date hereof.
SECTION 32. Descriptive Headings. Descriptive headings of the several
---------------------
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Rights Agreement.
SECTION 33. Force Majeure. Notwithstanding anything to the contrary
--------------
contained herein, the Rights Agent shall not be liable for any delays or
failures in performance resulting from acts beyond its reasonable control
including acts of God, terrorist acts, shortage of supply, breakdowns or
malfunctions, interruptions or
malfunctions of computer facilities, or loss of data due to power failures
or mechanical difficulties with information storage or retrieval systems, labor
difficulties, war or civil unrest.
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to
be duly executed as of the day and year first above written.
COMPETITIVE TECHNOLOGIES, INC.,
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
AMERICAN STOCK TRANSFER &
TRUST COMPANY, LLC as Rights Agent
By: /s/ Xxx Xxxxxx
----------------------------------
Name: Xxx Xxxxxx
Title: Vice President
EXHIBIT A
CERTIFICATE OF THE
DESIGNATIONS, PREFERENCES AND RELATIVE
PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS OF SERIES I
PREFERRED STOCK OF
COMPETITIVE TECHNOLOGIES, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, COMPETITIVE TECHNOLOGIES, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware, in accordance with
the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That, pursuant to the authority conferred upon the Board of Directors (the
"Board") of COMPETITIVE TECHNOLOGIES, INC. (the "Company") on December 2, 2010,
----- -------
adopted the following resolution designating a new series of preferred stock as
Series I Preferred Stock:
RESOLVED, that, pursuant to the authority vested in the Board of Directors
(the "Board") of COMPETITIVE TECHNOLOGIES, INC. (the "Company") in accordance
----- -------
with the provisions of the Certificate of Incorporation of the Company (the
"Certificate") and the provisions of Section 151(g) of the General Corporation
-----------
Law of the State of Delaware, a series of preferred stock of the Company is
hereby authorized, and the designation and number of shares thereof, and the
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations or restrictions thereof, shall be as follows (in
addition to any preferences and relative, participating, optional and other
special rights, and the qualifications, limitations or restrictions thereof, set
forth in the Certificate which are applicable to shares of Preferred Stock, par
value $0.001 per share of the Company (the "Preferred Stock")):
---------------
SECTION 1. Designation and Number of Shares. The shares of such series
---------------------------------
shall be designated as "Series I Preferred Stock" (the "Series I Preferred
------------------
Stock"). The number of shares initially constituting the Series I Preferred
-----
Stock shall be 20,000; provided, however, that, if more than a total of 20,000
-------- -------
shares of Series I Preferred Stock shall be issuable upon the exercise of Rights
(the "Rights") issued pursuant to the Rights Agreement dated as of December 2,
------
2010, between the Company and American Stock Transfer & Trust Company, LLC, as
Rights Agent (the "Rights Agreement"), the Board, pursuant to Section 151(g) of
----------------
the General Corporation Law of the State of Delaware, shall direct by resolution
or resolutions that a certificate be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of Section 103 thereof, providing
for the total number of shares of Series I Preferred Stock authorized to be
issued to be increased (to the extent that the Certificate then permits) to the
largest number of whole shares (rounded up to the nearest whole number) issuable
upon exercise of such Rights.
SECTION 2. Dividends or Distributions. (a) Subject to the superior
--------------------------
rights of the holders of shares of any other series of Preferred Stock or other
class of capital stock of the Company ranking superior to the shares of Series I
Preferred Stock with respect to dividends, the holders of shares of Series I
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board, out of the assets of the Company legally available therefor, (1)
quarterly dividends payable in cash on the last day of each fiscal quarter in
each year, or such other dates as the Board shall approve (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 a
fraction of a share of Series I Preferred Stock, in the amount of $0.25 per
whole share (rounded to the nearest cent) less the amount of all cash dividends
declared on the Series I Preferred Stock pursuant to the following clause (2)
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 I Preferred Stock (the total of which
shall not, in any event, be less than zero) and (2) dividends payable in cash on
the payment date for each cash dividend declared on the shares of Common Stock,
par value $0.001 per share, of the Company (the "Common Stock") in an amount per
------------
whole share (rounded to the nearest cent) equal to the Formula Number (as
hereinafter defined) then in
effect times the cash dividends then to be paid on each share of Common Stock.
In addition, if the Company shall pay any dividend or make any distribution on
the Common Stock payable in assets, securities or other forms of noncash
consideration (other than dividends or distributions solely in shares of Common
Stock), then, in each such case, the Company shall simultaneously pay or make on
each outstanding whole share of Series I Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in effect times such
dividend or distribution on each share of Common Stock. As used herein, the
"Formula Number" shall be 1,000; provided, however, that, if at any time after
-------------- -------- -------
December 2, 2010, the Company shall (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or make any distribution on the
Common Stock in shares of Common Stock, (ii) subdivide (by a stock split or
otherwise) the outstanding shares of Common Stock into a larger number of shares
of Common Stock or (iii) combine (by a reverse stock split or otherwise) the
outstanding shares of Common Stock into a smaller number of shares of Common
Stock, then in each such event the Formula Number shall be adjusted to a number
determined by multiplying the Formula Number in effect immediately prior to such
event by a fraction, the numerator of which is the number of shares of Common
Stock that are 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 (and rounding the result to the nearest whole number); and
provided further that, if at any time after December 2, 2010, the Company shall
----------------
issue any shares of its capital stock in a merger, reclassification, or change
of the outstanding shares of Common Stock, then in each such event the Formula
Number shall be appropriately adjusted to reflect such merger, reclassification
or change so that each share of Preferred Stock continues to be the economic
equivalent of a Formula Number of shares of Common Stock prior to such merger,
reclassification or change.
(b) The Company shall declare a cash dividend on the Series I Preferred
Stock as provided in Section 2(a) immediately prior to or at the same time it
declares a cash dividend on the Common Stock; provided, however, that, in the
-------- -------
event no cash dividend 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 or, with respect to the first Quarterly Dividend
Payment Date, during the period between the first issuance of any share or
fraction of a share of Series I Preferred Stock, a dividend of $0.25 per whole
share on the Series I Preferred Stock shall nevertheless accrue on such
subsequent Quarterly Dividend Payment Date or the first Quarterly Dividend
Payment Date, as the case may be. The Board may fix a record date for the
determination of holders of shares of Series I Preferred Stock entitled to
receive a dividend or distribution declared thereon, which record date shall be
the same as the record date for any corresponding dividend or distribution on
the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series I Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue and
be cumulative from and after 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 I 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 and after such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of
Series I 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.
(d) So long as any shares of Series I Preferred Stock are outstanding, no
dividends or other distributions shall be declared, paid or distributed, or set
aside for payment or distribution, on the Common Stock unless, in each case, the
dividend required by this Section 2 to be declared on the Series I Preferred
Stock shall have been declared and set aside.
(e) The holders of shares of Series I Preferred Stock shall not be
entitled to receive any dividends or other distributions except as herein
provided.
SECTION 3. Voting Rights. No voting rights shall attach to the Series I
--------------
Preferred Stock.
SECTION 4. Certain Restrictions. (a) Whenever quarterly dividends or
---------------------
other dividends or distributions on the Series I 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 I Preferred
Stock outstanding shall have been paid in full, the Company shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series I 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 I Preferred Stock, except dividends
paid ratably on the Series I Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series I Preferred Stock; provided, however,
-------- -------
that the Company may at any time redeem, purchase or otherwise acquire shares of
any such parity stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series I Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
I Preferred Stock, or any shares of stock ranking on a parity with the Series I
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board) to all holders of such shares upon
such terms as the Board, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Company shall not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under Section 4(a), purchase or otherwise acquire such shares
at such time and in such manner.
SECTION 5. Liquidation Rights. Upon the liquidation, dissolution or
-------------------
winding up of the Company, whether voluntary or involuntary, no distribution
shall be made (1) to the holders of any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding up) to the Series I
Preferred Stock unless, prior thereto, the holders of shares of Series I
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $1,000 per whole share
or (y) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (2) to the holders of any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the Series
I Preferred Stock, except distributions made ratably on the Series I Preferred
Stock and all other such parity stock in proportion to the total amounts to
which the holders of all such shares are entitled upon such liquidation,
dissolution or winding up; provided, that no holder of any Series I Preferred
--------
Stock shall be authorized or entitled to receive upon involuntary liquidation of
the Company an amount in excess of $100.00 per share of Series I Preferred
Stock.
SECTION 6. Consolidation, Merger, etc. In case the Company shall enter
---------------------------
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the then
outstanding shares of Series I Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share equal to the Formula
Number then in effect 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 exchanged or changed. In the event both
this Section 6 and Section 2 appear to apply to a transaction, this Section 6
will control.
SECTION 7. No Redemption; No Sinking Fund. (a) The shares of Series I
------------------------------
Preferred Stock shall not be subject to redemption by the Company or at the
option of any holder of Series I Preferred Stock; provided, however, that,
-------- -------
subject to Section 4(a)(iv), the Company may purchase or otherwise acquire
outstanding shares of Series I Preferred Stock in the open market or by offer to
any holder or holders of shares of Series I Preferred Stock.
(b) The shares of Series I Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
SECTION 8. Ranking. The Series I Preferred Stock shall rank junior to all
--------
other series of Preferred Stock of the Company unless the Board shall
specifically determine otherwise in fixing the powers, preferences and relative,
participating, optional and other special rights of the shares of such series
and the qualifications, limitations and restrictions thereof.
SECTION 9. Fractional Shares. The Series I Preferred Stock shall be
------------------
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one one-thousandth of a share
(as such fraction may be adjusted as provided in the Rights Agreement) or any
integral multiple of such fraction which shall entitle the holder, in proportion
to such holder's fractional shares, to receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series I
Preferred Stock. In lieu of fractional shares, the Company, prior to the first
issuance of a share or a fraction of a share of Series I Preferred Stock, may
elect (a) to make a cash payment as provided in the Rights Agreement for
fractions of a share other than one one-thousandths of a share (as such fraction
may be adjusted as provided in the Rights Agreement) or any integral multiple
thereof or (b) to issue depository receipts evidencing such authorized fraction
of a share of Series I Preferred Stock pursuant to an appropriate agreement
between the Company and a depository selected by the Company; provided, however,
-------- -------
that such agreement shall provide that the holders of such depository receipts
shall have all the rights, privileges and preferences to which they are entitled
as holders of the Series I Preferred Stock.
SECTION 10. Reacquired Shares. Any shares of Series I Preferred Stock
------------------
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancelation become authorized but unissued shares of Preferred
Stock, without designation as to series until such shares are once more
designated as part of a particular series by the Board pursuant to the
provisions of the Certificate.
SECTION 11. Amendment. So long as any shares of Series I Preferred Stock
----------
shall be outstanding, (i) none of the powers, preferences and relative,
participating, optional and other special rights of the Series I Preferred Stock
as herein provided shall be amended in any manner which would alter or change
the powers, preferences, rights or privileges of the holders of Series I
Preferred Stock so as to affect them adversely and (ii) no amendment, alteration
or repeal of the Certificate or of the By-laws of the Company shall be effected
so as to affect adversely any of such powers, preferences, rights or privileges.
IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed in its corporate name on this 2nd day of December, 2010.
COMPETITIVE TECHNOLOGIES, INC.,
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
EXHIBIT B
[Form of Right Certificate]
Certificate No. [R]-
___________ Rights
NOT EXERCISABLE AFTER DECEMBER 2, 2013, OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001
PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON
(AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.
Right Certificate
COMPETITIVE TECHNOLOGIES, 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 December 2, 2010 as it may be amended from time to time
(the "Rights Agreement"), between COMPETITIVE TECHNOLOGIES, INC., a Delaware
----------------
corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC,
-------
as Rights Agent (the "Rights Agent"), unless the Rights evidenced hereby shall
------------
have been previously redeemed or exchanged by the Company, to purchase from the
Company at any time after the Distribution Date (as defined in the Rights
Agreement) and prior to 5:00 p.m., New York City time, on the third anniversary
of the date of the Rights Agreement (the "Expiration Date"), at the office or
---------------
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth (1/1,000th) of a fully paid, nonassessable
share of Series I Preferred Stock, par value $0.001 per share, of the Company
(the "Preferred Shares"), at a purchase price per one one-thousandth (1/1,000th)
----------------
of a share equal to $100.00 (the "Purchase Price") payable in cash, upon
--------------
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of December 2, 2010. As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all 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
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate number
and kind of shares as
the Rights evidenced by the Right Certificate or Right Certificates surrendered
shall have entitled such holder to purchase. If this Right Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock, par value $0.001 per share,
of the Company or other securities of the Company deemed by the Board of
Directors of the Company to be at least equivalent in value) of $0.001 per Right
(which amount shall be subject to adjustment as provided in the Rights
Agreement) at any time prior to the earlier of (i) the Distribution Date and
(ii) the Expiration Date.
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-thousandth
(1/1,000th) of a share (as such fraction may be adjusted as provided in the
Rights Agreement) or any integral multiple thereof or to issue certificates or
utilize a depository arrangement as provided in the terms of the Rights
Agreement and the Preferred Shares.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company, including, without limitation, 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 other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of:
COMPETITIVE TECHNOLOGIES, INC.,
By: /s/
------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
Attest:
Name:
Title:
Date of countersignature:
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC
as Rights Agent,
by
Authorized Signatory
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _____Rights
represented by this Right Certificate to purchase the Preferred Shares (or other
shares) issuable upon the exercise of such Rights and requests that certificates
for such shares be issued in the name of:
Please insert social security
or other identifying number
-------------------------------
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
-------------------------------
(Please print name and address)
Dated: ____________
---------
Signature
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent
Medallion Program, the Stock Exchanges Medallion Program or the New York Stock
Exchange, Inc. Medallion Signature Program.
The undersigned hereby certifies that (1) the Rights evidenced by this Right
Certificate are not being exercised by or on behalf of a person who is or was an
Acquiring Person or an Affiliate or Associate thereof (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 not acquire the Rights evidenced by this
Right Certificate from any person who is or was an Acquiring Person or an
Affiliate or Associate thereof.
Dated: ,
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent
Medallion Program, the Stock Exchanges Medallion Program or the New York Stock
Exchange, Inc. Medallion Signature Program.
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfer unto
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________, ____
______________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in the Securities Transfer Agent
Medallion Program, the Stock Exchanges Medallion Program or the New York Stock
Exchange, Inc. Medallion Signature Program.
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement), (2) this Right Certificate
is not being sold, assigned or transferred to or on behalf of any such Acquiring
Person, Affiliate or Associate and (3) after inquiry and to the best knowledge
of the undersigned, the undersigned did not acquire the Rights evidenced by this
Right Certificate from any Person who is or was an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement).
______________________________
Signature
NOTICE
------
The signature on the foregoing Form of Election to Purchase or Form of
Assignment must correspond to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
EXHIBIT C
RIGHTS BENEFICIALLY OWNED BY ANY ACQUIRING PERSONS OR THEIR AFFILIATES OR
ASSOCIATES AND BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND
NONTRANSFERABLE.
SUMMARY OF RIGHTS TO PURCHASE
SERIES I PREFERRED STOCK
OF COMPETITIVE TECHNOLOGIES, INC.
On December 2, 2010, the Board of Directors (the "Board") of COMPETITIVE
-----
TECHNOLOGIES, INC., a Delaware corporation (the "Company"), declared a dividend
-------
of one right (collectively, the "Rights") for each outstanding share of Common
------
Stock, par value $0.001 per share, of the Company (the "Common Shares"). The
-------------
Rights will be issued to the holders of record of Common Shares outstanding at
December 2, 2010 (the " Record Date") and with respect to Common Shares issued
-----------
thereafter until the Distribution Date (as defined below). Each Right, when it
becomes exercisable as described below, will entitle the registered holder to
purchase from the Company one one-thousandth (1/1,000th) of a share of Series I
Preferred Stock, par value $0.001 per share, of the Company (the "Preferred
---------
Shares") at a price of $100.00 (the "Purchase Price"). The description and
------ --------------
terms of the Rights are set forth in a Rights Agreement dated as of December 2,
2010 as it may be amended from time to time (the "Rights Agreement"), between
----------------
the Company and American Stock Transfer & Trust Company, LLC, as Rights Agent
(the "Rights Agent").
------------
Until the earlier of (i) such time as the Company learns that a person or
group (including any affiliate or associate of such person or group), other than
any person or group with beneficial ownership of more than 20% of the
outstanding Common Stock as of December 2, 2010 (only so long as such person or
group does not increase its beneficial ownership of Common Stock, subject to
certain exceptions), has acquired, or obtained the right to acquire, beneficial
ownership of more than 20% of the outstanding Common Shares (any such person or
group being called an "Acquiring Person") and (ii) such date, if any, as may be
----------------
designated by the Board following the commencement of, or first public
disclosure of an intention to commence, a tender or exchange offer for
outstanding Common Shares which could result in such person or group becoming
the beneficial owner of more than 20% of the outstanding Common Shares (the
earlier of such dates being called the "Distribution Date"), the Rights will be
-----------------
evidenced by certificates for Common Shares registered in the names of the
holders thereof, or, in the case of Common Shares held in uncertificated form,
by the transaction statement or other record of ownership of such Common Shares,
and not by separate Right Certificates. With respect to any Common Shares
outstanding as of the Record Date, until the earliest of the Distribution Date,
the Redemption Date or the Expiration Date, (i) in the case of certificated
shares, the Rights associated with the Common Shares represented by a
certificate shall be evidenced by such certificate along with a copy of this
Summary of Rights, and the surrender for transfer of any such certificate shall
also constitute the transfer of the Rights associated with the Common Shares
represented thereby, and (ii) in the case of Common Shares held in
uncertificated form, the Rights associated with the Common Shares shall be
evidenced by the balances indicated in the book-entry account system of the
transfer agent for the Common Shares, and the transfer of any Common Shares in
the book-entry account system of the transfer agent for such Common Shares shall
also constitute the transfer of the Rights associated with such Common Shares.
Therefore, until the Distribution Date, the Rights may be transferred with and
only with the underlying Common Shares.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
------------------
of the Common Shares as of the close of business on the Distribution Date, and
such separate Right Certificates alone will thereafter evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire at
----------------------------------------------------------
5:00 p.m., New York City time, on December 2, 2013 (the "Expiration Date"),
---------------
unless earlier redeemed or exchanged by the Company as described below.
The number of Preferred Shares or other securities issuable upon exercise
of the Rights is subject to adjustment by the Board in the event of any change
in the Common Shares or Preferred Shares, whether by reason of stock dividends,
stock splits, reclassifications, recapitalizations, mergers, consolidations,
combinations or exchanges of securities, split-ups, split-offs, spin-offs,
liquidations, other similar changes in capitalization, any distribution or
issuance of assets, evidences of indebtedness or subscription rights, options or
warrants to holders of Common Shares or Preferred Shares or otherwise. The
Purchase Price and the number of Preferred Shares or other securities issuable
upon exercise of the Rights are subject to adjustment from time to time in the
event of the declaration of a stock dividend on the Common Shares payable in
Common Shares or a subdivision or combination of the Common Shares prior to the
Distribution Date.
The Preferred Shares are authorized to be issued in fractions which are an
integral multiple of one one-thousandth (1/1,000th) of a Preferred Share. The
Company may, but is not required to, issue fractions of shares upon the exercise
of Rights, and in lieu of fractional shares, the Company may make a cash payment
based on the market price of such shares on the first trading date prior to the
date of exercise or utilize a depositary arrangement as provided by the terms of
the Preferred Shares.
Subject to the right of the Board to redeem or exchange the Rights as described
below, at such time as there is an Acquiring Person, the holder of each Right
will thereafter have the right to receive, upon exercise thereof, for the
Purchase Price, that number of one one-thousandths (1/1,000ths) of a Preferred
Share equal to the number of Common Shares which at the time of such transaction
would have a market value of twice the Purchase Price. Any Rights that are or
were beneficially owned by an Acquiring Person on or after the Distribution Date
will become null and void and will not be subject to the "flip-in" provision.
In the event the Company is acquired in a merger or other business combination
by an Acquiring Person that has common shares publicly traded in the United
States or 50% or more of the Company's assets or assets representing 50% or more
of the Company's earning power are sold, leased, exchanged or otherwise
transferred (in one or more transactions) to an Acquiring Person that has common
shares publicly traded in the United States, proper provision must be made so
that each Right will entitle its holder to purchase, for the Purchase Price,
that number of common shares of such entity which at the time of the transaction
would have a market value of twice the Purchase Price. In the event the Company
is acquired in a merger or other business combination by an Acquiring Person
that does not have common shares publicly traded in the United States or 50% or
more of the Company's assets or assets representing 50% or more of the earning
power of the Company are sold, leased, exchanged or otherwise transferred (in
one or more transactions) to an Acquiring Person that does not have common
shares publicly traded in the United States, proper provision must be made so
that each Right will entitle its holder to purchase, for the Purchase Price, at
such holder's option, (i) that number of common shares of the surviving
corporation in the transaction with such entity which at the time of the
transaction would have a book value of twice the Purchase Price, (ii) that
number of common shares of such entity which at the time of the transaction
would have a book value of twice the Purchase Price or (iii) if such entity has
an affiliate which has common shares publicly traded in the United States, that
number of common shares of such affiliate which at the time of the transaction
would have a market value of twice the Purchase Price. The "flip-over"
provision only applies to a merger or similar business combination with an
Acquiring Person.
ANY RIGHTS THAT ARE OR WERE, AT ANY TIME ON OR AFTER THE DATE AN ACQUIRING
PERSON BECOMES SUCH, BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY AFFILIATE
OR ASSOCIATE OF AN ACQUIRING PERSON (OR A TRANSFEREE THEREOF) WILL BECOME NULL
AND VOID AND ANY HOLDER OF ANY SUCH RIGHT (INCLUDING ANY SUBSEQUENT HOLDER) WILL
BE UNABLE TO EXERCISE ANY SUCH RIGHT.
The Rights are redeemable by the Board at a redemption price of $0.001 per Right
(the "Redemption Price") any time prior to the earlier of (i) the Distribution
----------------
Date and (ii) the Expiration Date (the date of such redemption being the
"Redemption Date"). Immediately upon the action of the Board electing to redeem
---------------
the Rights, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
After there is an Acquiring Person the Board may elect to exchange each
Right (other than Rights owned by an Acquiring Person) for consideration per
Right consisting of (i) one-half of the securities that would be issuable at
such time upon the exercise of one Right pursuant to the terms of the Rights
Agreement or (ii) cash in an amount equal to the Purchase Price.
Notwithstanding the foregoing, the Board is not empowered to effect such
exchange at any time after any person (other than the Company, any subsidiary of
the Company, any employee benefit plan of the Company or any such subsidiary, or
any entity holding Common Shares for or pursuant to the terms of any such plan),
together with all affiliates and associates of such person, becomes the
beneficial owner of 50% or more of the Common Shares then outstanding.
At any time prior to such time as there shall be an Acquiring Person, the
Company may, without the approval of any holder of the Rights, supplement or
amend any provision of the Rights Agreement (including the date on which the
Distribution Date will occur, the amount of the Purchase Price or the definition
of "Acquiring Person"), except that no supplement or amendment may be made that
extends the Expiration Date or reduces the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends.
A copy of the Rights Agreement, including the terms of the Preferred Shares,
will be filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A. A copy of the Rights Agreement is available
free of charge from the Company upon written request. 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.
