Exhibit 4.1
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INTERNET SECURITY SYSTEMS, INC.
a Delaware corporation
AND
SUNTRUST BANK
a Georgia Banking Corporation
RIGHTS AGENT
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RIGHTS AGREEMENT
DATED AS OF JULY 18, 2002
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TABLE OF CONTENTS
Section 1. Certain Definitions................................................................................1
Section 2. Appointment of Rights Agent........................................................................5
Section 3. Issuance of Rights Certificates....................................................................5
Section 4. Form of Rights Certificates........................................................................7
Section 5. Countersignature and Registration..................................................................8
Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates.................................................................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.....................................10
Section 8. Cancellation and Destruction of Rights Certificates...............................................12
Section 9. Reservation and Availability of Capital Stock.....................................................12
Section 10. Preferred Shares Record Date......................................................................13
Section 11. Adjustments to Number and Kind of Shares; Number of Rights or Purchase Price......................13
Section 12. Certification of Adjustments......................................................................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..............................21
Section 14. Fractional Rights and Fractional Shares...........................................................24
Section 15. Rights of Action..................................................................................25
Section 16. Agreement of Right Holders........................................................................25
Section 17. Rights Certificate Holder Not Deemed a Stockholder................................................26
Section 18. Concerning the Rights Agent.......................................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent.........................................27
Section 20. Duties of Rights Agent............................................................................27
Section 21. Change of Rights Agent............................................................................29
Section 22. Issuance of New Rights Certificates...............................................................30
Section 23. Redemption and Termination........................................................................30
Section 24. Exchange..........................................................................................31
Section 25. Notice of Proposed Actions........................................................................32
Section 26. Notices...........................................................................................33
Section 27. Supplements and Amendments........................................................................34
Section 28. Determinations and Actions by the Board...........................................................34
Section 29. Successors........................................................................................34
Section 30. Benefits of this Agreement........................................................................34
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Section 31. Governing Law.....................................................................................34
Section 32. Counterparts......................................................................................35
Section 33. Descriptive Headings..............................................................................35
Section 34. Severability......................................................................................35
EXHIBITS
Exhibit A Form of Certificate of Designations of Series A Junior
Participating Preferred Stock of Internet Security
Systems, Inc.
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights to Purchase Junior Preferred Shares
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RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT (this "Agreement"), dated as of July 18, 2002,
is by and between Internet Security Systems, Inc., a Delaware corporation (the
"Company"), and SunTrust Bank, a Georgia banking corporation, as rights agent
(the "Rights Agent");
WITNESSETH:
WHEREAS, the Board of Directors of the Company has (i) authorized and
declared a dividend distribution of one preferred share purchase right (a
"Right") for each Common Share (as defined herein) outstanding as of the Close
of Business (as defined herein) on July 29, 2002 (the "Record Date"), each
Right initially representing the right to purchase one one-thousandth of a
Junior Preferred Share (as defined herein), upon the terms and subject to the
conditions set forth in this Agreement, and (ii) further authorized the
issuance of one Right with respect to each Common Share (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p)), in each
case that shall become outstanding between the Record Date, and the earliest of
the Distribution Date, the Expiration Date or the Final Expiration Date (each
such term as defined in this Agreement).
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or
which, together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 20% or more of the Voting Power of the Common Shares of the
Company then outstanding; provided, however, that:
(i) the term "Acquiring Person" shall not
include an Exempt Person (so long as such Person remains an Exempt Person);
(ii) a Person shall not be deemed to have become
an "Acquiring Person" solely as a result of the acquisition by the Company of
shares of capital stock of the Company which, by reducing the number or Voting
Power of shares outstanding, increases the Voting Power of the shares
beneficially owned by such Person to 20% or more of the Voting Power of the
Common Shares; provided, however, that if a Person shall so become the
Beneficial Owner of Common Shares of the Company representing 20% or more of
the Voting Power of the Common Shares of the Company then outstanding by reason
of the acquisition by the Company of shares of capital stock of the Company and
shall, after such share purchases by the Company, purchase or otherwise take
action to cause it to become the Beneficial Owner of any additional Common
Shares of the Company, then such Person shall be an Acquiring Person;
(iii) a Person shall not be deemed to have become
an "Acquiring Person" if (a) the Board of Directors of the Company in its good
faith judgment determines that a Person has inadvertently become the Beneficial
Owner of Common Shares of the Company that would otherwise cause such Person to
become an Acquiring Person; (b) the Board of Directors in
its sole discretion provides such Person with a designated period to divest a
sufficient number of shares so that such Person no longer is the Beneficial
Owner of Common Shares of the Company that would otherwise cause such Person to
be an Acquiring Person, and (c) such Person has so divested such shares at the
end of any such designated period and has not acquired any additional shares of
capital stock of the Company prior to the end of such designated period; and
(iv) Common Shares of the Company Beneficially
Owned by the Company or any Subsidiary of the Company shall not be considered
outstanding for purposes of calculating any Person's percentage ownership of
the Voting Power of the outstanding Common Shares of the Company.
(b) "Adjustment Shares" shall have the meaning set forth
in Section 11(a)(ii).
(c) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Exchange Act, as in effect on the date of this
Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of
and shall be deemed to "Beneficially Own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has (A) the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding, whether or not
in writing (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of or to "Beneficially
Own" securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates pursuant
to, and in accordance with the General Rules and Regulations promulgated under
the Exchange Act, until such tendered securities are accepted for purchase or
exchange; or (B) pursuant to any agreement, arrangement or understanding
whether or not in writing, the right to vote or dispose of such securities or
"beneficial ownership" (as defined in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date of this Agreement)
of such securities; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of or to "Beneficially Own" any securities if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy
or consent solicitation made to more than ten holders of shares of a class of
stock of the Company registered under Section 12 of the Exchange Act and
pursuant to, and in accordance with, the General Rules and Regulations under
the Exchange Act and, (2) is not also required to be reported by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
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(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliates or Associates thereof) with
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting (except as described in the proviso to
clause (B) of subparagraph (ii) of this Section 1(d)) or disposing of any
securities of the Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to Beneficially Own under this Agreement.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the State of
Delaware are authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean
5:00 P.M., central time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., central time, on the next
succeeding Business Day.
(g) "Common Shares," when used with reference to the
Company, shall mean shares of the common stock, par value $0.001 per share, of
the Company. "Common Shares," when used with reference to any Person other than
the Company, shall mean the capital stock or other equity interests with the
greatest per share or per unit voting power of such other Person or, if such
other Person is a Subsidiary of or is controlled by another Person, the Person
or Persons which ultimately control such first-mentioned Person.
(h) "Common Share Equivalents" shall have the meaning
set forth in Section 11(a)(iii).
(i) "Current Market Price" shall have the meaning set
forth in Section 11(d).
(j) "Current Value" shall have the meaning set forth in
Section 11(a)(iii).
(k) "Distribution Date" shall have the meaning set forth
in Section 3(a).
(l) "Equivalent Preferred Shares" shall have the meaning
set forth in Section 11(b).
(m) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(n) "Exchange Ratio" shall have the meaning set forth in
Section 24(a).
(o) "Exempt Person" shall mean (i) the Company, (ii) any
Subsidiary of the Company, (iii) any employee benefit plan of the Company or of
any Subsidiary of the Company, (iv) any Person or entity organized, appointed,
established or holding Common Shares of the Company for or pursuant to the
terms of any such employee benefit plan, or (v) any Person who
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together with such Person's Affiliates and Associates, as of the date of this
Agreement, directly or indirectly, Beneficially Own 20% or more of the Voting
Power of the Common Shares of the Company, provided that such Person takes no
action to purchase or cause it to become the Beneficial Owner of any additional
Common Shares of the Company.
(p) "Expiration Date" shall have the meaning set forth
in Section 7(a).
(q) "Flip-In Event" shall have the meaning set forth in
Section 11(a)(ii).
(r) "Flip-In Trigger Date" shall have the meaning set
forth in Section 11(a)(iii).
(s) "Flip-Over Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a).
(t) "Final Expiration Date" shall have the meaning set
forth in Section 7(a).
(u) "Junior Preferred Shares" shall mean shares of
Series A Junior Participating Preferred Stock, par value $0.001 per share, of
the Company, having the rights, preferences and limitations set forth in the
Certificate of Designations attached to this Agreement as Exhibit A, and, to
the extent there are not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
then outstanding Rights, any other series of preferred stock of the Company
designated for such purpose by the Board of Directors of the Company containing
terms substantially similar to the terms of the Series A Junior Participating
Preferred Stock.
(v) "Nasdaq National Market" shall have the meaning set
forth in Section 9(b).
(w) "Person" shall mean any individual, firm,
corporation, partnership or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(x) "Principal Party" shall have the meaning set forth
in Section 13(b).
(y) "Purchase Price" shall mean the price (subject to
adjustment as provided herein) at which a holder of a Right may purchase one
one-thousandth (1/1000th) of a share of Junior Preferred Stock (subject to
adjustment as provided herein) upon an exercise of a Right, which price shall
initially be $80.00.
(z) "Record Date" shall have the meaning set forth in
the recitals clause at the beginning of this Agreement.
(aa) "Redemption Date" shall mean the date on which the
Rights are redeemed as provided in Section 23.
(bb) "Redemption Period" shall have the meaning set forth
in Section 23(a)
(cc) "Redemption Price" shall have the meaning set forth
in Section 23(a).
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(dd) "Rights" shall have the meaning set forth in the
recitals clause at the beginning of this Agreement.
(ee) "Rights Certificates" shall have the meaning set
forth in Section 3(a).
(ff) "Securities Act" shall mean the Securities Act of
1933, as amended.
(gg) "Shares Acquisition Date" shall mean the earlier of
(i) the first public announcement (which for this purpose shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such (or, if such announcement occurs before the Record Date, the Close of
Business on the Record Date) or (ii) the public disclosure of facts by the
Company or an Acquiring Person indicating that an Acquiring Person has become
such; provided, however, that in the case of clause (i) or clause (ii) of this
Section 1(gg), if such Person is determined not to have become an Acquiring
Person pursuant to Section 1(a), then no such Shares Acquisition Date shall be
deemed to have occurred.
(hh) "Subsidiary" of a Person shall mean any corporation
or other entity of which securities or other ownership interests having
ordinary voting power sufficient to elect a majority of the board of directors
or other persons performing similar functions are Beneficially Owned, directly
or indirectly, or otherwise controlled by such Person.
(ii) "Substitution Period" shall have the meaning set
forth in Section 11(a)(iii).
(jj) "Summary of Rights" shall have the meaning set forth
in Section 3(b).
(kk) "Trading Day" shall have the meaning set forth in
Section 11(d)(i).
(ll) "Triggering Event" shall mean any Flip-In Event or
Flip-Over Event.
(mm) "Voting Power" shall mean the total number of votes
entitled to be cast generally by the holders of the Common Shares of the
Company then outstanding.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of
the Rights (who, in accordance with Section 3, shall, prior to the Distribution
Date, also be the holders of the Common Shares of the Company) in accordance
with the terms and conditions of this Agreement, and the Rights Agent hereby
accepts such appointment. The Company from time to time may appoint such
co-Rights Agents as it may deem necessary or desirable. If 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.
Section 3. Issuance of Rights Certificates.
(a) Until the earlier of
(i) the Close of Business on the tenth day
after the Shares Acquisition Date; or
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(ii) the Close of Business on the tenth Business
Day (or such later date as may be determined by action of the Board of
Directors of the Company prior to such time as any Person becomes an Acquiring
Person) after the date of the commencement by any Person (other than an Exempt
Person) of, or of the first public announcement of the intent of any Person
(other than an Exempt Person) to commence, a tender or exchange offer the
consummation of which would result in any Person, together with its Affiliates
and Associates, becoming the Beneficial Owner of 20% or more of the Voting
Power of the then outstanding Common Shares of the Company (irrespective of
whether any shares are actually purchased pursuant to such offer) (the earlier
of such events described in clauses (i) and (ii) being referred to in this
Agreement as the "Distribution Date"),
(x) the Rights will be evidenced (subject to the provisions of Section 3(c))
(1) by the certificates for the Common Shares registered in the names of the
holders thereof (which certificates for such Common Shares of the Company shall
be deemed also to be certificates for such Rights other than for purposes of
this Section 3 and any provision of this Agreement referring to the issuance or
distribution of Rights Certificates) and not by separate Rights Certificates or
(2) to the extent that any Common Shares are not evidenced by certificates but
are rather recorded in book entry form, by such book entry with respect to the
Common Shares, and (y) the Rights (and the right to receive separate Rights
Certificates) will be transferable only in connection with the transfer of the
underlying Common Shares of the Company (including a transfer to the Company).
As soon as practicable after the Distribution Date, the Company will prepare
and execute, the Rights Agent will countersign, and the Company will send or
cause to be sent (and the Rights Agent will, if requested, send) by first
class, insured, postage prepaid mail, to each record holder of Common Shares as
of the Close of Business on the Distribution Date, as shown by the records of
the Company, at the address of such holder shown on such records, one or more
rights certificates in substantially the form of Exhibit B hereto, evidencing
one Right for each Common Share (a "Rights Certificate"), so held, subject to
adjustment as provided in this Agreement. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights Certificates and will
be transferable separately from the Common Shares of the Company.
(b) As promptly as practicable following the Record
Date, the Company will send a copy of a Summary of Rights to Purchase Preferred
Shares, substantially in the form of Exhibit C attached hereto ("Summary of
Rights"), by first-class, postage prepaid mail, to each record holder of Common
Shares of the Company as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company. The Rights Agent
will mail to any holder of the Rights Certificate a copy of this Agreement
without charge to the holder but at the expense of the Company after receipt of
a written request therefor.
(c) With respect to Common Shares of the Company
outstanding as of the Close of Business on the Record Date, until the
Distribution Date (or, if earlier, the Expiration Date or the Final Expiration
Date), the Rights will be evidenced by certificates for Common Shares of the
Company registered in the names of the holders thereof together with a Summary
of Rights. Until the Distribution Date (or, if earlier, the Expiration Date or
Final Expiration Date), the surrender for transfer of any certificate for
Common Shares of the Company outstanding on the Record Date also shall
constitute the surrender for transfer of the Rights associated with the Common
Shares of the Company.
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(d) Rights shall be issued in respect of all Common
Shares of the Company that are issued (whether originally issued or from the
Company's treasury) after the Record Date but prior to the earliest of the
Distribution Date, the Expiration Date or the Final Expiration Date. Until the
Distribution Date, certificates representing Common Shares also shall be deemed
to be certificates for the associated Rights, and shall have impressed on,
printed on, written on or otherwise affixed to them substantially the following
legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights Agreement
between Internet Security Systems, Inc. and SunTrust Bank, as
Rights Agent, dated as of July 18, 2002 (the "Rights
Agreement"), the terms of which are incorporated herein by
reference and a copy of which is on file at the principal
executive offices of Internet Security Systems, Inc. Under
certain circumstances, as set forth in the Rights Agreement,
such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. Internet
Security Systems, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge, after receipt by it of a
written request therefor. Under certain circumstances as
provided in the Rights Agreement, Rights issued to, held by
or Beneficially Owned by Acquiring Persons, their Associates
or Affiliates (as such terms are defined in the Rights
Agreement), or any subsequent holder of such Rights will
become null and void.
With respect to such certificates containing the foregoing legends, the Rights
associated with the Common Shares of the Company shall, until the earliest of
the Expiration Date, the Final Expiration Date or the Distribution Date, be
evidenced by such certificates alone and holders of record of Common Shares of
the Company also shall be the holders of record of the associated Rights, and
the surrender for transfer of any such certificate shall also constitute the
surrender for transfer of the Rights associated with the Common Shares of the
Company represented thereby.
(e) If the Company purchases or acquires any Common
Shares of the Company after the Record Date but prior to the Distribution Date,
any Rights associated with such Common Shares shall be deemed canceled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares of the Company that are no longer
outstanding.
Section 4. Form of Rights Certificates.
(a) Rights Certificates (and the forms of election to
purchase shares and of assignment to be printed on the reverse thereof), when,
as and if issued, shall be substantially in the form set forth in 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 and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or trading system on which the Rights may
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from time to time be listed or traded, or to conform to usage. Subject to the
provisions of Sections 7(e), 11, 22, and 23 the Rights Certificates, whenever
distributed, shall be dated as of the distribution date and shall entitle the
holders thereof to purchase such number of one one-thousandths of a Junior
Preferred Share, as shall be set forth therein at the price per one
one-thousandth of a Junior Preferred Share set forth therein, but the amount
and type of securities purchasable upon the exercise of each Right and the
Purchase Price thereof shall be subject to adjustment as provided therein and
in this Agreement.
(b) Notwithstanding any other provision of this
Agreement, any Rights Certificate that represents Rights that are or were at
any time on or after the Distribution Date Beneficially Owned by an Acquiring
Person or any Affiliate or Associate thereof (or any transferee of such Rights)
shall have impressed on, printed on, written on or otherwise affixed to it (if
the Company or the Rights Agent has knowledge that such Person is an Acquiring
Person or an Associate or Affiliate thereof or transferee of such Person or a
nominee of any of the foregoing) the following legend:
The Beneficial Owner of the Rights represented by this Rights
Certificate is an Acquiring Person or an Affiliate or
Associate (as such terms are defined in the Rights Agreement)
of an Acquiring Person or a subsequent holder of such Rights
Certificate Beneficially Owned by such Persons. Accordingly,
under circumstances specified in the Rights Agreement, this
Rights Certificate and the Rights represented hereby will
become null and void.
Notwithstanding the above provision, failure to place such legend on any Rights
Certificate representing Rights which are otherwise null and void pursuant to
the terms of this Agreement shall not affect the null and void status of such
Rights.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf
of the Company by its Chairman of the Board, Chief Executive Officer, President
or any Vice President, either manually or by facsimile signature, shall have
affixed thereto the Company's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. If any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent or issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect
as though the person who signed such Rights Certificates had not ceased to be
such officer of the Company; and any Rights Certificate may be signed on behalf
of the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Agreement any
such person was not such an officer.
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(b) Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its office designated for such purposes,
books for registration and transfer of the Rights Certificates issued under
this Agreement. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates, the date of each of the Rights
Certificates, and the certificate numbers for each of the Rights Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section
7(e) and Section 14, at any time after the Close of Business on the
Distribution Date and at or prior to the Close of Business on the earlier of
the Expiration Date or the Final Expiration Date, any Rights Certificate or
Rights Certificates (other than such Rights Certificates representing Rights
that have become null and void pursuant to this Agreement or that have been
exchanged pursuant to Section 24) may be transferred, split up, combined or
exchanged for another Rights Certificate or Rights Certificates, entitling the
holder of record to purchase a like number of one one-thousandths of a Junior
Preferred Share (or, following a Triggering Event, Common Shares of the
Company, other securities, cash or other assets, as the case may be) as the
Rights Certificate or Rights Certificates surrendered then entitles such holder
(or former holder in the case of a transfer) to purchase. Any holder of record
desiring to transfer any Rights Certificate or Rights Certificates shall
surrender the Rights Certificate or Rights Certificates at the office of the
Rights Agent designated for such purposes with the form of assignment on the
reverse side thereof (or enclose with such Rights Certificate or Rights
Certificates a written instrument of transfer in a form satisfactory to the
Company and the Rights Agent), duly executed by the holder of record thereof or
his attorney duly authorized in writing, and with such signature duly
guaranteed. Any holder of record desiring to split up, combine or exchange any
Rights Certificate or Rights Certificates shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights Certificate or
Rights Certificates to be split up, combined or exchanged at the office of the
Rights Agent designated for such purposes. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the holder of record
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall request. Thereupon the Rights Agent (subject to Section 4(b), Section
7(e), Section 14 and Section 23) shall countersign and deliver to the person
entitled thereto a Rights Certificate or Rights Certificates, as the case may
be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, if requested by
the Company, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Rights Certificate if mutilated, the Company (subject
to the provisions of Section 4(b),
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Section 7(e), Section 14 and Section 23) will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for delivery to the registered
holder in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights.
(a) Subject to Section 7(e), at any time after the
Distribution Date, the holder of record of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided in this Agreement,
including without limitation, the restrictions on exercisability set forth in
Section 9(b), Section 11(a)(iii) and Section 23(a)), in whole or in part upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate contained in the form of election to purchase on the reverse
side thereof duly executed (with such signature duly guaranteed), to the Rights
Agent at the office of the Rights Agent designated for such purpose, together
with payment of the aggregate Purchase Price with respect to the total number
of one one-thousandths of a Junior Preferred Share (or other securities, cash
or other assets, as the case may be, as to which such surrendered Rights are
then exercisable), subject to adjustment as provided in this Agreement, at or
prior to the earlier of (i) the Close of Business on July 11, 2012 (as such
date may be extended by the Board of Directors) (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed as provided in Section 23 (such
date being herein referred to as the "Expiration Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24.
(b) The Purchase Price with respect to each Right shall
initially be $80.00 for each one one-thousandth of a Junior Preferred Share
issued pursuant to the exercise of a Right. The Purchase Price and the number
of one one-thousandths of a Junior Preferred Share or other securities or
consideration to be acquired upon exercise of a Right shall be subject to
adjustment from time to time as provided in Sections 11 and 13. The Purchase
Price shall be payable in lawful money of the United States of America in
accordance with Section 7(c).
(c) Except as provided in Section 7(e), upon receipt of
a Rights Certificate representing exercisable Rights, with the form of election
to purchase and the certificate contained in the form of election to purchase
duly executed, accompanied by payment of the Purchase Price for the shares or
other securities or assets to be purchased and an amount equal to any
applicable transfer tax, by cash, certified check or official bank check
payable to the order of the Company, the Rights Agent, subject to Section
20(j), shall thereupon promptly (i) (A) requisition from any transfer agent of
the Junior Preferred Shares (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the total number of Junior
Preferred Shares so elected to be purchased and the Company will comply and
hereby authorizes and directs such transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of Junior Preferred Shares issuable upon exercise of the Rights hereunder with
a depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a Junior Preferred Share as
are to be purchased (in which case certificates for the Junior Preferred Shares
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash, if any, to be paid in lieu of issuance of fractional shares in
accordance with Section 14, (iii) promptly after receipt of such certificates
or
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depositary receipts, cause the same to be delivered to or upon the order of the
holder of record of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) when appropriate, after receipt
promptly deliver such cash to or upon the order of the holder of record of such
Rights Certificate; provided, however, that in the case of a purchase of
securities, other than Junior Preferred Shares, pursuant to Section 13, the
Rights Agent shall promptly take the appropriate actions corresponding to the
foregoing clauses (i) through (iv). If the Company is obligated to issue other
securities (including Common Shares) of the Company, pay cash and/or distribute
other property pursuant to Section 11(a), the Company will make all
arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon an exercise of Rights, a number of Rights be
exercised so that only whole Junior Preferred Shares would be issued.
(d) If the holder of record of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the occurrence of a Triggering Event, any Rights
Beneficially Owned by (i) an Acquiring Person or an Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or a transferee
of any such Associate or Affiliate of the Acquiring Person) who becomes a
transferee after the Acquiring Person becomes such (and any subsequent
transferees of such transferee), or (iii) a transferee of an Acquiring Person
(or a transferee of any Associate or Affiliate of the 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 to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has a primary purpose or the effect of avoiding this Section 7(e), shall
become null and void without any further action, and any holder (including any
subsequent holder) of such Rights shall thereupon have no rights whatsoever
with respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) are complied with, but shall have no liability
to any holder of Right Certificates or other Person as a result of its failure
or inability to make any determinations with respect to an Acquiring Person or
its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a holder of record upon the occurrence of
any purported exercise as set forth in this Section 7 unless such holder of
record shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall request.
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Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, shall be canceled by it,
and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy or cause to be destroyed such canceled
Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause
to be reserved and kept available, out of and to the extent of its authorized
and unissued Junior Preferred Shares not reserved for another purpose (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares or other securities) or shares held in its treasury, the
number of Junior Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares or other securities) that, as provided in this
Agreement, including Section 11(a)(iii), will be sufficient to permit the
exercise in full of all outstanding Rights. Prior to the occurrence of a
Triggering Event, the Company shall not be obligated to cause to be reserved
and kept available, out of its authorized and unissued Common Shares or shares
of preferred stock (other than Junior Preferred Shares), any such Common Shares
or any shares of preferred stock (other than Junior Preferred Shares) to permit
exercise of outstanding Rights.
(b) The Company shall (i) cause, from and after such
time as the Rights become exercisable, the Rights and all Junior Preferred
Shares (and following the occurrence of a Triggering Event, Common Shares,
issued or reserved for issuance upon exercise thereof) to be listed or admitted
for trading by the NASDAQ National Market ("Nasdaq National Market") or any
other national securities exchange upon notice of issuance upon such exercise
and (ii) if then necessary to permit the offer and issuance of such Junior
Preferred Shares (and, following the occurrence of a Triggering Event, Common
Shares or other securities), register and qualify such Junior Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares or other
securities) under the Securities Act and any applicable state securities or
"blue sky" laws (to the extent exemptions therefrom are not available), cause
such registration statement and qualifications to become effective as soon as
possible after such filing and keep such registration and qualifications
effective until the earlier of the Expiration Date or the Final Expiration
Date. The Company may temporarily suspend, for a period of time not to exceed
ninety days, the exercisability of the Rights in order to prepare and file a
registration statement under the Securities Act and permit it to become
effective or to comply with such blue sky laws. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.
(c) The Company covenants and agrees that it will take
all such action as may be necessary to insure that all Junior Preferred Shares
(and following the occurrence of a Triggering
-00-
Xxxxx, Xxxxxx Shares or other securities) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Purchase Price in respect thereof), be duly and validly
authorized and issued and fully paid and nonassessable shares in accordance
with applicable law.
(d) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates or of any Junior Preferred Shares (or Common Shares, other
securities or assets, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
Person other than, or the issuance or delivery of certificates for Junior
Preferred Shares (or Common Shares, other securities or assets, as the case may
be) upon exercise of Rights in a name other than that of, the holder of record
of the Rights Certificate, and the Company shall not be required to issue or
deliver a Rights Certificate or certificate for Junior Preferred Shares (or
Common Shares or other securities, as the case may be) to a Person other than
such holder of record, until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Shares Record Date. Each Person in whose
name any certificate for Junior Preferred Shares (or Common Shares or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Junior
Preferred Shares (or Common Shares or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon
which the Rights Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date
upon which the Junior Preferred Shares (or Common Shares or other securities,
as the case may be) transfer books of the Company are closed, such Person shall
be deemed to have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Junior Preferred Shares (or Common Shares or other securities) transfer books
of the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights and shall
not be entitled to receive any notice of any proceedings of the Company, except
as otherwise provided in this Agreement.
Section 11. Adjustments to Number and Kind of Shares; Number of
Rights or Purchase Price. The number and kind of shares subject to purchase
upon the exercise of each Right, the number of Rights outstanding and the
Purchase Price are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) If the Company shall at any time after the date
of this Agreement (A) declare or pay any dividend on Junior Preferred Shares
payable in Junior Preferred Shares, (B) subdivide or split the outstanding
Junior Preferred Shares into a greater number of shares, (C) combine or
consolidate the outstanding Junior Preferred Shares into a smaller number of
shares or effect a reverse split of the outstanding Junior Preferred Shares or
(D) issue any shares
-13-
of its capital stock in a reclassification of the Junior Preferred Shares
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and subject to Section 7(e), the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and
the number and kind of Junior Preferred Shares or capital stock, as the case
may be, issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number and
kind of Junior Preferred Shares or capital stock, as the case may be, which, if
such Right had been exercised immediately prior to such date and at a time when
the Junior Preferred Shares transfer books of the Company were open, the holder
thereof would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one such Right be less than the per share par value of the shares
of capital stock of the Company issuable upon exercise of the Right. If an
event occurs which would require an adjustment under both this Section 11(a)(i)
and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
(ii) Subject to Section 23(a) and Section 24, if
any Person shall at any time after the date of this Agreement become an
Acquiring Person (a "Flip-In Event"), then, except as otherwise provided in
this Section 11, promptly following the occurrence of such event, 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 exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement in lieu of the number of one one-thousandths of a Junior Preferred
Share, such number of Common Shares, as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
one-thousandths of a Junior Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Flip-In Event, and (y) dividing
that product (such product, following such first occurrence, shall be referred
to as the "Purchase Price" with respect to each Right for all purposes of this
Agreement) by 50% of the Current Market Price (determined pursuant to Section
11(d)) per share of such class of Common Shares for which a Right is
exercisable on the date of such first occurrence (such number of shares is
herein called the "Adjustment Shares"); provided that the Purchase Price and
the number of Adjustment Shares shall be further adjusted as provided in this
Agreement to reflect any events occurring after the date of such first
occurrence; and provided, further, that if the transaction that would otherwise
give rise to the foregoing adjustment is also subject to the provisions of
Section 13, then only the provisions of Section 13 shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii).
(iii) If the number of Common Shares which are
authorized by the Company's certificate of incorporation but which are not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights, is not sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii) and the Rights shall become so exercisable,
the Company shall take all such action as may be necessary (including seeking
stockholder approval for the authorization of additional shares) to authorize
additional Common Shares for issuance upon exercise in full of the Rights;
provided, however, that if the Company after using its reasonable best efforts
to do so is unable to cause the authorization of a sufficient number of
-14-
additional Common Shares within 120 days (the "Substitution Period"), the
Company shall: (A) determine the value of the Adjustment Shares issuable upon
the exercise of a Right (the "Current Value") and (B) with respect to each
Right (subject to Section 7(e)), upon the exercise of such Right and payment of
the Purchase Price, make adequate provision to substitute for the Adjustment
Shares (1) cash, (2) a reduction in the Purchase Price, (3) equity securities
other than Common Shares of the Company (including, without limitation, shares,
or units of shares, of preferred stock of the Company which, by virtue of
having dividend, voting and liquidation rights substantially comparable to the
class of Common Shares of the Company for which a Right is exercisable are
deemed in good faith by the Board of Directors of the Company to have
essentially the same value as the class of Common Shares of the Company for
which a Right is exercisable (such shares or units of shares of preferred stock
are herein called "Common Share Equivalents")), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, having an
aggregate value which, when added to the value of the Common Shares of the
Company actually issued upon exercise of such Right, shall have an aggregate
value equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined in good faith
by the Board of Directors of the Company based upon the advice of a nationally
recognized independent investment banking firm selected in good faith by the
Board of Directors of the Company; provided, however, that if the Company shall
not have made adequate provision to deliver value pursuant to clause (B) above
within 120 days following the later of (x) the first occurrence of a Flip-In
Event and (y) the date on which the Company's right of redemption pursuant to
Section 23(a) expires (the later of (x) and (y) being referred to as the
"Flip-In Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, Common Shares of the Company for which a Right is exercisable
(to the extent available) and then, if necessary, cash or shares of capital
stock of the Company, which shares and/or cash have an aggregate value equal to
the excess of the Current Value over the Purchase Price. To the extent that the
Company determines that some action need be taken pursuant to the first
sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to
Section 7(e), that such action shall apply uniformly to all outstanding Rights,
and (y) may suspend the exercisability of the Rights until the expiration of
the Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of each Adjustment Share shall
be the Current Market Price per Common Share of the Company on the date of the
occurrence of the Flip-In Event and the per share or per unit value of any
Common Share Equivalent shall be deemed to equal the Current Market Price per
Common Share of the Company on such date.
(b) If the Company shall fix a record date for the
issuance of rights (other than the Rights), options or warrants to all holders
of Junior Preferred Shares entitling them to subscribe for or purchase (for a
period expiring within 45 calendar days after such record date) Junior
Preferred Shares, shares having the same rights, privileges and preferences as
the Junior Preferred Shares ("Equivalent Preferred Shares") or securities
convertible into Junior Preferred Shares or Equivalent Preferred Shares at a
price per Junior Preferred Share or Equivalent Preferred Share (or having a
conversion price per share, if a security convertible into Junior Preferred
Shares or Equivalent Preferred Shares) less than the Current Market Price (as
-15-
determined pursuant to Section 11(d)) per Junior Preferred Share on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Junior Preferred Shares outstanding on such record date, plus the number of
Junior Preferred Shares which the aggregate offering price of the total number
of Junior Preferred Shares and/or Equivalent Preferred Shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such Current Market Price, and the denominator
of which shall be the number of Junior Preferred Shares outstanding on such
record date, plus the number of additional Junior Preferred Shares and/or
Equivalent Preferred Shares to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible).
If such subscription price may be paid by delivery of consideration, part or
all of which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Junior Preferred Shares owned by or held for the account of the Company shall
not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed, and
if such rights or warrants are not so issued, the Purchase Price then in effect
shall be adjusted to be the Purchase Price which would then be in effect if
such record date had not been fixed.
(c) If the Company shall fix a record date for a
distribution to all holders of Junior Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Junior Preferred Shares, but including any dividend payable in stock
other than Junior Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined pursuant to
Section 11(d)) per Junior Preferred Share on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness so to
be distributed or of such subscription rights or warrants applicable to one
Junior Preferred Share and the denominator of which shall be such Current
Market Price (as determined pursuant to Section 11(d)) per Junior Preferred
Share. Such adjustments shall be made successively whenever such a record date
is fixed; and if such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such
record date had not been fixed.
(d) (i) For the purpose of any computation under this
Agreement, other than computations made pursuant to Section 11(a)(iii), the
"Current Market Price" per Common Share on any date shall be deemed to be the
average of the daily closing prices per share of the Common Shares for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made pursuant to Section
11(a)(iii), the "Current Market Price" per Common Share on any date shall be
deemed to
-16-
be the average of the daily closing prices per Common Share for the ten
consecutive Trading Days immediately following such date; provided, however,
that if the Current Market Price per Common Share is determined during a period
following the announcement by the Company of (A) any dividend or distribution
on such Common Shares payable in Common Shares or securities convertible into
Common Shares (other than a regular quarterly cash dividend and other than the
Rights), or (B) any subdivision, combination or reclassification of such Common
Shares, and prior to the expiration of the requisite thirty Trading Day or ten
Trading Day period, as set forth above, the ex-dividend date for such dividend
or distribution, or the record date for such subdivision, combination or
reclassification occurs, then, and in each such case, the Current Market Price
shall be appropriately adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the Nasdaq National Market or, if the Common Shares are
not listed or admitted to trading on the Nasdaq National Market, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Common Shares are listed or admitted to trading or, if the Common Shares are
not listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc., Automated Quotations System or such
other system then in use, or, if on any such date the Common Shares are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Common Shares selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Shares, the fair value of
such shares on such date as determined in good faith by the Board of Directors
of the Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange or national market system on which
the Common Shares are listed or admitted to trading is open for the transaction
of business or, if the Common Shares are not listed or admitted to trading on
any national securities exchange or national market system, a Business Day. If
the Common Shares are not publicly held or not so listed or traded, "Current
Market Price" per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
(i) For the purpose of any computation under
this Agreement, the "Current Market Price" of the Junior Preferred Shares shall
be determined in the same manner as set forth above for the Common Shares in
Section 11(d)(i) (other than the last 2 sentences thereof). If the Current
Market Price per Junior Preferred Share cannot be determined in the manner
provided above, the "Current Market Price" per Junior Preferred Share shall be
conclusively deemed to be an amount equal to 1,000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to the Common Shares of the Company occurring
after the date of this Agreement) multiplied by the Current Market Price per
Common Share. If neither the Common Shares nor the Junior Preferred Shares are
publicly held or so listed or traded, "Current Market Price" per share of the
Junior Preferred Shares shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed
-17-
with the Rights Agent and shall be conclusive for all purposes. For all
purposes of this Agreement, the "Current Market Price" of one one-thousandth of
a Junior Preferred Share shall be equal to the "Current Market Price" of one
Junior Preferred Share divided by 1,000.
(e) Anything in this Agreement to the contrary
notwithstanding, no adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
in the Purchase Price; provided, however, that any adjustments which by reason
of this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest ten-thousandth
of a Common Share or other security or one-millionth of a Junior Preferred
Share, as the case may be. Notwithstanding the first sentence of this Section
11(e), any adjustment required by this Section 11 shall be made no later than
the earlier of (i) three years from the date of the transaction which mandates
such adjustment, or (ii) immediately prior to the Expiration Date or the Final
Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a) or Section 13(a), the holder of any Right thereafter exercised
shall become entitled to receive any property or shares of capital stock other
than Junior Preferred Shares, thereafter the amount of such property and the
number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Junior Preferred Shares contained in this Section 11, and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Junior Preferred
Shares shall apply on like terms to any such other property or shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the Purchase Price, the number of one
one-thousandths of a Junior Preferred Share purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the Purchase Price, that number of one
one-thousandths of a Junior Preferred Share (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price or any adjustment to the number of one
one-thousandths of a Junior Preferred Share for which a Right may be exercised,
to adjust the number of Rights, in lieu of any adjustment in the number of one
one-thousandths of a Junior Preferred Share purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of one one-thousandths of a Junior
Preferred Share for which such Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to
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such adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least 10 days
later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record
of Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a Junior Preferred Share
issuable upon the exercise of the Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price per one
one-thousandth of a Junior Preferred Share and the number of one
one-thousandths of a share which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then par value, if any, of the
number of one one-thousandths of a Junior Preferred Share issuable upon
exercise of the Rights, the Company shall take any corporate action, including
using its best efforts to obtain any required stockholder approvals, which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable one one-thousandths of a
Junior Preferred Share at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such record
date of the number of one one-thousandths of a Junior Preferred Share and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-thousandths of a Junior Preferred Share
and other capital stock or securities of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in effect immediately prior to
such adjustment; provided, however, that the Company shall deliver to such
holder a due xxxx or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
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(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that in its good faith judgment the Board of
Directors of the Company shall determine to be advisable in order that any (i)
consolidation or subdivision of the Junior Preferred Shares, (ii) issuance
wholly for cash of any Junior Preferred Shares at less than the Current Market
Price, (iii) issuance wholly for cash of Junior Preferred Shares or securities
which by their terms are convertible into or exchangeable for Junior Preferred
Shares, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Junior Preferred Shares shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not,
at any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o)), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in
one transaction or a series of related transactions not in the ordinary course
of the Company's business, assets, cash flow or earning power aggregating more
than 50% of the assets, cash flow or earning power, as the case may be, of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o)), if (x) at the time of
or immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
that would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) shall have received a distribution of Rights previously owned
by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section
27, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, if the Company shall at any time after the date of this
Agreement and prior to the Distribution Date (i) declare a dividend on the
outstanding Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, or (iii) combine the outstanding Common Shares into
a smaller number of shares, the number of Rights associated with each Common
Share then outstanding, or issued or delivered thereafter but prior to the
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction the
numerator which shall be the aggregate number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the aggregate number of Common Shares outstanding immediately
following the occurrence of such event.
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Section 12. Certification of Adjustments. Whenever an adjustment
is made as provided in Sections 11 and 13, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief statement of
the facts giving rise to such adjustment, (b) promptly file with the Rights
Agent and with each transfer agent for the Common Shares or Junior Preferred
Shares a copy of such certificate and (c) if a Distribution Date has occurred,
mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
Common Shares) in accordance with Section 26. Notwithstanding the foregoing
sentence, the failure of the Company to give such notice shall not affect the
validity of or the force or effect of or the requirement for such adjustment.
The Rights Agent shall be fully protected in relying on any certificate
prepared by the Company pursuant to Sections 11 and 13 and on any adjustment
therein contained. Any adjustment to be made pursuant to Sections 11 and 13
shall be effective as of the date of the event giving rise to such adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of Assets
or Earning Power.
(a) If at any time following the time an Acquiring
Person becomes such, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person or Persons (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
and the Company shall not be the surviving or continuing corporation of such
consolidation or merger, (y) any Person or Persons (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o)), shall
consolidate with, or merge with and into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
Common Shares shall be changed into or exchanged for stock or other securities
of any other Person or of the Company or cash or any other property, or (z) the
Company or one or more of its Subsidiaries shall sell or otherwise transfer to
any other Person or any Affiliate or Associate of such Person (other than the
Company or any Subsidiary of the Company in one or more transactions each of
which complies with Section 11(o)), in one transaction or a series of related
transactions not in the ordinary course of the Company's business, assets, cash
flow, or earning power aggregating more than 50% of the assets, cash flow or
earning power, as the case may be, of the Company and its Subsidiaries (taken
as a whole), then, on the first occurrence of any such event, proper provision
shall be made so that (i) each holder of record of a Right, except as provided
in Section 7(e), shall thereafter have the right to receive, upon the exercise
thereof at the then Purchase Price in accordance with the terms of this
Agreement, such number of shares of validly issued, fully paid and
nonassessable and freely tradable Common Shares of the Principal Party (as
hereinafter defined) not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by
(1) multiplying the then current Purchase Price by the number of one
one-thousandths of a Junior Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Flip-Over Event (or, if a
Flip-In Event has occurred prior to the first occurrence of a Flip-Over Event,
multiplying the Purchase Price in effect immediately prior to the first
occurrence of a Flip-In Event by the number of one one-thousandths of a Junior
Preferred Share for which a Right was exercisable immediately prior to such
first occurrence of a Flip-In Event) and (2) dividing that product (such
product, following the first occurrence of a Flip-Over Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price (determined as provided in
Section 11(d)) per Common Share of such Principal Party on
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the date of consummation of such Flip-Over Event (or the fair market value on
such date of other securities or property of the Principal Party, as provided
for herein); provided that the Purchase Price and the number of Common Shares
of such Principal Party issuable upon exercise of each Right shall be further
adjusted as provided in this Agreement to reflect any events occurring after
the date of the first occurrence of a Flip-Over Event; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue of such
Flip-Over Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" for all purposes of this Agreement shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall only apply to such Principal
Party following the first occurrence of a Flip-Over Event; and (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
Section 9) in connection with the consummation of any such transaction as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; provided, however,
that, upon the subsequent occurrence of any merger, consolidation, sale of all
or substantially all assets, recapitalization, reclassification of shares,
reorganization or other extraordinary transaction in respect of such Principal
Party, each holder of a Right shall thereupon be entitled to receive, upon
exercise of a Right and payment of the Purchase Price, such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had he, at the time of such transaction, owned the Common Shares of
the Principal Party purchasable upon the exercise of a Right, and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property. The provisions of Section
11(a)(ii) shall be of no effect following the first occurrence of any Flip-Over
Event.
(b) "Principal Party" shall mean
(1) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a): (A) the Person that
is the issuer of any securities into which Common Shares of the Company are
converted in such merger or consolidation, or, if there is more than one such
issuer, the issuer the Common Shares of which has the greatest market value or
(B) if no securities are so issued, (x) the Person that is the other party to
the merger or consolidation and that survives said merger or consolidation, or,
if there is more than one such Person, the Person the Common Shares of which
has the greatest market value or (y) if the Person that is the other party to
the merger or consolidation does not survive the merger or consolidation, the
Person that does survive the merger or consolidation (including the Company if
it survives); and
(2) in the case of any transaction described in
clause (z) of the first sentence in Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that is a
party to such transaction or transactions receives the same portion of the
assets or earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever of such
Persons is the issuer of Common Shares having the greatest market value of
shares outstanding;
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provided, however, that in any such case described in Section 13(b)(1) or this
Section 13(b)(2), if the Common Shares of such Person are not at such time and
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or if
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of the Common
Shares having the greatest market value of shares outstanding.
(c) The Company shall not consummate any consolidation,
merger, sale or transfer referred to in Section 13(a) unless the Principal
Party shall have a sufficient number of authorized Common Shares which have not
been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections
13(a) and (b) shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer shall not result in a default
by the Principal Party under this Agreement as the same shall have been assumed
by the Principal Party pursuant to Sections 13(a) and (b) hereof and further
providing that, as soon as practicable after executing such agreement pursuant
to this Section 13, the Principal Party will:
(1) prepare and file a registration statement
under the Securities Act, if necessary, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, use
its best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the date of expiration of
the Rights, and similarly comply with applicable state securities laws;
(2) use its best efforts, if the Common Shares
of the Principal Party shall become listed on a national securities exchange,
to list (or continue the listing of) the Rights and the securities purchasable
upon exercise of the Rights on such securities exchange and, if the Common
Shares of the Principal Party shall not be listed on a national securities
exchange, to cause the Rights and the securities purchasable upon exercise of
the Rights to be listed by a national securities exchange or admitted for
trading on the Nasdaq National Market;
(3) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 (or
any successor form) under the Exchange Act; and
(4) obtain waivers of any rights of first
refusal or preemptive rights in respect of the Common Shares of the Principal
Party subject to purchase upon exercise of outstanding Rights.
If any of the transactions described in Section 13(a) shall occur at any time
after the occurrence of a transaction described in Section 11(a)(ii), the
Rights which have not theretofore been exercised shall thereafter be
exercisable in the manner described in Section 13(a). The
-23-
provisions of this Section 13 shall similarly apply to all successive mergers,
consolidations, sales, transfers or other Flip-Over Events.
(d) Furthermore, if the Principal Party which is to be a
party to a transaction referred to in this Section 13 has a provision in any of
its authorized securities or in its certificate of incorporation, articles of
incorporation, bylaws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue, in connection with, or as a consequence of, the consummation of a
transaction referred to in this Section 13, Common Shares of such Principal
Party at less than the then Current Market Price per share (determined pursuant
to Section 11(d)(i)) or securities exercisable for, or convertible into, Common
Shares of such Principal Party at less than such then Current Market Price
(other than to holders of Rights pursuant to this Section 13) or (ii) providing
for any special payment, tax or similar provisions in connection with the
issuance of Common Shares of such Principal Party pursuant to the provisions of
this Section 13; then, in such event, the Company hereby agrees with each
holder of Rights that it shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been canceled, waived or amended,
or that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions
of Rights or to distribute Rights Certificates which evidence fractional
Rights. In lieu of such fractional Rights, there shall be paid to the holders
of record of the Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to the same
fraction of the then current market value of a whole Right. For the purposes of
this Section 14(a), the then current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions
of Junior Preferred Shares (other than fractions which are integral multiples
of one one-thousandths of a Junior Preferred Share) upon exercise of the
Rights, or to exchange the Rights pursuant to Section 24 for fractions of
Common Shares. Fractions of Junior Preferred Shares in integral multiples of
one one-thousandth of a Junior Preferred Share may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of the Junior Preferred Shares. With respect to fractional
Junior Preferred Shares that are not integral multiples of one one-thousandth
of a Junior Preferred Share, if the Company does not issue fractional shares or
depositary receipts in lieu thereof, the Company shall pay to the registered
holders of Rights Certificates at the time such Rights Certificates are
exercised as herein provided an amount in cash equal to the same fraction of
the current market value of one one-thousandth of a Junior Preferred Share. For
purposes of this Section 14(b), the current market value of one one-thousandth
of a Junior Preferred Share shall
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be the Current Market Price of one one-thousandth of a Junior Preferred Share
(as determined pursuant to Section 11(d)(ii)).
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of Common Shares upon exercise
of the Rights or to distribute certificates which evidence fractional Common
Shares. In lieu of fractional Common Shares, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
per share market value of one Common Share for which a Right is exercisable.
For the purposes of this Section 14(c), the current per share market value of
one Common Share for which a Right is exercisable shall be the closing price of
one Common Share (as determined pursuant to Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by the acceptance of a Right
expressly waives his right to receive any fractional Right or any fractional
shares (other than fractions which are integral multiples of one
one-thousandths of a Junior Preferred Share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of
this Agreement, except the rights of action given to the Rights Agent under
Section 18, are vested in the respective holders of record of the Rights
Certificates (and, prior to the Distribution Date, the holders of record of the
Common Shares); and any holder of record of any Rights 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 Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company or any other Person to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Rights
Certificate (or prior to the Distribution Date, certificates for Common Shares)
in the manner provided in such Rights Certificate and in this Agreement.
Without limiting the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and,
accordingly, that they will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not
be evidenced by a Rights Certificate and will be transferable only in
connection with the transfer of Common Shares;
(b) after the Distribution Date, the Rights Certificates
will be transferable 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 fully executed;
(c) subject to Section 6(a) and Section 7(f), the
Company and the Rights Agent may deem and treat the Person in whose name the
Rights Certificate (or, prior to the Distribution
-25-
Date, the associated Common Shares certificates) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificate or the associated
Common Shares certificate made by anyone other than the Company or the Rights
Agent or the transfer agent of the Common Shares of the Company) for all
purposes whatsoever, and, subject to Section 7(e), neither the Company nor the
Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or a beneficial interest in a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, that the Company must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder.
No holder of a Right or a Rights Certificate, as such, shall be entitled to
vote, receive dividends in respect of or be deemed for any purpose to be the
holder of Junior Preferred Shares or any other securities of the Company which
may at any time be issuable upon the exercise of the Rights, nor shall anything
contained in this Agreement or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders of the Company 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 of the Company
(except as set forth in Section 25), or to receive dividends or subscription
rights in respect of any such stock or securities, or otherwise, until the
Right or Rights evidenced by such certificate for Common Shares or Rights
Certificate, as the case may be, shall have been exercised in accordance with
the provisions of this Agreement.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it under this Agreement
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
under this Agreement. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability or expense incurred
without negligence, bad faith or willful misconduct on the part of the Rights
Agent for anything done or omitted to be done by the Rights Agent in connection
with the acceptance and administration of this Agreement, including the costs
and expenses of defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur
no liability for or in respect of any action taken, suffered or omitted by it
in connection with its administration of this Agreement in reliance upon any
Rights Certificate, certificate for Common Shares or other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
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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, guaranteed, verified or acknowledged, by the proper Person or
Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties to this Agreement; provided that
such corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21. If at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of a predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and if at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of a predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) If at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver such Rights Certificates so
countersigned; and if at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action under this Agreement, such fact or matter (unless other evidence in
respect thereof be specifically prescribed in this Agreement) may be deemed to
be conclusively proved and established by a certificate signed by any one of
the Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and
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delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery of this Agreement (except the due execution of this Agreement by
the Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for any
change in the exercisability of the Rights or any adjustment required under the
provisions of this Agreement 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 in the exercisability of the Rights or any
change or adjustment (except with respect to the exercise of Rights evidenced
by Rights Certificates after actual notice of any such change or adjustment);
nor shall it by any act under this Agreement be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Shares or Junior Preferred Shares or other securities to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Common Shares or
Junior Preferred Shares or other securities will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with the instructions of any such officer or for any delay in
acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
-28-
were not the Rights Agent under this Agreement. Nothing in this Agreement shall
preclude the Rights Agent from acting in any other capacity for the Company or
for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty under this Agreement
either itself or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment
thereof.
(j) If, with respect to any Rights Certificate
surrendered to the Rights Agent for exercise or transfer, split up, combination
or exchange, 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 completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with
the Company.
Section 21. Change of Rights Agent.
(a) The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Agreement upon 30 days'
notice in writing mailed to the Company and to each transfer agent of the
Common Shares and the Junior Preferred Shares by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. The Company
may remove the Rights Agent or any successor Rights Agent (with or without
cause) upon 30 days' notice in writing, mailed to the Rights Agent or any
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares and the Junior Preferred Shares by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent.
(b) Notwithstanding the foregoing provisions of this
Section 21, in no event shall the resignation or removal of a Rights Agent be
effective until a successor Rights Agent shall have been appointed and have
accepted such appointment. 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 Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the incumbent Rights Agent or the holder of record of any Rights
Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent.
(c) Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be a corporation organized and doing business
under the laws of the United States or any State thereof, in good standing,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or
state authority and which has, or together with its parent entity has, at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million.
-29-
(d) 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 under this Agreement, 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 Junior Preferred Shares, and mail a
notice thereof in writing to the holders of record of the Rights Certificates
or, if prior to the Distribution Date, the holders of record of the Common
Shares.
(e) Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by the Board of Directors to reflect any
adjustment or change in the Expiration Date, the Purchase Price and/or the
number or kind or class of shares of stock or other securities or property
purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (i) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
issued by the Company hereinafter but prior to the Distribution Date, and (ii)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that (x) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (y)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (i) the Close of Business on the
tenth day following the Shares Acquisition Date (or, if the Shares Acquisition
Date shall have occurred prior to the Record Date, the Close of Business on the
tenth day following the Record Date), or (ii) the Final Expiration Date(such
period the "Redemption Period"), redeem all, but not less than all the then
outstanding Rights at a redemption price of $0.001 per Right, as such amount
may be appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date of this Agreement (such redemption
price being referred to in this Agreement as the "Redemption Price"). Any
redemption pursuant to the preceding sentence of this Section 23(a) will be
effective immediately upon the action of the Board of Directors of the Company
ordering the same, unless such action of the Board of Directors of the Company
expressly provides that such redemption
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will be effective at a subsequent time or upon the occurrence or nonoccurrence
of one or more specified events (in which case such redemption will be
effective in accordance with the provisions of such action of the Board of
Directors of the Company). The redemption of the Rights by the Board of
Directors of the Company may be made effective at such time, on such basis and
with such conditions as the Board of Directors of the Company may establish in
good faith.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the Rights pursuant to
Section 23(a), 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 such
action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice to all such
holders at each holder's last address as it appears upon the registry books of
the Rights Agent or, prior to the Distribution Date, on the registry books of
the transfer agent of the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. The failure to give
notice required by this Section 23 or any defect therein shall not affect the
legality or validity of any redemption hereunder. Neither the Company nor any
of its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this
Section 23 or in Section 24, and other than in connection with the purchase of
Common Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become null and void pursuant to the provisions of Section
7(e)) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement (such exchange ratio
being referred to in this Agreement as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than an Exempt Person), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of 50% or more of the Voting Power of the Common Shares then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
Section 24(a) and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall promptly mail a notice
of any such exchange to all of the holders of such Rights at the last addresses
of the holders 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
-31-
receives the notice. Each such notice of exchange will state the method by
which the exchange of the Common Shares for Rights will be effected and, in the
event of any partial exchange, the number and kind of Rights which will be
exchanged. The failure to give notice required by this Section 24 or any defect
therein shall not affect the legality or validity of any exchange hereunder.
(c) Any partial exchange shall be effected pro rata
based on the number of Rights being exchanged (other than Rights which have
become null and void pursuant to the provisions of Section 7(e)) held by each
holder of Rights.
(d) If there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions
of Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Rights 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 such whole Common Shares.
For purposes of this Section 24(e), the current market value of a whole Common
Share shall be the closing price of a Common Share (as determined pursuant to
the second sentence of Section 11(d)(i)) for the Trading Day immediately prior
to the date of exchange pursuant to this Section 24.
Section 25. Notice of Proposed Actions.
(a) If the Company, at any time after the Distribution
Date, shall propose to (i) effect any of the transactions referred to in
Section 11(a)(i) or to pay any dividend to the holders of record of its Junior
Preferred Shares payable in stock of any class or to make any other
distribution to the holders of record of its Junior Preferred Shares (other
than a regular quarterly cash dividend out of earnings or retained earnings of
the Company), (ii) offer to the holders of record of its Junior Preferred
Shares options, warrants or other rights to subscribe for or to purchase Junior
Preferred Shares (including any security convertible into or exchangeable for
Junior Preferred Shares) or shares of stock of any class or any other
securities, options, warrants, convertible or exchangeable securities or other
rights, (iii) effect any reclassification of its Junior Preferred Shares or any
recapitalization or reorganization of the Company, (iv) effect any
consolidation or merger with or into, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions not in the
ordinary course of the Company's business, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person or Persons, or (v) effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of record of Rights, in accordance with Section 26, notice of such
proposed action, which shall specify the record date for the purposes of such
transaction referred to in Section 11(a)(i), or such dividend or distribution,
or the date on which such reclassification, recapitalization, reorganization,
consolidation, merger, sale or transfer of assets, liquidation, dissolution, or
winding up is to take place and the record date for
-32-
determining participation therein by the holders of record of Junior Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of record of the Junior
Preferred Shares for purposes of such action, and in the case of any such other
action, at least 10 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of record of Junior
Preferred Shares, whichever shall be the earlier.
(b) If any of the transactions referred to in Section
11(a)(ii) or Section 13 are proposed, then, in any such case, the Company shall
give to each holder of Rights, in accordance with Section 26, notice of the
proposal of such transaction at least 10 days prior to consummating such
transaction, which notice shall specify the proposed event and the consequences
of the event to holders of Rights under Section 11(a)(ii) or Section 13, as the
case may be, and, upon consummating such transaction, shall similarly give
notice thereof to each holder of Rights.
(c) If any Flip-In Event shall occur, then all
references in this Section 25 to Junior Preferred Shares shall be deemed
thereafter to refer to the class of Common Shares or other securities for which
the Rights are then exercisable.
Section 26. Notices. Except as provided in Section 21, notices
or demands authorized by this Agreement to be given or made by the Rights Agent
or by the holder of record of any Rights Certificate or Right 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:
Internet Security Systems, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of record of
any Rights Certificate or Right 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:
SunTrust Bank
X.X. Xxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxxxxx
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of record of any Rights Certificate
or Right (or, if prior to the Distribution Date, to the holder of certificates
representing 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 it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent of the
Company.
-33-
Section 27. Supplements and Amendments. Prior to any Person
becoming an Acquiring Person, subject to the last sentence of this Section 27
the Company may and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of the Rights, the Common Shares. From and after any Person becoming an
Acquiring Person, the Company may and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights in order to (i) cure any ambiguity, (ii) correct or supplement any
provision contained in this Agreement which may be defective or inconsistent
with any other provisions in this Agreement, or (iii) change or supplement the
provisions hereunder in any manner which the Company may deem necessary or
desirable; provided, that no such supplement or amendment shall adversely
affect the interests of the holders of Rights (other than any interest of an
Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the
delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement or
amendment. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of the
Common Shares. Notwithstanding anything contained in this Agreement to the
contrary, this Agreement may not be amended at a time when the Rights are not
redeemable.
Section 28. Determinations and Actions by the Board. The Board
of Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Company or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend this Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board of Directors of the Company to any
liability to the holders of the Rights.
Section 29. Successors. All of the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns under
this Agreement.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the holders of record of the Rights Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the holders of
record of the Rights Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. Governing Law. This Agreement, each Right and each
Rights Certificate issued under this Agreement shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts made and to be performed entirely within such State.
-34-
Section 32. Counterparts. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Agreement.
Section 34. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, illegal, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
-35-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, all as of the day and year first above written.
Attest: Internet Security Systems, Inc.
By: /s/ Xxxxxxx Xxxxxxxx By: /s/ Xxxx Xxxxx
-------------------------------- --------------------------------
Name: Xxxxxxx Xxxxxxxx Name: Xxxx Xxxxx
Title: Corporate Controller Title: Vice President &
General Counsel
Attest: SunTrust Bank
By:/s/ Xxxxxx Xxxxxxxxx By:/s/ Xxx Xxxxxxx
-------------------------------- --------------------------------
Name: Xxxxxx Xxxxxxxxx Name: Xxx Xxxxxxx
Title: Vice President Title: Vice President
-36-
Exhibit A
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
Internet Security Systems, Inc.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
Internet Security Systems, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Corporation"), hereby certifies that the following resolution was adopted
by the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law on July 11, 2002:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the
Corporation's Restated Certificate of Incorporation (the "Certificate of
Incorporation") the Board of Directors hereby creates a new series of Preferred
Stock, par value $0.001 per share (the "Junior Preferred Stock"), of the
Corporation and hereby states the designation and number of shares of each such
series, and fixes the relative rights, preferences, and limitations of each
such series as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" (the
"Junior Preferred Stock") and the number of shares constituting the Junior
Preferred Stock shall be one hundred twenty thousand (120,000). Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Junior
Preferred Stock to a number less than the number of shares then outstanding
plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Junior
Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares
of any series of Preferred Stock (or any similar stock) ranking prior
and superior to the Junior Preferred Stock with respect to dividends,
the holders of shares of Junior Preferred Stock, in preference to the
holders of the Common Stock, par value $0.001 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, quarterly dividends payable in cash on the first day of
March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Junior Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of
(a) $1.00 or (b) subject to the provision for adjustment hereinafter
set forth, 1000 times the aggregate per share amount of all cash
dividends, and 1000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any share or fraction of a
share of Junior Preferred Stock. If the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Junior
Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or
distribution on the Junior Preferred Stock as provided in paragraph
(A) of this Section immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, if no dividend or distribution
shall have been declared on the Common Stock during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Junior
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Junior Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares
of Junior Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of
A-2
Directors may fix a record date for the determination of holders of
shares of Junior Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be
not more than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Junior
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Junior Preferred Stock shall entitle the
holder thereof to 1000 votes on all matters submitted to a vote of the
stockholders of the Corporation. If the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which holders of
shares of Junior Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Junior
Preferred Stock and the holders of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided
by law, holders of Junior Preferred Stock shall have no other voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Junior
Preferred Stock unless, prior thereto, the holders of shares of Junior
Preferred Stock shall have received $1000 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Junior Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Junior Preferred Stock, except distributions made ratably on the
Junior Preferred Stock and all such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the Corporation shall at any time
declare or pay any dividend on the Common Stock payable in
A-3
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Junior Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 5. Consolidation, Merger, etc. If the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case each share of
Junior Preferred Stock shall at the same time be similarly exchanged or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1000 times the aggregate amount of stock, securities, cash
or any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. If the Corporation
shall at any time declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of
shares of Junior Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 6. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock are in arrears,
thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall
not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution or winding
up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Junior Preferred Stock, except dividends
paid ratably on the Junior Preferred Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as
to dividends or upon liquidation, dissolution or
A-4
winding up) to the Junior Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (either
as to dividends or upon dissolution, liquidation or winding
up) to the Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Junior Preferred Stock, or any
shares of stock ranking on a parity with the Junior Preferred
Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 6, purchase or otherwise acquire such
shares at such time and in such manner.
Section 7. Reacquired Shares. Any shares of Junior Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock subject to the conditions and restrictions on issuance set
forth herein, in the Certificate of Incorporation, or in any other Certificate
of Designations creating a series of Preferred Stock or any similar stock or as
otherwise required by law.
Section 8. No Redemption. The shares of Junior Preferred Stock
shall not be redeemable.
Section 9. Rank. The Junior Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Certificate of Incorporation shall
not be amended in any manner which would alter or change the powers,
preferences or special rights of the Junior Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of at least
two-thirds of the outstanding Junior Preferred Stock.
Section 11. Fractional Shares. The Junior Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of the Junior Preferred Stock.
A-5
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chairman of the Board and attested by its
Secretary this _____ day of _____________, 2002.
----------------------------------
Chairman of the Board
Attest:
------------------------------
Secretary
A-6
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R-__ _______ Rights
NOT EXERCISABLE AFTER JULY 11, 2012 OR UNDER CERTAIN
CIRCUMSTANCES EARLIER. 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. IF THE RIGHTS
REPRESENTED BY THIS CERTIFICATE ARE ISSUED TO A PERSON WHO IS
AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON OR A TRANSFEREE OF THE RIGHTS PREVIOUSLY
OWNED BY SUCH PERSONS, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY WILL BECOME NULL AND VOID.
Rights Certificate
Internet Security Systems, Inc.
This certifies that _________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of July 18, 2002 (the "Rights Agreement") between
Internet Security Systems, Inc., a Delaware corporation (the "Company"), and
SunTrust Bank, a Georgia banking corporation (the "Rights Agent"), to purchase
from the Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M., Atlanta, Georgia time,
on July 11, 2012, at the principal office of the Rights Agent, or its
successors as Rights Agent, one one-thousandth of a fully paid and
nonassessable share of Series A Junior Participating Preferred Stock, $0.001
par value per share ("Junior Preferred Shares"), of the Company at a purchase
price of $80.00 as the same may from time to time be adjusted in accordance
with the Rights Agreement ("Purchase Price"), upon presentation and surrender
of this Rights Certificate with the Form of Election to Purchase duly executed.
The number of Rights evidenced by this Rights Certificate (and the number of
Junior Preferred Shares which may be purchased upon exercise hereof) set forth
above, and the Purchase Price set forth above, are the number and Purchase
Price as of July 29, 2002 (the "Record Date") based on the Junior Preferred
Shares of the Company as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of Junior Preferred Shares which
may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events and, upon the happening of certain events, securities other than
Junior Preferred Shares, or other
property, may be acquired upon exercise of the Rights evidenced by this Rights
Certificate, as provided by the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
incorporated herein by reference and made a part hereof and to which such
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of record of the Rights Certificates. Copies of the
Rights Agreement are on file at the principal executive office of the Company
and the above-mentioned offices of the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office of the Rights Agent, may be exchanged
for another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder of record to purchase a like aggregate
number of one one-thousandths of a Junior Preferred Share as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender
hereof, another Rights Certificate or Rights Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at its option
at a redemption price of $0.001 per Right or (ii) may be exchanged in whole or
in part for Common Shares of the Company or common stock equivalents.
No fractional Junior Preferred Shares will be issued upon the exercise
of any Rights evidenced hereby (other than, except as set forth above,
fractions that are integral multiples of one one-thousandth of a Junior
Preferred Share, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof, cash payment will be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Junior Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders of the
Company 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
of the Company (except as provided in the Rights Agreement) or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-2
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal, dated as of ______________ ____.
ATTEST: INTERNET SECURITY SYSTEMS, INC.
By:
----------------------------- --------------------------------
Secretary Name:
Title:
Countersigned:
----------------------------
By
--------------------------
Authorized signature
B-3
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto
_______________________________________________________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
Rights evidenced by this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_____________________ Attorney to transfer the within Rights Certificate on the
books of the within-named Company, with full power of substitution.
Dated: ,
--------------- --------
----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
-----------------------------------
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ]
are [ ] are not being sold, assigned and transferred by or on behalf of a
Person who is or was an Acquiring Person or an Affiliate or Associate of any
such Acquiring Person (as such terms are defined pursuant to the Rights
Agreement); and (2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate
or Associate of an Acquiring Person or any transferee of such Persons.
Dated: ,
--------------- --------
----------------------------------
Signature
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if registered holder desires to
Exercise the Rights Certificate.)
To: Internet Security Systems, Inc.
The undersigned hereby irrevocably elects to exercise
____________________ Rights represented by this Rights Certificate to purchase
the Junior Preferred Shares issuable upon the exercise of such Rights and
requests that certificates for such share(s) be issued in the name: Please
insert social security or other identifying number
--------------------------------------------
(Please print name and address)
--------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance 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 must conform in all
respects to name of holder as
specified on the face of this
Rights Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
-----------------------------------
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ]
are [ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate
or Associate of an Acquiring Person or any transferee of such Persons.
Dated: ,
--------------- --------
----------------------------------
Signature
EXHIBIT C
INTERNET SECURITY SYSTEMS, INC.
SUMMARY OF RIGHTS TO PURCHASE
JUNIOR PREFERRED SHARES
On July 11, 2002, the Board of Directors (the "Board") of Internet
Security Systems, Inc. (the "Company") adopted a Rights Agreement (the "Rights
Agreement") and authorized and declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of Common Stock, par
value $0.001 per share ("Common Share"), of the Company based on the conversion
ratios of those securities. The dividend is payable on July 29, 2002 to the
stockholders of record on that date (the "Record Date"), and with respect to
Common Shares issued thereafter until the Distribution Date (as hereinafter
defined) or the expiration or earlier redemption or exchange of the Rights.
Except as set forth below, each Right entitles the holder of record to purchase
from the Company at any time after the Distribution Date one one-thousandth of
a share of Series A Junior Participating Preferred Stock, par value $0.001 per
share (the "Junior Preferred Shares"), at a price of $80.00 per one
one-thousandth of a share, subject to adjustment (the "Purchase Price"). The
description and terms of the Rights are set forth in the Rights Agreement.
Initially, the Rights will be attached to all certificates
representing Common Shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will become exercisable and
separate from the Common Shares upon the earlier to occur of (i) ten days
following the earlier of (x) the first public announcement or (y) the first
public disclosure that a Person or group of affiliated or associated Persons
has acquired beneficial ownership of 20% or more of the voting power of the
outstanding Common Shares (such Person or group being hereinafter referred to
as an "Acquiring Person" and such earlier date in clause (x) or (y) being
hereinafter referred to as the "Shares Acquisition Date"), or (ii) 10 business
days (or such later date as the Board may determine) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer
the consummation of which would result in a Person or group becoming the
beneficial owner of 20% or more of the voting power of the outstanding Common
Shares (the earlier of such dates being called the "Distribution Date"). Common
Shares beneficially owned by the Company or any subsidiary of the Company will
not be considered outstanding for purposes of calculating the percentage
ownership of any Person.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with, and only with, the Common Shares. Until the
Distribution Date (or earlier redemption or expiration), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates of Common Shares
outstanding as of the Record Date, even without such notation, also will
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Rights
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 Rights Certificates alone will
evidence the Rights. The Rights are not exercisable until the Distribution
Date. The Rights will expire at the close of business on July 11, 2012, unless
earlier redeemed by the Company as described below.
Each of the following Persons will not be deemed to be an Acquiring
Person even if they have acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the voting power of the outstanding Common Shares
of the Company: (i) the Company, (ii) any subsidiary of the Company, (iii) any
employee benefit plan of the Company or of any subsidiary of the Company, (iv)
any Person who would otherwise become an Acquiring Person solely by virtue of a
reduction in the number of outstanding Common Shares unless and until such
Person shall become the beneficial owner of any additional Common Shares, and
(v) Persons that beneficially own 20% or more of the outstanding Common Shares
as of the date hereof, subject to certain conditions.
If any Person becomes an Acquiring Person, each holder of a Right will
thereafter have the right (the "Flip-In Right") to receive, in lieu of Junior
Preferred Shares and upon payment of the Purchase Price, Common Shares (or in
certain circumstances, cash, property or other securities of the Company)
having a value equal to two times the Purchase Price of the Right.
Notwithstanding the foregoing, all rights that are, or were, beneficially owned
by an Acquiring Person or any affiliate or associate thereof will be null and
void and not exercisable.
If, at any time on or after a Person becomes an Acquiring Person, (i)
the Company is acquired in a merger or other business combination transaction
in which the holders of all of the outstanding Common Shares immediately prior
to the consummation of the transaction are not the holders of all of the
surviving corporation's voting power, or (ii) more than 50% of the Company's
assets, cash flow or earning power is sold or transferred other than in the
ordinary course of the Company's business, then each holder of a Right (except
Rights which have previously been voided as set forth above) shall thereafter
have the right (the "Flip-Over Right") to receive, in lieu of Junior Preferred
Shares and upon exercise and payment of the Purchase Price, common shares of
the acquiring company having a value equal to two times the Purchase Price. If
a transaction would otherwise result in a holder's having a Flip-In as well as
a Flip-Over Right, then only the Flip-Over Right will be exercisable; if a
transaction results in a holder's having a Flip-Over Right subsequent to a
transaction resulting in a holder's having a Flip-In Right, a holder will have
Flip-Over Rights only to the extent such holder's Flip-In Rights have not been
exercised.
The Purchase Price payable, and the number of Junior Preferred Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Junior Preferred Shares, (ii) upon the grant to holders of the Junior Preferred
Shares of certain rights or warrants to subscribe for Junior Preferred Shares
or convertible securities at less than the current market price of the Junior
Preferred Shares or (iii) upon the distribution to holders of the Junior
Preferred Shares of evidences of indebtedness or assets (excluding dividends
payable in Junior Preferred Shares) or of subscription rights or warrants
(other than those referred to above). However, no adjustment in the Purchase
Price will be required until cumulative adjustments require an adjustment of at
least 1%.
C-2
The number of outstanding Rights and the number of one one-thousandths
of a Junior Preferred Share issuable upon exercise of each Right are also
subject to adjustment in the event of a stock split of the Common Shares or a
stock dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such
case, prior to the Distribution Date.
Junior Preferred Shares purchasable upon exercise of the Rights will
not be redeemable. Each Junior Preferred Share will be entitled to a minimum
preferential quarterly dividend payment of $1 per share but will be entitled to
an aggregate dividend of 1000 times the dividend declared per share of Common
Share. In the event of liquidation, the holders of Junior Preferred Shares will
be entitled to a minimum preferential liquidation payment of $1000 per share
but will be entitled to an aggregate payment of 1000 times the payment made per
Common Share. Each Junior Preferred Share will have 1000 votes, in each case
voting together with the Common Shares. Finally, in the event of any merger,
consolidation or other transaction in which the Common Shares are exchanged,
each Junior Preferred Share will be entitled to receive 1000 times the amount
received per Common Share. These rights are protected by customary antidilution
provisions.
Because of the nature of the dividend, liquidation and voting rights
of the Junior Preferred Shares, the value of the one one-thousandth interest in
a Junior Preferred Share purchasable upon exercise of each Right should
approximate the value of one Common Share.
If, after the triggering of Flip-In Rights, insufficient Common Shares
are available for the exercise in full of the Rights, the Company shall take
all such action as may be necessary to authorize additional Common Shares for
issuance upon exercise in full of the Rights. If, after the expiration of 120
days after the triggering of Flip-In Rights, insufficient Common Shares are
available for the exercise in full of the Rights, holders of Rights will
receive upon exercise Common Shares or to the extent available cash, property
or other securities of the Company, in proportions determined by the Company,
so that the aggregate value received is equal to twice the Purchase Price.
The Company is not required to issue fractional Junior Preferred
Shares (other than fractions which are integral multiples of one one-thousandth
of a Junior Preferred Share, which may, at the election of the Company be
evidenced by depositary receipts), and in lieu thereof, a payment in cash will
be made to the holder of such Rights equal to the same fraction of the current
value of one one-thousandth of a Junior Preferred Share. Following the
triggering of the Flip-In Rights, the Company will not be required to issue
fractional Common Shares upon exercise of the Rights and, in lieu thereof, a
payment in cash will be made to the holder of such Rights equal to the same
fraction of the current market value of a Common Share.
In general, the Company may redeem the Rights at a price of $.001 per
Right (subject to adjustment), at any time prior to earlier of (i) the Close of
Business on the tenth Business Day following the Shares Acquisition Date and
(ii) the date on which the Rights expire.
At any time after any Person becomes an Acquiring Person and prior to
the acquisition by any Person of 50% or more of the outstanding Common Shares,
the Board of Directors of the Company may exchange the then outstanding and
exercisable Rights (other than Rights owned
C-3
by an Acquiring Person, which will have become null and void), in whole or in
part, for Common Shares, each Right being exchangeable for one Common Share or
common share equivalents equal to one Common Share, subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
The issuance of the Rights is not taxable to the Company or to
stockholders under presently existing federal income tax law, and will not
change the way in which stockholders can presently trade the Company's Common
Shares. If the Rights should become exercisable, stockholders, depending on
then existing circumstances, may recognize taxable income.
Prior to any Person becoming an Acquiring Person, the Rights Agreement
generally may be amended by the Board of Directors of the Company. On or after
the time that a Person becomes an Acquiring Person, the Company may amend the
Rights Agreement only to (i) cure any ambiguity, (ii) correct or supplement any
provision which may be defective or inconsistent with the other provisions of
the Rights Agreement, or (iii) change or supplement the Rights Agreement in any
other manner which the Company may deem necessary or desirable, provided that
no amendment shall adversely affect the interests of the holders of Rights
(other than any interest of an Acquiring Person or an Affiliate or Associate of
an Acquiring Person). However, no amendment may be made at any time when the
Rights are not redeemable.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a Person or group that attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being
acquired. Accordingly, the existence of the Rights may deter certain acquirors
from making takeover proposals or tender offers. However, the rights plan helps
ensure that the Company's stockholders receive fair and equal treatment in the
event of any proposed takeover of the Company. The adoption of the plan is not
in response to any specific takeover threat or proposal, but is a precaution
taken to protect the rights of the Company's stockholders.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Company's Registration Statement on
Form 8-A with respect to the Rights filed with the Securities and Exchange
Commission (Commission File No. ___________). A copy of the Rights Agreement is
available free of charge from the Company, 0000 Xxxxxxxx Xxxx, Xxxxxxx, Xxxxxxx
00000, Attention: General Counsel. 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 in this summary description by
reference.
C-4
