Exhibit 4
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Closure Medical Corporation
and
American Stock Transfer & Trust Company
as Rights Agent
RIGHTS AGREEMENT
Dated as of July 30, 2001
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Table of Contents
Section Page
Section 1. Certain Definitions..................................................................................... 1
Section 2. Appointment of Rights Agent............................................................................. 5
Section 3. Issue 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.............................................................................. 8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights........................................... 9
Section 8. Cancellation and Destruction of Rights Certificates..................................................... 11
Section 9. Reservation and Availability of Capital Stock; Registration of Securities............................... 11
Section 10. Capital Stock Record Date............................................................................... 13
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights............................. 13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.............................................. 22
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.................................... 22
Section 14. Fractional Rights and Fractional Shares................................................................. 24
Section 15. Rights of Action........................................................................................ 26
Section 16. Agreement of Rights Holders............................................................................. 26
Section 17. Rights Certificate Holder Not Deemed A Shareholder...................................................... 27
Section 18. Concerning the Rights Agent............................................................................. 27
Section 19. Merger or Consolidation or Change of Name of Rights Agent............................................... 27
Section 20. Duties of Rights Agent.................................................................................. 28
Section 21. Change of Rights Agent.................................................................................. 30
Section 22. Issuance of New Rights Certificates..................................................................... 31
Section 23. Redemption and Termination.............................................................................. 31
Section 24. Notice of Certain Events................................................................................ 32
Section 25. Notices................................................................................................. 33
Section 26. Supplements and Amendments.............................................................................. 33
Section 27. Successors.............................................................................................. 34
Section 28. Determinations and Actions by the Board of Directors, etc............................................... 34
Section 29. Benefits of This Agreement.............................................................................. 34
Section 30. Severability............................................................................................ 34
Section 31. Governing Law........................................................................................... 35
Section 32. Counterparts............................................................................................ 35
Section 33. Descriptive Headings.................................................................................... 36
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July 30, 2001 (the "Agreement"), between
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Closure Medical Corporation, a Delaware corporation (the "Company"), and
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American Stock Transfer & Trust Company (the "Rights Agent").
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W I T N E S S E T H
WHEREAS, on June 19, 2001 (the "Rights Dividend Declaration Date"),
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the Board of Directors of the Company authorized, and on July 30, 2001 declared,
a dividend distribution of one Right for each Common Share (as hereinafter
defined) of the Company outstanding at the close of business on July 30, 2001
(the "Record Date") (which for these purposes shall include all Common Shares
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presently entitled to receive dividends) and has authorized the issuance of one
Right (as such number may hereafter be adjusted pursuant to the provisions of
Section 11(p) hereof) for each Common Share of the Company issued between the
Record Date (whether originally issued or delivered from the Company's treasury)
and the Distribution Date (as hereinafter defined), each Right initially
representing the right to purchase one one-thousandth of a Preferred Share (as
hereinafter defined) of the Company having the rights, powers and preferences
set forth in the form of the Resolution of the Board of Directors attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter
set forth (the "Rights"); and
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WHEREAS, the Rights will be held by the Rights Agent under this
Agreement as trustee for the stockholders of the Company until the Distribution
Date; and
WHEREAS, the Board of Directors of the Company has considered whether
approval of this Agreement and the distribution of the Rights is in the best
interests of the Company has also considered the effects upon employees,
suppliers and customers of the Company and upon communities in which offices or
other establishments of the Company are located; and
WHEREAS, the Board of Directors of the Company has concluded that
approval of this Agreement and the distribution of the Rights is in the best
interests of the Company because the existence of the Rights will help (i)
reduce the risk of coercive two-tiered, front-end loaded or partial offers that
may not offer fair value to all stockholders, (ii) mitigate against market
accumulators who through open market and/or private purchases may achieve a
position of substantial influence or control without paying to selling or
remaining stockholders a fair control premium, (iii) deter market accumulators
who are simply interested in putting the Company into "play," and (iv) preserve
the Board of Directors' bargaining power and flexibility to deal with third-
party acquirers and to otherwise seek to maximize values for all stockholders.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and intending to be legally bound hereby, the
parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
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the following terms have the meanings indicated:
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(a) "Acquiring Person" shall mean any Person who or which, together with
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all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the Common Shares then outstanding (other than as a result of a
Qualified Offer (as defined hereinafter)), but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of
the Company or of any Subsidiary of the Company (including, without limitation,
any stock incentive or compensation plan) or any Person organized, appointed or
established by the Company for or pursuant to the terms of any such plan, (iv)
any Person that acquires Common Shares from the Company, (v) the Grandfathered
Shareholders and (vi) any Person would be an "Acquiring Person" as the result of
an acquisition of Common Shares by the Company which, by reducing the number of
Common Shares outstanding, increases the proportionate number of Common Shares
beneficially owned by such Person to 15% or more of the Common Shares then
outstanding; provided, however, that if a Person shall become the Beneficial
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Owner of 15% or more of the then outstanding Common Shares by reason of Common
Shares purchased by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional Common Shares, then such
Person shall be considered an "Acquiring Person" on the date of such additional
purchase. Notwithstanding the foregoing, if a majority of the Continuing
Directors then in office determines in good faith that a Person who would
otherwise be an "Acquiring Person", as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an Acquiring Person, as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be an "Acquiring Person" for purposes of this Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
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ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date hereof
(the "Exchange Act").
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(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
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deemed to "beneficially own" any securities:
(i) that such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or upon
the exercise of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
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the "Beneficial Owner" of, or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such tendered securities
are accepted for payment, purchase or exchange, or (B) securities issuable
upon exercise of Rights at any time prior to the occurrence of a Triggering
Event, or (C) securities issuable upon exercise of Rights from and after
the occurrence of a Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Section 3(a) or Section 22 hereof (the
"Original Rights") or pursuant to Section 11(i) hereof in connection with
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an adjustment made with respect to any Original Rights;
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(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial" ownerships of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act),
including without limitation pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a
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Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own" any security under this subparagraph (ii) as a
result of an oral or written agreement, arrangement or understanding
to vote such security if such agreement, arrangement or understanding:
(A) arises solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in accordance
with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(i) that are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of
this paragraph (c)) or disposing of any voting securities of the
Company,
provided, however, that nothing in this paragraph (c) shall cause a Person
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engaged in business as an underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own" any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
(d) "Business Day" shall mean any day other than a Saturday, Sunday
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or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(e) "Close of business" an any given date shall mean 5:00 P.M., New
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York, New York time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 P.M., New York, New York time, on the next
succeeding Business Day.
(f) "Common Share" shall mean the shares of Common Stock, par value
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$.01 per share, of the Company and, to the extent that there are not a
sufficient number of Common Shares authorized to permit the full exercise of the
Rights, shares of any other class or series of the Company designated for such
purpose containing terms substantially similar to the terms of the Common
Shares, except that "Common Share" when used with reference to any Person other
than the Company shall mean the shares of capital stock of such Person with the
greatest voting power, or the equity securities or other equity interest having
power to control or direct the management, of such Person.
(g) Intentionally left blank.
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(h) "Distribution Date" shall have the meaning set forth in Section 3
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hereof.
(i) "Expiration Date" shall have the meaning set forth in Section 7(a).
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(i) "Grandfathered Shareholders" shall mean both F. Xxxxxxx Xxxxxxx and
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Xxxx X. Xxxxxxx together with their Affiliates or Associates; provided, however,
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that the Grandfathered Shareholders shall cease to be Grandfathered
Shareholders if (A) the total amount of Common Shares Beneficially Owned by the
Grandfathered Shareholders in the aggregate (except for any acquisition of
Common Shares by such Grandfathered Shareholder upon exercise of any Securities
of the Company owned by such Grandfathered Shareholder as of the date hereof
that are convertible into or exercisable for Common Shares) exceeds 49% of the
outstanding Common Shares at any time, or (B) at any time after the date hereof
the total amount of Common Shares Beneficially Owned by any Grandfathered
Shareholder equals 15% or less of the outstanding Common Shares.
(j) "Person" shall mean any individual, firm, corporation, partnership
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or other entity.
(k) "Preferred Share" shall mean a share of Series A Junior
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Participating Preferred Stock, par value $.01 per share, of the Company and, to
the extent that there are not a sufficient number of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, shares of any other series of Series Preferred Stock of the Company
designated for such purpose containing terms substantially similar to the terms
of the Series A Junior Participating Preferred Stock.
(l) "Preferred Share Fraction" shall mean one one-thousandth of a
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Preferred Share.
(m) "Section 11(a)(ii) Event" shall mean any event described in Section
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11(a)(ii) (A), (B) or (C) hereof.
(n) "Section 13 Event" shall mean any event described in clauses (x),
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(y) or (z) of Section 13(a) hereof.
(o) "Stock Acquisition Date" shall mean the first date of public
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announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(p) "Subsidiary" shall have the meaning ascribed to such term in Rule
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12b-2 of the General Rules and Regulations under the Exchange Act.
(q) "Trading Day" shall have the meaning set forth-in Section 11(d)(i)
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hereof.
(r) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
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Section 13 Event.
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Unless otherwise specified, where reference is made in this Agreement
to sections of, and the General Rules and Regulations under, the Exchange Act,
such reference shall mean such sections and rules as amended from time to time
and any successor provisions thereto.
Section 2. Appointment of Rights Agent.
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(a) The Company hereby appoints the Rights Agent to act as
agent for the Company and trustee for the beneficial owners of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
(b) On the Record Date, the Company will deliver a Rights
Certificate to the Rights Agent, registered in the name of the Rights Agent as
trustee for the beneficial owners of the Rights represented thereby, for that
number of Rights equal to the number of Common Shares issued and outstanding on
the Record Date, and the Rights Agent shall hold the Rights represented thereby
in trust for the beneficial owners in accordance with the provisions of this
Agreement.
Section 3. Issue of Rights Certificates.
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(a) Until the earlier of (i) the close of business on the
tenth day after a Stock Acquisition Date involving an Acquiring Person that has
become such in a transaction as to which the Board of Directors has not made the
determination referred to in Section 11(a)(ii)(B) hereof, or (ii) the close of
business on such date as may be fixed by the Board of Directors of the Company
by notice to the Rights Agent and publicly announced by the Company, which date
shall not be later than 65 days after the date that a tender or exchange offer
by any Person (other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the Company, or any
Person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
"Beneficial Owner" of 15% or more of the Common Shares then outstanding (the
earlier of (i) and (ii) being herein referred to as the "Distribution Date"),
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(x) beneficial interests in the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Shares registered in the names of the holders of the Common Shares (which
certificates for Common Shares shall be deemed also to be certificates for
beneficial interests in the Rights) and not by separate certificates, and (y)
the Rights and beneficial interests therein will be transferable only in
connection with the transfer of the underlying Common Shares (including a
transfer to the Company). As soon as practicable after the Distribution Date,
the Rights Agent will send by first-class, insured, postage prepaid mail, to
each record holder of the Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for each Common Share
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so held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11(p) hereof, at the
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time of distribution of the Rights certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates. Upon the distribution of the Rights Certificates as provided in
this subsection (a), the trust created hereby shall cease.
(b) As promptly as practicable following the Record Date the
Company will send a copy of a Summary of Rights, in substantially the form of
Exhibit C hereto (the "Summary of Rights"), by first-class, postage prepaid
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mail, to each record holder of the Common Shares as of the close of business on
the Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Shares outstanding as of
the Record Date, until the Distribution Date, beneficial interests in the Rights
will be evidenced by such certificates for the Common Shares and the registered
holders of the Common Shares shall also be the registered holders of the
beneficial interests in the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date (as such term is defined in Section 7
hereof), the transfer of any certificates representing Common Shares in respect
of which Rights have been issued shall also constitute the transfer of the
Rights associated with such Common Shares. Certificates issued after the Record
Date upon the transfer of Common Shares outstanding on the Record Date shall
bear the legend set forth in subsection (c).
(c) Except as provided in Section 22 hereof, Rights shall be issued
in respect of all Common Shares that are issued (whether originally issued or
delivered from the Company's treasury) after the Record Date but prior to the
earlier of the Distribution Date or the Expiration Date. Certificates
representing such Common Shares shall also be deemed to be certificates for
beneficial interests in the associated Rights, and shall bear the following
legend:
"This certificate also evidences a beneficial interest in
and entitles the holder hereof to certain rights as set
forth in the Rights Agreement between Closure Medical
Corporation (the "Company") and American Stock Transfer &
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Trust Company (the "Rights Agent") dated as of July 30,
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2001 (the "Rights Agreement"), and as the same may be
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amended from time to time, the terms of which are hereby
incorporated herein by reference and a copy of which is
on file at the principal offices of the Company. Under
certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate
certificates and beneficial interests therein will no
longer be evidenced by this certificate. The Company will
mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth
in the Rights Agreement, Rights issued to, or held by,
any Person
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who is, was or becomes an Acquiring Person or any
Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may
become null and void."
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, beneficial
interests in the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone and registered
holders of Common Shares shall also be the registered holders of beneficial
interests in the associated Rights, and the transfer of any of such certificates
shall also constitute the transfer of beneficial interests in the Rights
associated with the Common Shares represented by such certificates.
Section 4. Form of Rights Certificates.
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(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each 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 on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall
entitle the holders thereof to purchase such number of Preferred Share Fractions
as shall be set forth therein at the price set forth therein (such exercise
price per Preferred Share Fraction, the "Purchase Price"), but the amount of
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securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a)
or Section 22 hereof that represents Rights that the Company knows are
beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing oral or written plan, agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
that the Board of Directors of the Company has determined is part of an oral or
written plan, agreement, arrangement or understanding that has as a primary
purpose or effect avoidance of Section 7(e) hereof, and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
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"The Rights represented by this Rights Certificate are or
were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the
Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement."
Section 5. Countersignature and Registration.
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(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless so countersigned. In case
any officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the Person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificates may be signed on behalf of the Company by any Person
who, at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates, the Certificate number and the date of each
of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
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Certificates; Mutilated, Destroyed, Lost or Stolen Rights
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Certificates.
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(a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of Preferred Share Fractions
(or, following a Triggering Event, Common Shares or other securities, cash or
other assets, as the case may be, as the Rights Certificate or Certificates
surrendered then entitled such holder or former holder in the case of a
transfer). Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Certificate shall make such request in
writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Certificates to be
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transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such Purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
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 reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, 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 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 will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
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of Rights.
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(a) Subject to subsection (e), the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price (except as
provided in Section 11(q) hereof) with respect to the total number of Preferred
Share Fractions (or Common Shares, other securities, cash or other assets, as
the case may be) as to which such surrendered Rights are then exercisable
(except as provided in Section 11(q) hereof), at or prior to the earliest of (i)
the close of business on July 30, 2011 (the "Final Expiration Date"), (ii) the
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consummation of a transaction contemplated by Section 13(d) hereof, or (iii) the
time at which the Rights are redeemed or terminated as provided in Section 23
hereof (the earlier of (i), (ii) and (iii) being herein referred to as the
"Expiration Date").
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(b) The Purchase Price for each Preferred Share Fraction
pursuant to the exercise of a Right shall initially be $140.00, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with subsection (c).
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per Preferred Share
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Fraction (or Common Shares, other securities, cash or other assets, as the case
may be) to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) and Section 14(b)
hereof, thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent
for such Shares) certificates for the total number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit some or all of the total number of Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of Preferred Share
Fractions as are to be purchased (in which case certificates for the Preferred
Shares represented by such receipts shall be deposited by the transfer agent
with the depositary agent) and the Company will direct the depositary agent to
comply with such request, (ii) requisition from the Company the amount of cash,
if any, to be paid in lieu of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder, and (iv) after receipt thereof, deliver such cash, if any, to or
upon the order of the registered holder of such Rights Certificate. The payment
of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) may be made, at the election of the holder of the Rights
Certificate, (x) in cash or by certified bank check or money order payable to
the order of the Company, or (y) by delivery of Rights if and to the extent
authorized by Section 11(q) hereof. In the event that the Company is obligated
to issue other securities of the Company (including Common Shares) pay cash
and/or distribute other property pursuant to Section 11(a) hereof, 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.
(d) In case the registered holder 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 and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) 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
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing oral or written plan,
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of them Company has determined is part
of an oral or written plan, agreement, arrangement or understanding which has as
a primary purpose or effect the avoidance of this Section 7(e), shall become
null and void without any further action and no holder of such Rights shall have
any rights whatsoever with respect to such Rights, whether under any provision
of this Agreement or otherwise; provided, however, that the Rights held by an
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Acquiring Person,
10
an Affiliate or Associate of an Acquiring Person or the transferees of such
Persons referred to above shall not be voided unless the Acquiring Person in
question or an Affiliate or Associate of such Acquiring Person shall be involved
in the transaction giving rise to the Section 11(a)(ii) Event. The Company shall
use all reasonable efforts to insure that the provisions of this Section 7(e)
and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates' or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on-the reverse side of the 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 reasonably request.
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 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 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;
----------------------------------------------
Registration of Securities.
--------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available for issuance upon the exercise of outstanding Rights
as many of its authorized and unissued Preferred Shares (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities or out of its authorized and issued shares held
in its treasury), which together shall at all times after the Distribution Date
be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares and other
securities reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
11
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement or statements
under the Securities Act of 1933 (the "Act"), with respect to the securities
---
purchasable upon exercise of the Rights on an appropriate form or forms, (ii)
cause such registration statement or statements to become effective as soon as
practicable after such filing, and (iii) cause such registration statement or
statements to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
subsection (c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to-become effective. 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.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Preferred Shares (and,
following a Triggering Event, Common Shares or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares or other securities (subject to payment of the Purchase Price), be duly
and validly authorized and issued and, with respect to Preferred Shares, Common
Shares or other shares of capital stock, fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
that may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of Preferred Share Fractions
(or Common Shares or other securities, as the case may be) upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax that
may be payable in respect of any transfer or delivery of Rights Certificates to
a Person other than, or the issuance or delivery of a number of Preferred Share
Fractions (or Common Shares or other securities, as the case may be) in respect
of a name other than that of the registered holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for a number of Preferred Share Fractions (or Common Shares or
other securities, as the case may be) in a name other than that of the
registered holder upon the exercise of any Rights until 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. Capital Stock Record Date. Each Person in whose
-------------------------
name any certificate for a number of Preferred Share Fractions (or Common Shares
or other securities, as
12
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 such Preferred Share Fractions (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 all applicable transfer taxes) was made; provided, however, that if the
-------- -------
date of such surrender and payment is a date upon which the applicable transfer
books of the Company are closed, such Person shall be deemed to have become the
record holder of such shares (fractional or otherwise) on, and such certificate
shall be dated, the next succeeding Business Day on which the applicable
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 shareholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
----------------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of shares and other
----------------
securities covered by each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after
the date of this Agreement (A) declare a dividend on any security of the Company
payable in Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C)
combine the outstanding Preferred Shares into a smaller number of shares, or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of 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 adjusted Purchase Price, the aggregate number and kind of Preferred
Shares or capital stock, as the case may be, that, if such Right had been
exercised immediately prior to such date and at a time when the Preferred Share
transfer books were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the Stock
Acquisition Date, directly or indirectly, (1) shall merge into the
Company or otherwise combine with the Company and the Company shall be
the continuing or surviving corporation of such merger or combination
and the Common Shares of the Company or other equity securities of the
Company shall remain outstanding, (2) shall, in one
13
transaction or a series of transactions, transfer any assets to the
Company or to any of its Subsidiaries in exchange (in whole or in
part) for Common Shares, for shares of other equity securities of the
Company, or for securities exercisable for or convertible into shares
of equity securities of the Company (Common Shares or otherwise) or
otherwise obtain from the Company, with or without consideration, any
additional shares of such equity securities or securities exercisable
for or convertible into shares of such equity securities (other than
pursuant to a pro rata distribution to all holders of Common Shares),
(3) shall sell, purchase, lease, exchange, mortgage, pledge, transfer
or otherwise acquire or dispose of assets in one transaction or a
series of transactions, to, from or with (as the case may be) the
Company or any of its Subsidiaries, on terms and conditions less
favorable to the Company than the Company would be able to obtain in
arm's-length negotiation with an unaffiliated third party, other than
pursuant to a Section 13 Event, (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of assets having an aggregate fair market value of more than
$5,000,000 in one transaction or a series of transactions, to, from or
with (as the case may be) the Company or any of the Company's
Subsidiaries (other than incidental to the lines of business, if any,
engaged in as of the date hereof between the Company and such
Acquiring Person or Associate or Affiliate), other than pursuant to a
Section 13 Event, (5) shall receive any compensation from the Company
or any of the Company's Subsidiaries other than compensation for full-
time employment as a regular employee at rates in accordance with the
Company's (or its Subsidiaries') past practices, or (6) shall receive
the benefit, directly or indirectly (except proportionately as a
shareholder and except if resulting from a requirement of law or
governmental regulation), of any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax
advantage provided by the Company or any of its Subsidiaries, or
(B) any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms
of any such plan), alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend Declaration
Date become the Beneficial Owner of 15% or more of the Common Shares
then outstanding, unless the event causing the 15% threshold to be
crossed is a Section 13 Event, or is an acquisition of Common Shares
pursuant to a tender offer or an exchange offer for all outstanding
Common Shares at a price and on terms that provide fair value to all
shareholders, as determined by at least a majority of the Board of
Directors of the Company, after taking into consideration all factors
that such members of the Board of Directors deem relevant, including,
without limitation, the long-term prospects and value of the Company
and the prices and terms that such members of the Board of Directors
believe, in good faith, could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum
value (a "Qualified Offer"), or
14
(C) during such time as there is an Acquiring Person,
there shall be any reclassification of securities (including any
reverse stock split), or recapitalization of the Company, or any
merger or consolidation of the Company with any of its Subsidiaries or
any other transaction or series of transactions involving the Company
or any of its Subsidiaries, other than a Section 13 Event or series of
such Events (whether or not with or into or otherwise involving an
Acquiring Person) that has the effect, directly or indirectly, of
increasing by more than its proportionate share, the outstanding
shares of any class of equity securities of the Company or any of the
Company's Subsidiaries that is directly or indirectly beneficially
owned by any Acquiring Person or any Associate or Affiliate of any
Acquiring Person,
then, promptly following the first occurrence of a Section 11(a)(ii)
Event, proper provision shall be made so that each holder of a Right
(except as provided below and in Section 7(e) hereof) shall thereafter
have the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of Preferred Share Fractions, such number of Common Shares
of the Company as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of Preferred Share
Fractions for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event, and (y) dividing that
product (which, following such first occurrence, shall thereafter 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 pursuant to Section 11(d) hereof) per Common Share on the
date of such first occurrence (such number of shares, the "Adjustment
----------
Shares").
------
(iii) In the event that the number of Common Shares that are
authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this Section 11(a), the Company shall: (A) determine the excess of
the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over the Purchase Price (such excess, the
-------------
"Spread"), and (B) with respect to each Right, make adequate provision
------
to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Shares of the same or a different class or other
equity securities of the Company (including, without limitation,
preferred shares or units of preferred shares that a majority of the
Board of Directors of the Company in office at the time has deemed
(based, among other things, on the dividend and liquidation rights of
such preferred shares) to have substantially the same economic value
as Common Shares (such preferred shares, hereinafter referred to as
"common share equivalents"), (4) debt securities of the Company, (5)
-------------------------
other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value, where such aggregate value
has been determined by a majority of the Board of Directors of the
Company in office at the time after considering the advice of a
nationally
15
recognized investment banking firm selected by the Board of Directors
of the Company; provided, however, if the Company shall not have made
-------- -------
adequate provision to deliver value pursuant to clause (B) above
within thirty (30) days following the later of (x) the first
occurrence of a Section 11(a)(ii) 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 herein as the "Section
-------
11(a)(ii) 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 (to the extent
available) and then, if necessary, cash, which shares and/or cash have
an aggregate value equal to the Spread. If the Board of Directors of
the Company shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance
upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a)(ii) Trigger Date, in order
that the Company may seek shareholder approval for the authorization
of such additional shares (such period, as it may be extended, the
"Substitution Period"). To the extent that the Company determines
-------------------
that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and 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. The Company shall make a
public announcement when the exercisability of the Rights has been
temporarily suspended, and again when such suspension is no longer in
effect. For purposes of this Section 11(a)(iii), the value of the
Common Shares shall be the current market price (as determined
pursuant to Section 11(d) hereof) per Common Share on the Section
11(a)(ii) Trigger Date and the value of any common share equivalent
shall be deemed to have the same value as the Common Shares on such
date.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to holders of any security of the Company
entitling them to subscribe for or purchase (for a period expiring within forty-
five (45) calendar days after such record date) Preferred Shares (or shares
having the same rights, privileges and preferences as the Preferred Shares
("equivalent preferred shares")) or securities convertible into Preferred Shares
---------------------------
or equivalent preferred shares at a price per Preferred Share or per equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
current market price (as determined pursuant to Section 11(d) hereof) per
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 Preferred Shares outstanding on such record date, plus
the number of Preferred Shares that the aggregate offering price of the total
number of Preferred Shares and/or equivalent preferred shares so to be offered
(and/or the aggregate initial conversion price of the convertible securities so
to be offered) would purchase at such current market price, and the denominator
of which shall be the number of Preferred Shares outstanding on such record
date, plus the number of additional Preferred Shares
16
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). In case 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 Company, the Rights
Agent and the holders of the Rights. Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price that would
then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Shares (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly dividend out of the earnings or retained earnings of the Company),
assets (other than a regular quarterly dividend referred to above or dividend
payable in Preferred Shares, but including any dividend payable in stock other
than Preferred Shares) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the current market price (as determined pursuant to Section 11(d)
hereof) per Preferred Share on such record date, less the then 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) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a Preferred
Share and the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per Preferred Share. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall 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 hereunder, other
than computations made pursuant to section 11(a)(iii) hereof, the "current
-------
market price" per Common Share on any date shall be deemed to be the average of
------------
the daily closing prices per Common Share for the thirty (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)
hereof, the "current market price" per Common Share on any date shall be deemed
to be the average of the daily closing prices per Common Share for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
-------- -------
that in the event that the current market price per Common Share is determined
during a period following the announcement by the issuer of such Common Share of
(A) a dividend or distribution on such Common Share payable in Common shares or
securities convertible into Common Shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the
17
current market price shall be properly adjusted to take into account ex-dividend
trading. The closing price for each Trading 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 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 Quotation System ("NASDAQ") 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 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, 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.
(ii) For the purpose of any computation hereunder, the
"current market price" per Preferred Share shall be determined in the
same manner as set forth above for the Common Shares in clause (i) of
this Section 11(d) (other than the last sentence thereof). If the
current market price per Preferred Share cannot be determined in the
manner provided above or if the Preferred Shares are not publicly held
or listed or traded in a manner described in clause (i) of this
Section 11(d), the "current market price" per Preferred Share shall be
conclusively deemed to be an amount equal to 1000 (as such number may
be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares
occurring after the date of this Agreement) multiplied by the current
market price per Common Share. If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, "current
market price" per Preferred 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. For all
purposes of this Agreement, the "current market price" of a Preferred
Share Fraction shall be equal to the current market price of one
Preferred Share divided by 1000.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any
-------- -------
18
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 one-millionth of a Preferred
Share, as the case may be. Notwithstanding the first sentence of this subsection
(e), any adjustment required by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the transaction that mandates
such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter 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 Preferred Shares contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k), (m) and (q), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Preferred Share
Fractions 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 subsections (b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Preferred Share Fractions (calculated to the nearest one-millionth of a
Preferred Share) obtained by (i) multiplying (x) the number of Preferred Share
Fractions covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of Preferred Share Fractions 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 Preferred Share Fractions for
which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest ten-thousandth of a Preferred
Share) 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. The record date for the adjustment may be the date on
which the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this
19
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 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders 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 Preferred Share Fractions issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Preferred Share Fraction and the
number of Preferred Share Fractions that 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 stated or par value, if any, of the
number of Preferred Share Fractions issuable upon exercise of the Rights, the
Company shall take any corporate action that may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue such number
of fully paid and nonassessable Preferred Share Fractions 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
the number of Preferred Share Fractions and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the number of
Preferred Share Fractions and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
-------- -------
such holder a due xxxx or other appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or otherwise) or securities
upon the occurrence of the event requiring such adjustment.
(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 their 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 Preferred Shares, (ii) issuance wholly for cash of any
Preferred Shares at less than the current market price, (iii) issuance wholly
for cash or Preferred Shares or securities which by their terms are convertible
into or exchangeable for 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 Preferred Shares shall not be taxable to such
shareholders.
20
(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) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) 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) hereof), 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 shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
---------------
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, 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,
in the event that the Company shall at any time after the Rights Dividend
Declaration Date 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 of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following the
occurrence of such event.
(q) In the event that the Rights become exercisable following a
Section 11(a)(ii) Event, the Company, by action of a majority of the Board of
Directors of the Company in office at the time, may permit the Rights, subject
to Section 7(e) hereof, to be exercised for 50% of the Common Shares (or cash or
other securities or assets to be substituted for the Adjustment Shares pursuant
to subsection (a)(iii)) that would otherwise be purchasable under subsection
(a), in consideration of the surrender to the Company of the Rights so exercised
and without other payment of the Purchase Price. Rights exercised under this
subsection (g) shall be deemed to have been exercised in full and shall be
canceled.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
----------------------------------------------------------
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company
21
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent, and with each transfer agent for the Preferred Shares and
the Common Shares, a copy of such certificate, and (c) 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 25 hereof. The Rights Agent shall be fully protected in relying on
any such certificate and on any adjustment therein contained and shall not be
deemed to have knowledge of any adjustment unless and until it shall have
received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
-------------
(a) In the event that, following the Stock Acquisition
Date, directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding Common Shares shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case and except as
contemplated by subsection (d), proper provision shall be made so that:
(i) each holder of a Right, except as provided in Section
7(e) hereof or subsection (e), shall thereafter have the right to
receive, upon the exercise thereof at the then current Purchase Price
in accordance with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non assessable and freely tradeable
Common Shares of the Principal Party (as such term is 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 Preferred Share Fractions for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of such
shares for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that
product (which, following the first occurrence of a Section 13 Event,
shall be referred to as the "Purchase Price" for each Right and for
--------------
all purposes of this Agreement) by (2) 50% of the current market price
(determined pursuant to Section 11(d)(i) hereof) per Common Share of
such Principal Party on the date of consummation of such Section 13
Event,
22
(ii) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to
-------
such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal
Party following the first occurrence of a Section 13 Event;
(iv) such Principal Party shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common
Shares) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter
be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights;
and
(v) the provisions of Section 11(a)(ii) hereof shall be of no
effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
---------------
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of subsection (a), the Person that is the
issuer of any securities into which Common Shares of the Company are
converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of subsection (a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Shares of such
-------- -------
Person are not at such time and have not been continuously over the preceding
twelve (12) month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Shares of which are and have been so registered, "Principal Party" shall refer
to such other Person, and (2) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, the Common Shares of two or more of which
are and have been so registered, "Principal Party" shall refer to whichever of
such Persons is the issuer of the Common Shares having the greatest aggregate
market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number-of authorized shares of its Common Shares that have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
section
23
13 and further providing that, as soon as practicable after the date of any
Section 13 event, the Principal Party will
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements of the Act)
until the Expiration Date; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section 11(a)(ii) Event, the
Rights that have not theretofore been exercised shall thereafter become
exercisable solely in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 (other than this subsection (d)) shall not be applicable to, and the
term "Section 13 Event" shall not include, a transaction described in
----------------
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person, or Persons who acquired Common Shares pursuant to a
Qualified Offer (or a wholly owned Subsidiary of any such Person or Persons),
(ii) the price per Common Share offered in such transaction is not less than the
price per Common Share paid to all holders of Common Shares whose shares were
purchased pursuant to such tender offer or exchange offer and (iii) the form of
consideration being offered to the remaining holders of Common Shares pursuant
to such transaction is the same as the form of consideration paid pursuant to
such tender or exchange offer. Upon consummation of any such transaction
contemplated by this subsection (d), all Rights hereunder shall expire
(e) In the event that the Rights become exercisable under
subsection (a) (except as provided in subsection (d)), the Company, by action of
a majority of the Board of Directors of the Company in office at the time, may
agree with the Principal Party that the Principal Party shall permit the Rights
to be exercised for 50% of the Common Shares of the Principal Party that would
otherwise be purchasable under subsection (a), in consideration of the surrender
to the Principal Party, as the successor to the Company under subsection (a)
(ii), of the Rights so exercised and without other payment of the Purchase
Price. Rights exercised under this subsection (e) shall be deemed to have been
exercised in full and shall be canceled.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates that evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market
24
value of a whole Right. For purposes of this subsection (a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the Nasdaq National
Market or, if the Rights 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 Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Shares upon exercise of the Rights or to distribute certificates which
evidence fractional Preferred Shares, except in each case for fractions which
are integral multiples of Preferred Shares. In lieu of fractional Preferred
Shares that are not integral multiples of Preferred 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 market value of a Preferred Share. For purposes of this subsection (b),
the current market value of one Preferred Share shall be the closing price of a
Preferred Share (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of Common Shares upon exercise of the
Rights or to distribute certificates that evidence fractional Common Shares. In
lieu of fractional Common Shares, the Company may pay to the registered holders
of Rights Certificates at the time such Rights are exercised as herein provided
an amount in cash equal to the same fraction of the current market value of one
Common Share. For purposes of this subsection (c), the current market value of
one Common Share shall be the closing price of one Common Share (as determined
pursuant to Section 11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right or a beneficial interest in a Right by
the acceptance thereof expressly waives his right to receive any fractional
Rights or any fractional Common Shares upon exercise of a Right, except as
permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
----------------
Agreement other than those vested in the Rights Agent in Section 18, are vested
in the respective registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Rights Certificate (or, prior to the
25
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 to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights or beneficial interests
therein, it is specifically acknowledged that the holders of Rights or
beneficial interests therein would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right or a
---------------------------
beneficial interest in a Right by accepting the same consents and agrees with
the Company and the Rights Agent and with every other such holder that:
(a) prior to the Distribution Date, beneficial interests in the
Rights will be transferable only in connection with the transfer of Common
Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or Offices of the Rights Agent designated for such
purposes, 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) hereof, the Company
and the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to 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, 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 Shareholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of Preferred
Share Fractions or any other securities of the Company (including the Common
Shares) that may at any time be issuable on the exercise of the
26
Rights represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a shareholder of the Company or any right to vote for
the election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 24 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
----------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability 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 or certificate for Common Shares or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
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 hereto; provided, however, that such corporation
-------- -------
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency and trust 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 in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name of the successor Rights Agent;
27
and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
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
or beneficial interests in the Rights, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the written opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of the current market price) be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(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 or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the
28
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates
after receipt of a Certificate furnished pursuant to Section 12, describing any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Shares to be issued pursuant to this Agreement or any Rights Certificate or as
to whether any Common Shares or Preferred Shares will, when so issued, be
validly authorized and issued, fully paid and nonassessable:
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or 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 the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer 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 instructions of any such officer. Any
application by the Rights Agent for written instructions from the Company may,
at the option of the Rights Agent, set forth in writing any action proposed to
be taken or omitted by the Rights Agent under this Rights Agreement and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Rights Agent shall not be liable for any action taken by, or
omission of, the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date shall
not be less than five Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement, and none of such actions shall constitute a breach
of trust. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, 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, however, reasonable care was exercised in the
-------- -------
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any
29
of its duties hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 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. The Rights Agent or any successor
----------------------
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' prior written notice mailed to the Company and to each
transfer agent of the Common Shares and 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 upon
thirty (30) days' prior written notice mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares and 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. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized, doing business
and in good standing under the laws of the United States or of any state, having
a principal office in the State of New York or the State of Delaware, that is
authorized by law to exercise corporate trust and stock transfer powers and is
subject to supervision or examination by federal or state authority and that has
at the time of its-appointment as Rights Agent a combined capital and surplus
adequate in the judgment of a majority of the Board of Directors of the Company
in office at the time to assure the performance of its duties hereunder and the
protection of the interests of the Company and the holders of Rights or
beneficial interests therein, or (b) an Affiliate of a corporation described in
clause (a) of this sentence. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares and Preferred Shares and mail a notice thereof in writing to
the registered holders of the Rights Certificates or, prior to the Distribution
Date, to the registered holders of the Common Shares. 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.
30
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 its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance, sale or delivery of Common Shares following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to Common Shares so issued, sold or delivered pursuant to
the exercise of stock options, stock appreciation rights grants or awards
outstanding on the Distribution Date under any benefit plan or arrangement for
employees or directors, or upon the exercise, conversion or exchange of
securities outstanding on the Record Date or hereinafter issued by the Company,
and (b) 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 (i) 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 (ii) 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 a Stock Acquisition Date (or, if the Stock 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, redeem all but
not less than all the then outstanding Rights at a redemption price of $.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price") and
----------------
the Company may, at its option, pay the Redemption Price either in Common Shares
(based on the "current market price", as defined in Section 11(d)(i) hereof, of
the Common Shares at the time of redemption) or cash. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the 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 for the Common Shares. Any notice that
is mailed in the manner herein provided shall be deemed given, whether
31
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.
(c) In deciding whether or not to exercise the Company's right of
redemption hereunder, the directors of the Company shall act in good faith, in a
manner they reasonably believe to be in the best interests of the Company and
with such care, including reasonable inquiry, skill and diligence, as a Person
of ordinary prudence would use under similar circumstances.
Section 24. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular quarterly dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Shares rights or warrants to subscribe for or to purchase any additional
Preferred Shares or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Shares
(other than a reclassification involving only the subdivision of outstanding
Preferred Shares), or (iv) to effect any consolidation or merger into or with
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), 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, 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 (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of 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 twenty (20) days prior to the record date for
determining holders of Preferred Shares for purposes of such action, and in the
case of any such other action, at least twenty (20) days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of Preferred Shares, whichever shall be the earlier.
(b) Upon the occurrence of a Section 11(a)(ii) Event, (i) the
Company shall as soon as practicable thereafter give to each holder of a Right,
to the extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Shares shall be deemed
thereafter to refer to Common Shares and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this Agreement to be
-------
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the
32
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:
Closure Medical Corporation
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Corporate Secretary
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 any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Corporate Trust Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (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 shown on the
registry books of the Company.
Section 26. Supplements and Amendments.
--------------------------
(a) Prior to the Distribution Date 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 Common Shares. From and
after the Distribution Date 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 Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner that the Company may deem necessary or desirable and that shall
not adversely affect the interests of the holders of Rights Certificates;
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable,
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company that states that the proposed supplement or amendment is
in compliance with the terms of this Section 26, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the beneficial owners of Rights shall be deemed coincident with the interests of
the holders of Common Shares.
(b) In deciding whether or not to supplement or amend this
Agreement, the directors of the Company shall act in good faith, in a manner
they reasonably
33
believe to be in the best interests of the Company and with such care, including
reasonable inquiry, skill and diligence, as a Person of ordinary prudence would
use under similar circumstances, and they may consider the effects of any action
upon employees, suppliers and customers of the Company and upon communities in
which offices or other establishments of the Company are located, and all other
pertinent factors.
Section 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Determinations and Actions by the Board of Directors,
----------------------------------------------------
etc. For all purposes of this Agreement, any calculation of the number of Common
----
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
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 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 or supplement the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) that 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 to any liability to the holders of the Rights.
Section 29. 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 registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Shares).
Section 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent Jurisdiction or
other Authority to be invalid, void or unenforceable for any purpose or under
any set of circumstances or as applied to any Person, such invalid, void or
unenforceable term, provision, covenant or restriction shall continue in effect
to the maximum extent possible for all other purposes, under all other
circumstances and as applied to all other Persons; and the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
-------- -------
contrary, if any such term, provision, covenant or restriction is held by such
Court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of
34
redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the close of business on the tenth day following the date of such
determination by the Board of Directors.
Section 31. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such jurisdiction applicable to
contracts made and to be performed entirely within such jurisdiction.
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.
35
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 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
CLOSURE MEDICAL CORPORATION
By __________________________________
Name: __________________________________
Title: __________________________________
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By __________________________________
Name: __________________________________
Title: __________________________________
36
EXHIBIT A
RESOLUTION OF THE BOARD OF DIRECTORS OF
CLOSURE MEDICAL CORPORATION
ESTABLISHING AND DESIGNATING
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
AS A SERIES OF THE PREFERRED STOCK
RESOLVED, that pursuant to the authority expressly vested in the Board of
Directors of Closure Medical Corporation (the "Corporation") by Section 4.2 of
the Certificate of Incorporation of the Corporation, the Board of Directors
hereby fixes and determines the voting rights, designations, preferences,
qualifications, privileges, limitations, restrictions, options, conversion
rights and other special or relative rights of the first series of the Series
Preferred Stock, par value $.01 per share, which shall consist of 50,000 shares
and shall be designated as Series A Junior Participating Preferred Shares (the
"Series A Junior Shares").
Special Terms of the Series A Junior Shares
-------------------------------------------
Section 1. Dividends and Distributions.
---------------------------
(a) The rate of dividends payable per share of Series A Junior Shares
on the first day of January, April, July and October in each year or such other
quarterly payment date as shall be specified by the Board of Directors (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 the Series A Junior Shares, shall be
(rounded to the nearest cent) equal to the greater of (i) $10.00 or (ii) subject
to the provision for adjustment hereinafter set forth, 1,000 times the aggregate
per share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in cash, based upon the fair market value at the time the non-
cash dividend or other distribution is declared or paid as determined in good
faith by the Board of Directors) 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, $.01 par value per share, of the
Corporation 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 the Series A Junior Shares.
Dividends on the Series A Junior Shares shall be paid out of funds legally
available for such purpose. In the event the Corporation shall at any time after
July 30, 2001 (the "Rights Declaration Date"), (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares, then in each such case the amounts to which
holders of Series A Junior Shares were entitled immediately prior to such event
under clause (ii) of the preceding sentence shall be adjusted by multiplying
each such amount by a fraction the numerator of which is the number of shares of
Common 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) Dividends shall begin to accrue and be cumulative on outstanding Series
A Junior Shares from the Quarterly Dividend Payment Date next preceding the date
of issue of such Series A Junior 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 Series A
Junior Shares 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 Series A Junior
Shares in an amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a share-by-
share basis among all such shares at the time outstanding.
Section 2. Voting Rights. In addition to any other voting rights required by
-------------
law, the holders of Series A Junior Shares shall have the following voting
rights:
(a) Subject to the provision for adjustment hereinafter set forth, each
Series A Junior Share shall entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the shareholders of the Corporation. In the
event the Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of Series A Junior
Shares 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) In the event that dividends upon the Series A Junior Shares shall be in
arrears to an amount equal to six full quarterly dividends thereon, the holders
of such Series A Junior Shares shall become entitled to the extent hereinafter
provided to vote noncumulatively at all elections of directors of the
Corporation, and to receive notice of all shareholders' meetings to be held for
such purpose. At such meetings, to the extent that directors are being elected,
the holders of such Series A Junior Shares voting as a class shall be entitled
solely to elect two members of the Board of Directors of the Corporation; and
all other directors of the Corporation shall be elected by the other
shareholders of the Corporation entitled to vote in the election of directors.
Such voting rights of the holders of such Series A Junior Shares shall continue
until all accumulated and unpaid dividends thereon shall have been paid or funds
sufficient therefor set aside, whereupon all such voting rights of the holders
of shares of such series shall cease, subject to being again revived from time
to time upon the reoccurrence of the conditions above described as giving rise
thereto.
At any time when such right to elect directors separately as a class shall
have so vested, the Corporation may, and upon the written request of the holders
of record of not less than 20% of the then outstanding total number of shares of
all the Series A Junior Shares having the right to elect directors in such
circumstances shall, call a special meeting of holders of such Series A Junior
Shares for the election of directors. In the case of such a written request,
such
special meeting shall be held within 90 days after the delivery of such request,
and, in either case, at the place and upon the notice provided by law and in the
By-laws of the Corporation; provided, that the Corporation shall not be required
to call such a special meeting if such request is received less than 120 days
before the date fixed for the next ensuing annual or special meeting of
shareholders of the Corporation. Upon the mailing of the notice of such special
meeting to the holders of such Series A Junior Shares, or, if no such meeting be
held, then upon the mailing of the notice of the next annual or special meeting
of shareholders for the election of directors, the number of directors of the
Corporation shall, ipso facto, be increased to the extent, but only to the
extent, necessary to provide sufficient vacancies to enable the holders of such
Series A Junior Shares to elect the two directors hereinabove provided for, and
all such vacancies shall be filled only by vote of the holders of such Series A
Junior Shares as hereinabove provided. Whenever the number of directors of the
Corporation shall have been increased, the number as so increased may thereafter
be further increased or decreased in such manner as may be permitted by the By-
laws and without the vote of the holders of Series A Junior Shares, provided
that no such action shall impair the right of the holders of Series A Junior
Shares to elect and to be represented by two directors as herein provided.
So long as the holders of Series A Junior Shares are entitled
hereunder to voting rights, any vacancy in the Board of Directors caused by the
death or resignation of any director elected by the holders of Series A Junior
Shares, shall, until the next meeting of shareholders for the election of
directors, in each case be filled by the remaining director elected by the
holders of Series A Junior Shares having the right to elect directors in such
circumstances.
Upon termination of the voting rights of the holders of any series of
Series A Junior Shares the terms of office of all persons who shall have been
elected directors of the Corporation by vote of the holders of Series A Junior
Shares or by a director elected by such holders shall forthwith terminate.
(c) Except as otherwise provided herein, in the Certificate of
Incorporation of the Corporation or by law, the holders of Series A Junior
Shares and the holders of Common Stock (and the holders of shares of any other
series or class entitled to vote thereon) shall vote together as one class on
all matters submitted to a vote of shareholders of the Corporation.
Section 3. Reacquired Shares. Any Series A Junior Shares 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 Series Preferred Stock and may
be reissued as part of a new series of Series Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
Section 4. Liquidation, Dissolution or Winding Up. In the event of any
--------------------------------------
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of Series A Junior Shares shall be entitled to receive
the greater of (a) $1.00 per share, plus accrued dividends to the date of
distribution, whether or not earned or declared, or (b) an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 1,000
times the aggregate amount to be distributed per share to holders of Common
Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
Series A Junior Shares were entitled immediately prior to such event pursuant to
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.
Section 5. Consolidation, Merger, etc. In case the Corporation shall
--------------------------
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the Series A
Junior Shares shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
shares of Common Stock, or (iii) combine the outstanding shares of Common Stock
into a smaller number of shares, then in each such case the amount set forth in
the preceding sentence with respect to the exchange or change of shares of
Series A Junior Shares shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 6. No Redemption. The Series A Junior Shares shall not be
-------------
redeemable.
Section 7. Ranking. The Series A Junior Shares shall rank junior to all
-------
other series of the Corporation's Series Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
Section 8. Fractional Shares. Series A Junior Shares may be issued in
-----------------
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Junior Shares.
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ___________ Rights
NOT EXERCISABLE AFTER JULY 30, 2011 OR AFTER EARLIER REDEMPTION BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS
ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]*
_______________
* The bracketed portion of the legend shall be inserted only if applicable
and shall replace the preceding sentence.
CLOSURE MEDICAL CORPORATION
RIGHTS CERTIFICATE
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 30, 2001 (the "Rights Agreement"), by and between
Closure Medical Corporation, a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company (the "Rights Agent"), to purchase from
the Company at any time prior to 5:00 P.M. (New York time) on July 30, 2011 at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, nonassessable
share of Series A Junior Participating Preferred Stock (the Preferred Share) of
the Company, at a purchase price (the Purchase Price) of $140 per one one-
thousandth of a Preferred Share (such fraction, a Preferred Share Fraction),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly executed. Except as provided
in Sections 11(q) and 13(e) of the Rights Agreement, the Purchase Price shall be
paid, at the option of the Company, in cash or Common Stock, of the Company (the
Common Shares) having an equivalent value. The number of Rights evidenced by
this Rights Certificate (and the number of Preferred Share Fractions that may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
Preferred Share Fraction set forth above, are the number and Purchase Price as
of July 30, 2001, based on the Preferred Shares as constituted at such date.
Except as otherwise provided in the Rights Agreement, upon the occurrence
of any Section 11(a)(ii) Event (as such term is defined in the Rights
Agreement), if the Rights evidenced by this Rights Certificate are beneficially
owned by (i) an Acquiring Person or Associate or Affiliate or Associate of any
Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any Acquiring Person (of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of any such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of Preferred Shares or other securities that 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, including
Triggering Events and a Section 11(a)(ii) Event.
This Rights Certificate is subject to all of the terms, covenants and
restrictions of the Rights Agreement, which terms, covenants and restrictions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent and are also available upon
written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of Preferred Share Fractions 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 may be redeemed by the Company at its option at a redemption
price of $.01 per Right at any time prior to the earlier of the Close of
Business (as such term is defined in the Rights Agreement) on (i) the tenth day
following the Stock Acquisition Date (as such time period may be extended
pursuant to the Rights Agreement), and (ii) the Final Expiration Date. Under
certain circumstances set forth in the Rights Agreement, the decision to redeem
shall require the concurrence of a majority of the Continuing Directors.
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are integral
multiples of a Preferred Share, which may, as the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of Preferred Shares or of any
other securities of the Company (including Common Shares) that may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of ____________, 20__
ATTEST CLOSURE MEDICAL CORPORATION
___________________________________ By:_____________________________
Secretary Name:
Title:
Countersigned
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:________________________________
Authorized Signature
[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)
___________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________ Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: _________________, 20 __
___________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [_] is [_] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(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, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ________________, 20__ ___________________________
Signature
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and Certificate 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 holder desires to exercise
Rights represented by the Rights Certificate.)
To: CLOSURE MEDICAL CORPORATION
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Rights Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or Common Shares or such other securities of
the Company or of any other person that may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
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 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: _____________, 20__
__________________________
Signature
Signature Guaranteed:
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that
(1) the Rights evidenced by this Rights Certificate [_] are [_] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) 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, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _____________, 20__ _______________________________
Signature
Signature Guaranteed:
NOTICE
------
The signatures to the foregoing Election to Purchase and Certificate 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.
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On July 30, 2001, the Board of Directors of Closure Medical
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of Common Stock, $.01 par value (each, a "Common Share"),
of the Company to stockholders of record at the close of business on July 30,
2001. Each Right entitles the registered holder to purchase from the Company a
unit consisting of one one-thousandth of a share (a "Unit") of the Series A
Junior Participating Preferred Shares, par value $.01 per share, of the Company
(the "Preferred Shares"), or a combination of securities and assets of
equivalent value, at a Purchase Price of $140 per Unit, subject to adjustment.
The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and American Stock Transfer & Trust
Company, as Rights Agent.
Initially, ownership of the Rights will be evidenced by the Common
Share certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common
Shares and a Distribution Date (a "Distribution Date") will occur upon the
earlier of (i) 10 days following a public announcement that a person or group
(other than certain Grandfathered Shareholders) of affiliated or associated
persons (an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding Common Shares (the "Stock
Acquisition Date"), or (ii) the close of business on such date as may be fixed
by the Board of Directors, which date shall not be more than 65 days following
the commencement of a tender offer or exchange offer that would result in a
person or group beneficially owning 15% or more of the outstanding Common
Shares. Until the Distribution Date, (i) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with such Common
Share certificates, (ii) new Common Share certificates issued after July 30,
2001 will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Common Shares
outstanding will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on July 30, 2011, unless earlier redeemed by the
Company as described below or unless a transaction under Section 13(d) of the
Rights Agreement has occurred.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, and except in connection with the exercise of employee
stock options or stock appreciation rights or under any other benefit plan for
employees or directors or in connection with the exercise of warrants or
conversion of convertible securities, only Common Shares issued after July 30,
2001 and prior to the Distribution Date will be issued with Rights.
Except in the circumstances described below, after the Distribution
Date each Right will be exercisable for one one-thousandth of a Preferred Share
(a "Preferred Share Fraction"). Each Preferred Share Fraction carries voting
and dividend rights that are intended to produce the equivalent of one Common
Share. The voting and dividend rights of the Preferred Shares are subject to
adjustment in the event of dividends, subdivisions and combinations with respect
to the Common Shares of the Company. In lieu of issuing certificates for
Preferred Share Fractions which are less than an integral multiple of one
Preferred Share (i.e., 1000 Preferred Share Fractions), the Company may pay cash
representing the current market value of the Preferred Share Fractions.
In the event that at any time following the Stock Acquisition Date,
(i) the Company is the surviving corporation in a merger with an Acquiring
Person and its Common Shares remain outstanding, (ii) a Person (other than a
Grandfathered Shareholder) becomes the beneficial owner of more than 15% of the
then outstanding Common Shares other than pursuant to a tender offer that
provides fair value to all stockholders, (iii) an Acquiring Person engages in
one or more "self-dealing" transactions as set forth in the Rights Agreement, or
(iv) during such time as there is an Acquiring Person an event occurs that
results in such Acquiring Person's ownership interest being increased by more
than 1% (e.g., a reverse stock split), each holder of a Right will thereafter
have the right to receive, upon exercise, Common Shares (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. In lieu of requiring
payment of the Purchase Price upon exercise of the Rights following any such
event, the Company may permit the holders simply to surrender the Rights, in
which event they will be entitled to receive Common Shares (and other property,
as the case may be) with a value of 50% of what could be purchased by payment of
the full Purchase Price. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in clauses (i), (ii), (iii) or (iv) of
this paragraph, all Rights that are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially owned by any Acquiring Person who
was involved in the transaction giving rise to any such event will be null and
void. However, Rights are not exercisable following the occurrence of any of
the events set forth above until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, at an exercise price of $140 per Right, each Right not
otherwise voided following an event set forth in the preceding paragraph would
entitle its holder to purchase $280 worth of Common Shares (or other
consideration, as noted above) for $140. Assuming that the Common Shares had a
per share value of $28 at such time, the holder of each valid Right would be
entitled to purchase ten Common Shares for $140. Alternatively, the Company
could permit the holder to surrender each Right in exchange for stock or cash
equivalent to five Common Shares (with a value of $140) without the payment of
any consideration other than the surrender of the Right.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger that is described in, or that follows a tender offer or exchange offer
described in, the second preceding paragraph), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right. Again, provision is made to permit surrender of the Rights in exchange
for one-half of the value otherwise purchasable. The events set forth in this
paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, and the number of Units of 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
Preferred Shares, (ii) if holders of the Preferred Shares are granted certain
rights or warrants to subscribe for Preferred Shares or convertible securities
at less than the current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Preferred Shares on the
last trading date prior to the date of exercise.
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right. That ten-day redemption period may be extended by the Board of Directors
so long as the Rights are still redeemable. Immediately upon the action of the
Board of Directors ordering redemption of the Rights, the Rights will terminate
and the only right of the holders of Rights will be to receive the $.01
redemption price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Preferred Shares (or other consideration) of the Company or for
common shares of the acquiring company as set forth above.
Any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes that do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement is being filed with the Securities and
Exchange Commission as an Exhibit to the Company's Current Report on Form 8-K
dated July 30, 2001. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
