EXHIBIT 4.1
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of February 26, 2010 (the "Agreement"), between
Gateway Energy Corporation, a Delaware corporation (the "Company"), and American
Stock Transfer and Trust Company, LLC, as agent (the "Rights Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on February 26, 2010 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company (the "Board of Directors") authorized and
declared a dividend distribution of one Right for each share of Common Stock of
the Company outstanding at the Close of Business on March 10, 2010 (the "Record
Date"), and has authorized the issuance of one (as such number may hereinafter
be adjusted pursuant to the provisions of Section 11(p) hereof) Right for each
share of Common Stock issued between the Record Date (whether originally issued
or delivered from the Company's treasury) and the Distribution Date, and, in
certain circumstances provided in Section 22 of this Agreement, after the
Distribution Date, each Right initially representing on the date hereof the
right to purchase one ten-thousandth of a share of Preferred Stock of the
Company having the rights, powers and preferences set forth in the Company's
Certificate of Incorporation, as amended, upon the terms and subject to the
conditions hereinafter set forth ("Rights");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean collectively any Person who or
which, together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding (other than as a result of a Qualifying Offer) or was such a
Beneficial Owner at any time after the date hereof, whether or not such
Person together with all Affiliates or Associates of such Person continues
to be the Beneficial Owner of 15% or more of the then outstanding Common
Stock. Notwithstanding the foregoing:
(i) the term "Acquiring Person" shall not include (A) the
Company, (B) any Subsidiary of the Company, (C) any employee benefit
plan of the Company or of any Subsidiary of the Company, (D) any
Person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan, (E) any Person together
with all Affiliates and Associates of such Person who or which becomes
the Beneficial Owner of 15% or more of the then outstanding shares of
Common Stock as a result of the acquisition of Common Stock directly
from the Company (each of (A) through (E), an "Exempted Person");
(ii) no Person shall become an "Acquiring Person" as a result of
an acquisition of Common Stock by the Company which, by reducing the
number of such shares then outstanding, increases the proportionate
number of shares beneficially owned by such Person together with all
Affiliates and Associates of such Person to 15% or more of the
outstanding Common Stock, except that if such Person, after such share
purchases by the Company, becomes the Beneficial Owner of additional
shares of Common Stock constituting 0.5% or more of the then
outstanding shares of Common Stock other than pursuant to a Qualifying
Offer, such Person shall be deemed to be an "Acquiring Person;"
(iii) if the Board of Directors of the Company determines in good
faith that a Person, together with all Affiliates and Associates of
such Person, who would otherwise be an "Acquiring Person" has become
such inadvertently, and such Person, together with all Affiliates and
Associates of such Person, divests as promptly as practicable a
sufficient number of shares of Common Stock so that such Person,
together with all Affiliates and Associates of such Person, would no
longer be an Acquiring Person, then such Person shall not be deemed to
be an "Acquiring Person;" and
(iv) no Person shall become an "Acquiring Person" as a result of
such Person, together with all Affiliates and Associates of such
Person, Beneficially Owning as of the date of this Agreement 15% or
more of the shares of Common Stock then outstanding so long as such
Person, together with all Affiliates and Associates of such Person,
does not thereafter become the Beneficial Owner of additional shares
of Common Stock constituting 0.5% or more of the then outstanding
shares of Common Stock other than pursuant to a Qualifying Offer.
Any Person subject to clause (ii), (iii) or (iv) at any time shall
cease to be subject to such clause at such time, if any, as such Person,
together with all Affiliates and Associates of such Person, ceases to be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding. The term "outstanding," when used with reference to a Person's
Beneficial Ownership of shares of Common Stock or other securities of the
Company, shall mean the number of such shares of Common Stock or other
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would
be deemed to beneficially own hereunder.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) of this Agreement.
(d) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
(e) "Associate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
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(f) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable immediately
or only after the passage of time or fulfillment of a condition)
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 the "Beneficial Owner" of, or to
beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, 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 ("Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original
Rights;
(ii) which 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 ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations in effect on the date
hereof under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding either: (A)
(I) arises solely from a revocable proxy or consent 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 (II) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or (B) in the case of Xxxxxxxxx
X. Xxxxx, Xx. ("Pevow") and on or prior to July 4, 2010 (I) arises
solely from one or more revocable proxies or consents given in
accordance with the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (II) the aggregate number of
shares of Common Stock subject to such proxies or consents would not,
if included as beneficially owned by Pevow (or any Affiliates or
Associates of Pevow), cause Pevow (or any Affilates or Associates of
Pevow) to beneficially own 20% or more of the shares of Common Stock
then outstanding; or
(iii) which 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),
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for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy or consent as described in the proviso to subparagraph
(ii) of this paragraph (f)) or disposing of any voting securities of
the Company;
provided, however, that nothing in this paragraph (f) shall cause a person
engaged in business as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities acquired through such
person's participation in good faith in a bona fide firm commitment
underwriting until the expiration of forty days after the date of such
acquisition. Notwithstanding anything in this definition of Beneficial
Owner to the contrary, a Person who, prior to the Distribution Date, is a
member of the Board of Directors or an officer of the Company or who is an
Affiliate or Associate of a member of the Board of Directors or officer of
the Company (each, an "Excluded Person") shall not be deemed the Beneficial
Owner of, or to "beneficially own," shares of Common Stock held by another
Excluded Person solely by reason of any agreement, arrangement or
understanding, written or otherwise, entered into in opposition to any
transaction or in support of a Qualifying Offer.
(g) "Board of Directors" shall mean the Board of Directors of the
Company as constituted from time to time.
(h) "Book-Entry" shall mean an uncertificated book entry for the
Common Stock.
(i) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the state in which the principal
office of the Rights Agent is located are authorized or obligated by law or
executive order to close.
(j) "Close of Business" on any given date shall mean 5:00 p.m., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., New York City time, on the next
succeeding Business Day.
(k) "Common Stock" shall mean the common stock, par value $0.25 per
share, of the Company (or in the event of a subdivision, combination or
reclassification with respect to such shares of Common stock, the shares of
Common Stock resulting from such subdivision, combination or
reclassification), except, subject to the proviso in Section 13(b) of this
Agreement, that "Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock (or other equity securities
or equity interests) of such Person with the greatest voting power to
control or direct the management of such Person, or if such Person is a
Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person.
(l) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) of this Agreement.
(m) "Company" shall have the meaning set forth in the introductory
paragraph of this Agreement.
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(n) "Current Market Price" shall have the meaning set forth in Section
11(d).
(o) "Current Value" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(p) "Distribution Date" shall have the meaning set forth in Section
3(a) of this Agreement.
(q) "Equivalent preferred stock" shall have the meaning set forth in
Section 11(b) of this Agreement.
(r) "Exchange" shall have the meaning set forth in Section 4(a) of
this Agreement.
(s) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(t) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(u) "Excluded Person" shall have the meaning set forth in Section 1(f)
of this Agreement.
(v) "Exempted Person" shall have the meaning set forth in Section 1(a)
of this Agreement.
(w) "Expiration Date" shall have the meaning set forth in Section 7(a)
of this Agreement.
(x) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) of this Agreement.
(y) "Original Rights" shall have the meaning set forth in Section
1(f)(i) of this Agreement.
(z) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company or other entity.
(aa) "Preferred Stock" shall mean shares of Series A Preferred Stock,
par value $1.00 per share, of the Company (or in the event of a
subdivision, combination or reclassification with respect to such shares of
Preferred Stock, the shares of Preferred Stock resulting from such
subdivision, combination or reclassification), and, to the extent that
there is not a sufficient number of shares of Series A Preferred Stock
authorized to permit the full exercise of the Rights, any other series of
preferred stock of the Company designated for such purpose containing terms
substantially similar to the terms of the Series A Preferred Stock.
(bb) "Principal Party" shall have the meaning set forth in Section
13(b) of this Agreement.
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(cc) "Purchase Price" shall have the meaning set forth in Section 4(a)
of this Agreement.
(dd) "Qualifying Offer" shall mean an acquisition of shares of Common
Stock pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a
majority of the members of the Board of Directors, after receiving advice
from one or more investment banking firms selected by the Board of
Directors, to be (a) fair to stockholders (taking into account all factors
which the Board of Directors may deem relevant including, without
limitation, prices which could reasonably be achieved if the Company or its
assets were sold on an orderly basis designed to realize maximum value) and
(b) otherwise in the best interests of the Company and its stockholders
(other than the Person or any Affiliate or Associate thereof on whose
behalf the offer is being made) taking into account all factors that the
Board of Directors may deem relevant; provided, however, that (i) such
determination is made by the Board of Directors prior to the purchase of
shares under such tender offer or exchange offer, and (ii) a majority of
the members of the Board of Directors are not Acquiring Persons or
Affiliates, Associates, nominees or representatives of an Acquiring Person.
(ee) "Redemption Date" shall have the meaning set forth in Section
7(a) of this Agreement.
(ff) "Redemption Price" shall have the meaning set forth in Section 23
of this Agreement.
(gg) "Rights" shall have the meaning set forth in the "WHEREAS" clause
at the beginning of this Agreement.
(hh) "Rights Agent" shall have the meaning set forth in the
introductory paragraph of this Agreement.
(ii) "Rights Certificates" shall have the meaning set forth in Section
3(a) of this Agreement.
(jj) "Rights Dividend Declaration Date" shall have the meaning set
forth in the "WHEREAS" clause at the beginning of this Agreement.
(kk) "Section 11(a)(ii) Event" shall have the meaning set forth in
Section 11(a)(ii) of this Agreement.
(ll) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) of this Agreement.
(mm) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) of this Agreement.
(nn) "Spread" shall have the meaning set forth in Section 11(a)(iii)
of this Agreement.
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(oo) "Stock Acquisition Date" shall mean the earlier of the date of
(i) the public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed under the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such or
(ii) the public disclosure of facts by the Company or an Acquiring Person
indicating that an Acquiring Person has become an Acquiring Person;
provided, however, that if such Person is determined by the Board of
Directors not to have become an Acquiring Person pursuant to Section
1(a)(iii) hereof, then no Stock Acquisition Date shall be deemed to have
occurred.
(pp) "Subsidiary" shall mean, with reference to any Person, any
corporation or other Person of which an amount of voting securities
sufficient to elect at least a majority of the directors or others having
similar authority over such corporation or other Person is beneficially
owned, directly or indirectly, by such first-named Person, or otherwise
controlled by such first-named Person.
(qq) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(rr) "Summary of Rights" shall have the meaning set forth in Section
3(b) of this Agreement.
(ss) "Trading Day" shall have the meaning set forth in Section
11(d)(i) of this Agreement.
(tt) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
(uu) "Vote" shall mean, with respect to any entity, the ability to
cast a vote at a stockholders', members' or comparable meeting of such
entity with respect to the election of directors, managers or other members
of such entity's governing body, or the ability to cast a general
partnership or comparable vote.
(vv) "Voting Power" shall mean, with respect to any entity as at any
date, the aggregate number of Votes outstanding as at such date in respect
of such entity.
(ww) "Voting Securities" shall mean the Common Stock and any other
securities of the Company the holders of which are ordinarily, in the
absence of contingencies, entitled to Vote, even though the right to such
Vote has been suspended by the happening of such a contingency.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and in no event shall
be liable for, the acts or omissions of any such co-Rights Agent.
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Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the Close of Business on the tenth
Business Day after the Stock Acquisition Date, or (ii) the Close of
Business on the tenth Business Day (or such later date as the Board of
Directors shall determine) after the date of the earlier of commencement by
any Person (other than an Exempted Person) of, or the first public
announcement of the intention of any Person (other than an Exempted Person)
to commence, a tender or exchange offer the consummation of which would
result in any Person becoming an Acquiring Person (the earlier of (i) and
(ii) being herein referred to as the "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3(c) of this
Agreement) by the certificates or Book-Entries for the Common Stock
registered in the names of the record holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates or Book-Entries, and the record
holders of the Common Stock represented by such certificates or
Book-Entries shall be the record holders of Rights represented thereby, and
(y) the Rights will be transferable only in connection with the transfer of
the underlying shares of Common Stock (including a transfer to the
Company); provided, however, that if a tender or exchange offer is
terminated prior to the occurrence of a Distribution Date, then no
Distribution Date shall occur as a result of such tender or exchange offer.
The Board of Directors may defer the date set forth in clause (ii) of the
preceding sentence to a specified later date or to an unspecified later
date, each to be determined by action of the Board of Directors. As soon as
practicable after the Distribution Date, the Company shall prepare and
execute and the Rights Agent will countersign and, at the Company's
expense, send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the Close of Business on the Distribution
Date, at the address of such holder shown on the registry books for the
Common Stock of the Company, one or more rights certificates, in
substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to
Section 11(p) hereof, at the 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.
(b) Commencing as promptly as practicable following the Record Date,
the Company will make available a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit A (the "Summary of
Rights"), to any holder of Rights who may so request from time to time
prior to the Expiration Date. With respect to certificates or Book-Entries
for the Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates or
Book-Entries for the Common Stock and the record holders of the Common
Stock shall also be the record holders of the associated Rights. Until the
earlier of the Distribution Date or the Expiration Date, transfer on the
Company's direct registration system of any Common Stock represented by a
Book-Entry or the surrender for transfer of any certificate for Common
Stock shall constitute the surrender for transfer of the Right or Rights
associated with the Common Stock evidenced thereby, whether or not
accompanied by a copy of the Summary of Rights.
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(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
prior to the earlier of the Distribution Date or the Expiration Date, and,
in certain circumstances provided in Section 22 of this Agreement, after
the Distribution Date. Rights issued prior to the Distribution Date will be
evidenced by certificates or Book-Entries for the Common Stock.
Certificates for Common Stock and confirmations evidencing Book-Entries
which become outstanding after the Record Date but prior to the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date
shall bear the following legend (with appropriate modifications in the case
of confirmations):
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Gateway Energy
Corporation (the "Company") and American Stock Transfer and Trust Company,
LLC (the "Rights Agent"), dated as of February 26, 2010 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, 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 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 the Distribution Date or the Expiration Date, the Rights associated
with the Common Stock represented by such certificates shall be evidenced by
such certificates alone and record holders of Common Stock shall also be the
record holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates. In the event the Company
purchases or acquires any Common Stock prior to the Distribution Date, any
Rights associated with such Common Stock shall be deemed canceled and retired so
that the Company shall not be entitled to exercise any Rights associated with
the Common Stock which are no longer outstanding. Notwithstanding this paragraph
(c), the omission of a legend shall not affect the enforceability of any part of
this Agreement or the rights of any holder of the Rights.
Section 4. Form of Rights Certificates.
(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
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not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation
made pursuant thereto, or with any rule or regulation of any stock exchange
or quotation system ("Exchange") on which or with whom the Rights may from
time to time be listed or quoted, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall entitle the record holders thereof to purchase
such number of one ten-thousandths of a share of Preferred Stock as shall
be set forth therein at the price set forth therein (such exercise price
per one ten-thousandth of a share, the "Purchase Price"), but the amount
and the type of 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 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 agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has 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:
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, or may have already
become, null and void in the circumstances specified in Section 7(e)
of such Agreement.
The provisions of Section 7(e) of this Agreement shall be operative whether
or not the foregoing legend is contained in any such Rights Certificate.
Section 5. Countersignature and Registration.
(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
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facsimile signature. The Rights Certificates shall be countersigned by an
authorized signatory of the Rights Agent, either manually or by facsimile
signature, and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certificates, nevertheless, may be countersigned by an
authorized signatory of 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. 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 record holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates. The Company and Rights Agent may deem and
treat the person in whose name any Rights Certificate (or prior to the
Distribution Date, the associated Common Stock Certificate) is recorded on
the books for the registration and transfer of Rights (or, the Common
Stock) as the absolute owner thereof, for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to
the contrary.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 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 record holder to purchase a like number of one
ten-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, 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) to purchase. Any
record holder desiring to transfer, split up, combine or exchange any
Rights Certificate or Certificates shall make such request in writing in a
form acceptable and delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the 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 record 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
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Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment by the record
holder of a Rights Certificate of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
(b) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, upon receipt by the Rights Agent of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of a
Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security to the Rights Agent and the Company reasonably
satisfactory to the Rights Agent 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
record holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the record 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), Section 23(a)
and Section 24(b) 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 office or offices of the Rights
Agent designated for such purpose, along with a signature guarantee and
such other and further documentation as the Rights Agent may reasonably
request, together with payment of the aggregate Purchase Price with respect
to the total number of one ten-thousandths of a share of Preferred Stock
(or, following the occurrence of a Triggering Event, Common Stock or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i)
the Close of Business on the tenth anniversary of the date hereof (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof, or (iv)
the consummation of a transaction contemplated by Section 13(d) hereof (the
earliest of (i), (ii), (iii) and (iv) being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one ten-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be
$1.87, 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
paragraph (c) below.
(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 one ten-thousandth of a share of Preferred Stock
(or other shares, securities, cash or other assets, as the case may be) to
be purchased as set forth below and an amount equal to any applicable
12
transfer tax required to be paid by the holder of such Rights Certificate
in accordance with Section 9 hereof, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the shares of Preferred Stock (or make available, if the
Rights Agent is the transfer agent for such shares) certificates for the
total number of one ten-thousandths of a share of Preferred Stock to be
purchased, and the Company hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Company shall have elected
to deposit the total number of shares of Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one
ten-thousandths of a share of Preferred Stock as are to be purchased (in
which case certificates for the shares of Preferred Stock 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) promptly after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the record holder of
such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof, promptly deliver
such cash, if any, to or upon the order of the record holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by
certified bank check or bank draft payable to the order of the Company. In
the event that the Company is obligated to issue other securities
(including Common Stock) of the Company, 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. The Company reserves the right to require, prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.
(d) In case the record 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
record 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 Affiliate or Associate
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
agreement, arrangement or understanding regarding the transferred Rights or
(B) a transfer which the Board of Directors has determined is part of a
13
plan, 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 record holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but neither the Rights Agent nor the Company shall have any
liability to any record holder of Rights Certificates or other Person as a
result of the Company's failure to make any determinations with respect to
an Acquiring Person or its Affiliates, Associates or transferees hereunder.
The Company may require (or cause the Rights Agent or any transfer agent of
the Company to require) any Person who submits a Rights Certificate (or a
certificate representing shares of Common Stock that evidences, or but for
the provisions of this Section 7(e) would evidence, Rights) for transfer on
the registry books or to exercise the Rights represented thereby to
establish to the satisfaction of the Company in its sole discretion that
such Rights have not become null and void pursuant to the provisions of
this Section 7(e).
(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 record holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless such 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 a
certificate of cancellation to the Company and shall destroy such canceled
Rights Certificates in accordance with applicable law and regulations.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred
Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or
out of its authorized and issued shares held in its treasury), the number
of shares of Preferred Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) that, as provided in this
Agreement, including Section 11(a)(iii) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights.
14
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange or national automated quotation system,
the Company shall use its best efforts to cause, from and after such time
as the Rights become exercisable (but only to the extent that it is
reasonably likely that the Rights will be exercised), all shares reserved
for such issuance to be listed on such exchange or authorized to be quoted
on such quotation system upon official notice of issuance upon such
exercise.
(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, a registration statement under the Act with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as
of which the Rights are no longer exercisable for such securities, and (B)
the Expiration Date. 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 Section 9(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 make a public
announcement, and shall give simultaneous written notice to the Rights
Agent, 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. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification
in such jurisdiction shall not have been obtained, the exercise thereof
shall not be permitted under applicable law or a registration statement
shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one ten-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities, as the case may be) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for
such shares, Common Stock, or other securities, as the case may be (subject
to payment of the Purchase Price), be duly and validly authorized and
issued, and fully paid and nonassessable including, without limitation,
effecting such changes to the accounts of the Company as may be necessary
to accomplish the foregoing purposes.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all U.S. federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
15
Certificates and of any certificates for a number of one ten-thousandths of
a share of Preferred Stock (or Common Stock or other securities, as the
case may be) upon the exercise of the Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights Certificates to a Person
other than, or the issuance or delivery of certificates or depositary
receipts for a number of one ten-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) in respect of
a name other than that of, the record holder of the Rights Certificates
evidencing Rights surrendered for exercise or to issue or deliver any
certificates for a number of one ten-thousandths of a share of Preferred
Stock (or, following the occurrence of a Triggering Event, Common Stock or
other securities, as the case may be) in a name other than that of the
record 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. Preferred Stock Record Date. Each person in whose name any
certificate for a number of one ten-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/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 Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the record
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
16
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of
Preferred Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the record holder of any
Right exercised after such time shall be entitled to receive, upon payment
of the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or capital stock, as the case may be, which, if
such Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company 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) Subject to Section 24 hereof, in the event 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 an Acquiring Person, unless such person becomes an Acquiring Person
pursuant to a transaction set forth in Section 13(a) hereof (such an event
being referred to herein as a "Section 11(a)(ii) Event"), then, promptly
following the occurrence of such Section 11(a)(ii) Event, proper provision
shall be made by the Company 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 one
ten-thousandths of a share of Preferred Stock, such number of shares of
Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
ten-thousandths of a share of Preferred Stock for which a Right was
exercisable (or, if the Distribution Date shall not have occurred prior to
the date of such Section 11(a)(ii) Event, the number of one ten-thousandths
of a share of Preferred Stock for which a Right would have been exercisable
if the Distribution Date had occurred on the Business Day immediately
preceding the date of such Section 11(a)(ii) Event) 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 share of Common Stock on the date of such first
occurrence (such number of shares being referred to as the "Adjustment
Shares").
(iii) Subject to such limitations existing as of the date hereof as
are necessary to prevent a default under any agreement to which the Company
is a party, in the event that the number of shares of Common Stock which
17
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, acting by resolution of its Board of Directors shall
(A) determine the excess of (x) the value of the Adjustment Shares issuable
upon the exercise of a Right determined as set forth below (the "Current
Value"), over (y) the Purchase Price (such excess, the "Spread"), and (B)
with respect to each Right (subject to Section 7(e) hereof), make adequate
provision to substitute for the Adjustment Shares, upon the exercise of a
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares or units
of shares of preferred stock, such as the Preferred Stock, which the Board
of Directors has deemed to have essentially the same value or economic
rights as shares of Common Stock (such shares of preferred stock or other
equity securities being referred to as "Common Stock 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 (less
the amount of any reduction in the Purchase Price), where such aggregate
value has been determined by the Board of Directors based upon the advice
of an investment banking firm selected by the Board of Directors; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the date on which the Company's right of redemption pursuant to
Section 23(a) expires (such date 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 (other than an amount equal to the par value of the
shares of Common Stock to be issued), shares of Common Stock (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 determines
in good faith that it is likely that sufficient additional shares of Common
Stock 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 stockholder approval for
the authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the "Substitution Period"). To the
extent that action is to be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights, and (2) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
such stockholder approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall make a public announcement and shall
give simultaneous written notice to the Rights Agent stating that the
18
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.
For purposes of this Section 11(a)(iii), the Current Value of each
Adjustment Share shall be the Current Market Price per share of the Common
Stock on the Section 11(a)(ii) Trigger Date, and the per share or per unit
value of any Common Stock Equivalent shall be deemed to equal the Current
Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all record holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as the shares of
Preferred Stock ("equivalent preferred stock")) or securities convertible
into Preferred Stock or equivalent preferred stock at a price per share of
Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock
or equivalent preferred stock) less than the Current Market Price per share
of Preferred Stock on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock and
equivalent preferred stock outstanding on such record date, plus the number
of shares of Preferred Stock and equivalent preferred stock which the
aggregate offering price of the total number of shares of Preferred Stock
and/or equivalent preferred stock 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 shares of Preferred Stock and equivalent preferred
stock outstanding on such record date, plus the number of additional shares
of Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid 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, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent and the holders of the Rights. Shares of Preferred
Stock and equivalent preferred stock owned by or held for the account of
the Company shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not
so issued, the Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all record holders of Preferred Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect
19
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 share of Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and
the holders of the Rights) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of
which shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall 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 share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common
Stock for the thirty (30) consecutive Trading Days immediately prior
to such date, and for purposes of computations made pursuant to
Section 11(a)(iii) hereof, the Current Market Price per share of
Common Stock on any date shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided,
however, that in the event that the Current Market Price per share of
the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend or
ex-distribution date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite thirty (30)
Trading Day or ten (10) Trading Day period, as set forth above, then,
and in each such case, the Current Market Price shall be properly
adjusted to reflect the current market price per share equivalent of
Common Stock. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange,
the last sale price, regular way, or, if such last sale price is not
reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASDAQ Global Market or
such other system then in use, or, if on any such date the shares of
20
Common Stock are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market
maker making a market in the Common Stock selected by the Board of
Directors. If on any such date no market maker is making a market in
the Common Stock, the fair value of such shares on such date as
determined in good faith by the Board of Directors shall be used. The
term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, Current Market Price per
share shall mean the fair value per share as determined in good faith
by the Board of Directors, 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 share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last sentence thereof). If the
Current Market Price per share of Preferred Stock cannot be determined
in the manner provided above or if the Preferred Stock is not publicly
held or listed or traded in a manner described in clause (i) of this
Section 11(d), the Current Market Price per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 10,000 (as such
number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current
Market Price per share of the Common Stock. If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded,
Current Market Price per share of the Preferred Stock shall mean the
fair value per share as determined in good faith by the Board of
Directors, 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 one
ten-thousandth of a share of Preferred Stock shall be equal to the
Current Market Price of one share of Preferred Stock divided by
10,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest hundred-thousandth
of a share of Common Stock or other share or one-millionth of a share of
Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section 11 shall be
made no later than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment, or (ii) the Expiration Date.
21
(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
Stock, 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 Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one ten-thousandths
of a share of Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided
herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of one ten-thousandths of a share of Preferred Stock (calculated to the
nearest one- millionth) obtained by (i) multiplying (x) the number of one
ten-thousandths of a share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price, and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one ten-thousandths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one ten-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one-millionth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price
in effect immediately after adjustment of the Purchase Price. The Company
shall make a public announcement and shall give simultaneous written notice
to the Rights Agent of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time,
the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of 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
22
to such holders 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 by one ten-thousandths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
ten-thousandths of a share and the number of one ten-thousandths of a share
which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of one
ten-thousandths of a share of Preferred Stock, or the par value, if any, of
any shares of any other capital stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue such number of fully paid and non-assessable one ten-thousandths of a
share of Preferred Stock (or such other shares) at such adjusted Purchase
Price. If upon any exercise of the Rights, a holder is to receive a
combination of Common Stock and Common Stock Equivalents, a portion of the
consideration paid upon such exercise, equal to at least the then par value
of a share of Common Stock, shall be allocated as the payment for each
share of Common Stock so received.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer, until the occurrence of
such event, the issuance to the record holder of any Right exercised after
such record date the number of one ten-thousandths of a share of Preferred
Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of one
ten-thousandths of a share of Preferred Stock, and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such
additional shares (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
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any
shares of Preferred Stock at less than the Current Market Price thereof,
23
(iii) issuance wholly for cash of shares of Preferred Stock or securities
which by their terms are convertible into or exchangeable for shares of
Preferred Stock, (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 Stock shall not be taxable to such holders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been
redeemed pursuant to Section 23 hereof or exchanged pursuant to Section 24
hereof, (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 certificate of incorporation or bylaw provisions or any
rights, warrants or other instruments or securities outstanding or
agreements in effect or other actions taken which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of
Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
The Company shall not consummate any such consolidation, merger, sale or
transfer unless prior thereto the Company and such other person shall have
executed and delivered to the Rights Agent a supplemental agreement
evidencing compliance with this Section 11(n).
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, Section 24 or Section
27 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 or pay any
dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide or split the outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or consolidate the
outstanding shares of Common Stock into a smaller number of shares or
effect a reverse split of the outstanding shares of Common Stock, then, and
in each such event, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior
to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be the total
24
number of shares of Common Stock outstanding immediately prior to the
occurrence of the event and the denominator of which shall be the total
number of shares of Common Stock outstanding immediately following the
occurrence of such event.
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 shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each record holder of a Rights Certificate (or, if
prior to the Distribution Date, to each record holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
such 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 (which for
purposes of this Section 13(a) only shall also include the date of the
first public announcement or public disclosure (including, without
limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) that 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), together with
any of such Person's Affiliates and Associates, has become the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding
pursuant to a Qualifying Offer), 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 shares of Common
Stock 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, upon the first occurrence of such event
(except as may be contemplated by Section 13(d) hereof), proper provision
shall be made so that: (i) each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, in accordance with the
terms of this Agreement, such number of validly authorized and issued,
fully paid, non-assessable and freely tradeable shares of Common Stock of
25
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 one ten-thousandths of a share of
Preferred Stock 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 one ten-thousandths of a share 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 share of the Common Stock of such Principal Party on
the date of consummation, provided that the Purchase Price and the number
of shares of Common Stock of such Principal Party issuable upon exercise of
each Right shall be further adjusted as provided in Section 11(f) of this
Agreement to reflect any events occurring in respect of such Principal
Party after the date of such Section 13 Event; (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 shares of its Common Stock) 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 shares of Common Stock 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 Section 13(a): (A) the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, or if there is
more than one such issuer, the issuer of the shares of Common Stock
which has the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (1) the Person that is the
other party to the merger, if such Person survives said merger, or, if
there is more than one such Person, the Person the shares of Common
Stock of which has the greatest aggregate market value of shares
outstanding or (2) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger
(including the Company if it survives) or (3) the Person resulting
from the consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
26
transferred pursuant to such transaction or transactions or, if each
Person that is a party to such transaction or transactions receives
the same portion of the assets or earning power so transferred or if
the Person receiving the greatest portion of the assets or earning
power cannot be determined, whichever of such Persons as is the issuer
of the shares of Common Stock having the greatest aggregate market
value of shares outstanding;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value of shares
outstanding; and (3) in case such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in (1) and (2) above shall
apply to each of the chains of ownership having an interest in such joint
venture as if such party were a "Subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party covenants and agrees that it
will cause to be reserved and kept available out of its authorized and
unissued shares of Common Stock or out of its authorized and issued shares
held in its treasury, the number of shares of its Common Stock that will be
sufficient to permit the exercise in full of all outstanding Rights under
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 confirming that the requirements set forth in paragraphs (a) and
(b) of this Section 13 shall be promptly performed in accordance with their
terms and further providing that, as soon as practicable after executing
such agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date and similarly comply with applicable state securities
laws;
(ii) use its best efforts, if the shares of Common Stock of the
Principal Party shall be listed or admitted to trading on an Exchange
to list or admit to trading (or continue the listing of) the Rights
and the securities purchasable upon exercise of the Rights on such an
Exchange and, if the shares of Common Stock of the Principal Party
shall not be listed or admitted to trading on an Exchange, to cause
the Rights and the securities purchasable upon exercise of the Rights
to be reported by such other system then in use;
27
(iii) deliver to record holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the shares of Common Stock of the Principal Party
subject to purchase upon exercise of outstanding Rights.
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 which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a). If, for any reason, the
Rights cannot be exercised for Common Stock of the Company or such Principal
Party, then a holder of Rights will have the right to exchange such Rights for
cash from the Company or such Principal Party in an amount equal to the number
of shares of such Common Stock such holder would otherwise be entitled to
purchase times 50% of the then Current Market Price, as determined pursuant to
Section 11(d)(i) hereof, of such stock of such Principal Party or the Company.
If, for any reason, including, without limitation, such Principal Party is an
individual, private partnership or private company, the foregoing formulation
cannot be applied to determine the cash amount into which the Rights are
exchangeable, then the Board of Directors, based upon advice from one or more
investment banking firms, shall determine such amount reasonably and with utmost
good faith to the holders of Rights. Any such determination shall be binding and
final.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to 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 shares of Common Stock
pursuant to a Qualifying Offer (or a wholly owned Subsidiary of any such
Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid
to all record holders of shares of Common Stock whose shares were purchased
pursuant to such Qualifying Offer, and (iii) the form of consideration
being offered to the remaining record holders of shares of Common Stock
pursuant to such transaction is the same as the form of consideration paid
pursuant to such Qualifying Offer. Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.
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 which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the record 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
28
of the current market value of a whole Right. For purposes of this Section
14(a), the current market value of a whole Right shall be the closing price
of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable. The closing
price 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 New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which the 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 sale price or, if such last sale price is not
reported, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the NASDAQ Global Market or such
other system then in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors. 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 shall be
used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than, except as provided in Section 7(c), fractions
which are integral multiples of one ten-thousandth of a share of Preferred
Stock) upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions which
are integral multiples of one ten-thousandth of a share of Preferred
Stock). Fractions of shares of Preferred Stock in integral multiples of one
ten-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such
depositary receipts shall have the rights, privileges and preferences to
which they are entitled as beneficial owners of the shares of Preferred
Stock represented by such depositary receipts. In lieu of fractional shares
of Preferred Stock that are not integral multiples of one ten-thousandth of
a share of Preferred Stock, the Company may pay to the record 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 ten-thousandth of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of one ten-thousandth of a
share of Preferred Stock shall be one ten-thousandth of the closing price
of a share of Preferred Stock (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 shares of Common Stock, exercise the
Rights or distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock the Company may
pay to the record holders of Rights Certificates at the time such Rights
are exercised as herein provided an amount in cash equal to the same
29
fraction of the current market value of one share of Common Stock. For
purposes of this Section 14(c), the current market value of one share of
Common Stock shall be determined in a manner set forth in Section 11(d)(i)
hereof for the Trading Day immediately prior to the date of such exercise.
(d) The record holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this
Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, except the rights of action given to the Rights Agent, are vested in
the respective record holders of the Rights Certificates (and, prior to the
Distribution Date, the record holders of the Common Stock); and any record
holder of any Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the record holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), 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 record holders of Rights, it is specifically
acknowledged that such holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and shall be entitled to specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement. After a Triggering Event, holders of Rights (other than an Acquiring
Person or such Person's Affiliates and Associates) shall be entitled to recover
the reasonable costs and expenses, including attorneys' fees, incurred by them
to enforce the provisions of this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be evidenced by
the Book-Entries representing, or the certificates for, Common Stock
registered in the name of the holders of Common Stock, which Book-Entries
representing, or the certificates for, Common Stock shall also constitute
certificates for Rights, and not by separate Rights Certificates, and each
Right shall be transferable only simultaneously and together with the
transfer of shares of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the transfer books of the Rights Agent if surrendered
at the 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 Book-Entry
representing, or certificate for, Common Stock) is registered on the
transfer books of the Rights Agent as the absolute owner thereof and of the
30
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the penultimate 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 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, judgment, decree or ruling (whether
interlocutory or final) issued by a court 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 obligations;
provided, however, the Company must use its reasonable efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as
possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
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 one ten-thousandths of
a share of Preferred Stock or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent such compensation as
shall be agreed to in writing between the Company and the Rights Agent 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 including
its members, directors, officers, employees, shareholders and agents, for,
and to hold it harmless against, any loss, liability, or expense, incurred
without gross 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, without limitation, the costs and expenses of defending against
any claim of liability in the premises (including reasonable counsel fees
and expenses). The indemnity provided for herein shall survive the
expiration of the Rights and the termination of this Agreement.
31
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to
be signed, executed, and where necessary, verified, guaranteed or
acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stockholder services business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided, that such
Person would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of
the Rights Certificates shall have been countersigned but not delivered;
any such successor Rights Agent may adopt the countersignature of 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 in the name of the successor Rights
Agent; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
specific duties and obligations expressly imposed by this Agreement, and no
implied duties or obligations shall be read into this Agreement against the
Rights Agent, upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
32
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and
the determination of "Current Market Price") be proved or established by
the Company prior to taking or omitting any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by 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 omitted in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates 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
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 actual notice of any such adjustment); nor shall
it by any act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any shares of Common Stock,
Preferred Stock or other securities to be issued pursuant to this Agreement
or any Rights Certificate or as to whether any shares of Common Stock,
Preferred Stock or other securities, will when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or 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
33
instructions in connection with its duties, and it shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance
with instructions of any such officer or for any delay in acting while
waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other 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, that reasonable
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any 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.
(l) The Rights Agent shall have no responsibility to the Company, any
holders of Rights or any holders of shares of Common Stock for interest or
earnings on any moneys held by the Rights Agent pursuant to this Agreement.
(m) The Rights Agent shall not be required to take notice or be deemed
to have notice of any event or condition hereunder, including, but not
limited to, a Distribution Date, a Redemption Date, any adjustment of the
Purchase Price of the Common Stock, and adjustment to the Purchase Price of
the Preferred Stock, the existence of an Acquiring Person or any other
event or condition that may require action by the Rights Agent, unless the
Rights Agent shall be specifically notified in writing of such event or
condition by the Company, and all notices or other instruments required by
this Agreement to be delivered to the Rights Agent must, in order to be
effective, be received by the Rights Agent as specified in Section 26
hereof, and in the absence of such notice so delivered, the Rights Agent
may conclusively assume no such event or condition exists.
34
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' notice in writing, mailed to the Company and shall
provide notice thereof to each transfer agent of the Common Stock or Preferred
Stock by registered or certified mail, and to the holders of the Rights
Certificates in accordance with Section 26 hereof, or if prior to the
Distribution Date, to the holders of Rights through any filing made by the
Company pursuant to the Exchange Act. In the event the transfer agency
relationship in effect between the Company and the Rights Agent terminates, the
Rights Agent will be deemed to have resigned automatically and be discharged
from its duties under this Agreement as of the effective date of such
termination, and the Company shall be responsible for sending any required
notice. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and shall provide notice thereof to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates in accordance with
Section 26 hereof, or, if prior to the Distribution Date, to the holders of
Rights through any filing made by the Company pursuant tot he Exchange Act. 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 record holder of a Rights Certificate (who shall, with such notice,
submit his Rights Certificate for inspection by the Company), then any record
holder of any Rights Certificate or the Rights Agent 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
corporation or banking association organized and doing business under the laws
of the United States or of the State of Missouri or the State of New York (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of Missouri or the State of
New York), in good standing, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus, along with its Affiliates, of at least
$50,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed and the rights and
obligations of the predecessor shall cease and terminate, 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
Stock and the Preferred Stock, and mail a notice thereof in writing to the
holders of the Rights Certificates in accordance with Section 26 hereof, or, if
prior to the Distribution Date, give notice to the holders of Rights through any
filing made by the Company pursuant to the Exchange Act. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
35
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
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificates shall be issued
and this sentence shall be null and void ab initio 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, at its option, at any time prior to the
earlier of (i) the Close of Business on the tenth Business Day following
the Stock Acquisition Date, or (ii) the time at which the Rights expire
pursuant to this Agreement, may redeem all but not less than all the then
outstanding Rights at a redemption price of $.001 per Right, as such amount
may be adjusted pursuant hereto (such redemption price being hereinafter
referred to as the "Redemption Price"). 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. The Company may,
at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the Current Market Price of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the
Board of Directors. The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board of Directors
in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(a) (or at such later time
as the Board of Directors may establish for the effectiveness of such
redemption), notice of which shall have been provided to 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 by the Board of Directors ordering the
redemption of the Rights becoming effective, the Company shall provide
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights in accordance with Section 26 (provided that the failure
to provide, or any defect in, such notice shall not affect the validity of
such redemption). Any notice which is provided in the manner herein
provided shall be deemed given, whether or not the record holder receives
the notice. Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made.
36
Section 24. Exchange.
(a) The Board of Directors may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the "Exchange Ratio"),
provided that the shares of Common Stock so exchanged shall be of the same
class or series which the holders of such Rights would have been entitled
to receive upon the exercise thereof. Notwithstanding the foregoing, the
Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than an Exempted Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of
Voting Securities of the Company then outstanding representing 50% or more
of the Voting Power of the Company.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to Section 24(a) and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be
to receive that number of shares of Common Stock equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio, provided
that the shares of Common Stock so exchanged shall be of the same class or
series which the holder of such Rights would have been entitled to receive
upon the exercise thereof. The Company shall promptly make a public
announcement of any such exchange; provided, however, that the failure to
make, or any defect in, such public announcement shall not affect the
validity of such exchange. Promptly after the action of the Board of
Directors ordering the exchange of the Rights becoming effective, the
Company shall provide notice of such exchange to the Rights Agent and all
of the holders of the then outstanding Rights in accordance with Section 25
hereof (provided that the failure to give, or any defect in, such notice
shall not affect the validity of such exchange). Any notice which is mailed
in the manner provided in Section 26 hereof shall be deemed given, whether
or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for
Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be
effected based on the number of Rights (other than Rights which have become
null and void pursuant to the provisions of Section 7(e) hereof) held by
each holder of Rights.
(c) In the event that there shall not be authorized and unissued
shares of the applicable class or series of Common Stock and/or authorized
and issued shares of the applicable class or series of Common Stock held in
its treasury sufficient to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take all such action as
may be necessary to authorize additional shares of the applicable class or
37
series of Common Stock for issuance upon exchange of the Rights. In the
event the Company shall, after good faith effort, be unable to take all
such action as may be necessary to authorize such additional shares of the
applicable class or series of Common Stock, the Company shall substitute,
for each share of such class or series of Common Stock that would otherwise
be issuable upon exchange of a Right, a number of shares of the applicable
series of Preferred Stock or fraction thereof (subject to Section 14(b)
hereof) such that the Current Market Price per share of the applicable
series of Preferred Stock multiplied by such number or fraction is equal to
the Current Market Price per share of such class or series of Common Stock
as of the date of issuance of such shares of such series of Preferred Stock
or fraction thereof.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the Right Certificates with
regard to which such fractional shares of Common Stock would otherwise be
issuable an amount in cash equal to the same fraction of the Current Market
Price per share of the applicable class or series of Common Stock as of the
Trading Day immediately prior to the record date of exchange pursuant to
this Section 24.
Section 25. 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 Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend
out of earnings or retained earnings of the Company), or (ii) to offer to
the holders of Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock),
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 and to the Rights
Agent, to the extent feasible and in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the
date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if
any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
38
Stock for purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
(b) In the event that a Section 11(a)(ii) Event shall occur, then in
any such case (i) the Company shall as soon as practicable thereafter give
to the Rights Agent and to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii)
hereof, and (ii) all references in the preceding paragraph to Preferred
Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities of the Company.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by overnight
delivery or first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Rights Agent) as follows:
Gateway Energy Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: President
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 overnight delivery or first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company, LLC
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx/Xxxxxx Xxxxx
with a copy to:
American Stock Transfer & Trust Company, LLC
0000 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Legal 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
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Rights Agent (or, if prior to
the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock of the Company).
Section 27. Supplements and Amendments. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement without the approval of any holders of the Rights. At any time when
the Rights are no longer redeemable, except as provided in the penultimate
39
sentence of this Section 27, 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 to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder, or (iv) change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable; provided that no
such supplement or amendment adversely affects the interests of the holders of
Rights as such (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person) and no such amendment may cause the Rights again to become
redeemable or cause the Agreement again to become amendable other than in
accordance with this sentence. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment; provided, however, that the Rights
Agent may, but shall not be obligated to, enter into any such supplement or
amendment which adversely affects the Rights Agent's own rights, duties or
immunities under this Agreement.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, Etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
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, except as otherwise specifically
provided for herein, shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights Certificates (and, prior to the
Distribution Date, record holders of the Common Stock) and all other parties,
and (y) not subject the Board of Directors to any liability to the holders of
the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
record holders of the Rights Certificates (and, prior to the Distribution Date,
record holders of the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the record holders of the
Rights Certificates (and, prior to the Distribution Date, record holders of the
Common Stock).
40
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board 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 redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth Business Day (or such longer period of time as permitted pursuant to
Section 27 of this Agreement) following the date of such determination by the
Board of Directors. Without limiting the foregoing, if any provision requiring
that a determination be made by less than the entire Board of Directors (or at a
time or with the concurrence of a group of directors consisting of less than the
entire Board of Directors) is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then be
made by the Board of Directors in accordance with applicable law and the
Company's Certificate of Incorporation and Bylaws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 35. Force Majeure. Notwithstanding anything to the contrary
contained herein, the Rights Agent shall not be liable for any delays or
failures in performance resulting from acts beyond its reasonable control
including, without limitation, acts of God, terrorist acts, shortage of supply,
breakdowns or malfunctions, interruptions or malfunctions of computer
facilities, or loss of data due to power failures or mechanical difficulties
with information storage or retrieval systems, labor difficulties, war or civil
unrest.
41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
GATEWAY ENERGY CORPORATION
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Xxxxxx Xxxxxx
President and
Chief Executive Officer
AMERICAN STOCK TRANSFER AND TRUST
COMPANY, LLC, as Rights Agent
By: /s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx
Vice President
42
EXHIBIT A
---------
SUMMARY OF RIGHTS
-----------------
Declaration of Rights
On February 26, 2010, the Board of Directors of Gateway Energy Corporation
(the "Company") declared a dividend distribution of one right (a "Right") for
each outstanding share of the Company's common stock, par value $0.25 per share
(the "Common Stock"), payable to stockholders of record at the close of business
on March 10, 2010 (the "Record Date") and with respect to the Common Stock
issued thereafter until the Distribution Date (defined below) and, in certain
circumstances, with respect to the Common Stock issued after the Distribution
Date. Except as set forth below, each Right, when it becomes exercisable,
entitles the registered holder to purchase from the Company a unit consisting
initially of one ten-thousandth of a share (a "Unit") of Series A Preferred
Stock, par value $1.00 per share (the "Preferred Stock"), of the Company, at a
purchase price of $1.87 per Unit, subject to adjustment (the "Purchase Price").
The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement"), dated as of February 26, 2010, between the Company and
American Stock Transfer and Trust Company, LLC, as Rights Agent.
Rights will also be issued with respect to shares of Common Stock issued by
the Company or transferred from the Company's treasury after February 26, 2010
and prior to the Distribution Date, and, under certain circumstances, Rights
will be issued with respect to shares of Common Stock issued or transferred by
the Company after the Distribution Date.
Rights Initially Attached to and Trade with Common Stock
Until the earlier of the Distribution Date or the date the Rights are
redeemed or expire:
(1) the Rights will be evidenced by Common Stock certificates and no
separate Rights Certificates will be distributed,
(2) the Rights will be transferable only in connection with the transfer of
the underlying shares of Common Stock,
(3) the surrender for transfer of any Common Stock certificate (with or
without a copy of a Summary of Rights attached thereto) will also constitute the
transfer of the Rights associated with the shares of Common Stock represented by
such certificate, and
(4) new Common Stock certificates issued after March 10, 2010 will contain
a notation incorporating the Rights Agreement by reference. Stockholders will
not be required to take any action in connection with the payment of the Rights
dividend on March 10, 2010.
43
When Rights Separate from Common Stock and Become Exercisable
The Rights will separate from the Common Stock and become exercisable on
the Distribution Date. As soon as practicable after the Distribution Date,
Rights Certificates will be mailed to holders of record of the Common Stock as
of the close of business on the Distribution Date, and thereafter the separate
Rights Certificates will represent the Rights.
The "Distribution Date" will occur upon the earlier of (1) ten business
days after the Stock Acquisition Date (as defined below) or (2) ten business
days (or such later date as the Board shall determine) following the
commencement of, or announcement of an intention to make, a tender or exchange
offer, the consummation of which would result in a Person becoming an Acquiring
Person (as defined below).
The "Stock Acquisition Date" means the earlier of (i) the date of the first
public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such or (ii) the public disclosure of facts by the company or
an Acquiring Person that such Person has become an Acquiring Person.
Under the Rights Agreement, an "Acquiring Person" is collectively a person,
together with all Affiliates (defined below) and Associates (defined below) of
such person who or which has acquired beneficial ownership of 15% or more of the
outstanding shares of Common Stock except pursuant to a Qualifying Offer
(defined below). The term "Acquiring Person" excludes (i) the Company, (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the Company or any
subsidiary of the Company, (iv) any person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, and
(v) any person, together with such person's Affiliates and Associates, who or
which becomes a beneficial owner of 15% or more of the outstanding shares of
Common Stock as a result of acquiring such shares directly from the Company.
An "Affiliate" of a person is a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the person specified. An "Associate" of a person is (i) any
corporation or organization (other than the Company or any majority-owned
subsidiary of the Company) of which such person is an officer or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity securities, (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of such
person, or any relative of such spouse, who has the same home as such person or
who is a director or officer of such person or any of its parents or
subsidiaries.
No person shall become an "Acquiring Person" either:
(1) as the result of an acquisition of Common Stock by the Company which,
by reducing the number of such shares then outstanding, increases the
proportionate number of shares beneficially owned by such person, together with
all Affiliates and Associates of such person, unless such person, after such
44
share purchases by the Company, becomes the beneficial owner of additional
shares of Common Stock constituting 0.5% or more of the then outstanding shares
of Common Stock (other than pursuant to a Qualifying Offer);
(2) the Board of Directors of the Company determines in good faith that a
person who would otherwise be an "Acquiring Person" has become such
inadvertently, and such person divests as promptly as practicable a sufficient
number of shares of Common Stock so that such person would no longer be an
Acquiring Person; or
(3) as a result of the beneficial ownership of 15% or more of the Common
Stock as of the date of this Agreement provided such person does not thereafter
become the beneficial owner of additional shares of Common Stock constituting
0.5% or more of the then outstanding shares of Common Stock (other than pursuant
to a Qualifying Offer).
Exercising Rights
In the event that, at any time following the Distribution Date, a person
becomes an Acquiring Person, except pursuant to an offer for all outstanding
shares of Common Stock which a majority of the directors determine, after
receiving advice from one or more investment banking firms, to be fair to the
stockholders and otherwise in the best interests of the Company and its
stockholders (other than the Acquiring Person on whose behalf the offer is being
made) (a "Qualifying Offer"), each holder of a Right will thereafter have the
right to receive, upon exercise of the Right, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the Purchase Price of the Right. Notwithstanding any of the
foregoing, following the occurrence of the event set forth in this paragraph,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person (or any Affiliate or
Associate of an Acquiring Person) will be null and void and nontransferable and
any holder of any such Right (including any purported transferee or subsequent
holder) will be unable to exercise or transfer any such right. However, at the
option of the Board of Directors of the Company, during such time as an
Acquiring Person Beneficially Owns an amount of stock less than 50% of the
outstanding Common Stock, the Company may exchange, in whole or in part, each
Right of each holder (other than the Acquiring Person or the Acquiring Person's
Affiliate or Associates or their subsequent holders) for one share of Common
Stock. Notwithstanding any of the foregoing, following the occurrence of the
event set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person (or any Affiliate or Associate of an Acquiring Person) will be
null and void and nontransferable and any holder of any such Right (including
any purported transferee or subsequent holder) will be unable to exercise or
transfer any such right.
Adjustment of Rights upon Occurrence of a Triggering Event
In the event that a Person becomes an Acquiring Person, each holder of a
Right (except the Acquiring Person and certain other persons as described below)
will no longer have the right to purchase Units of Preferred Stock, but instead
45
will thereafter have the right to receive, upon exercise of the Right, shares of
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a Current Market Price (as defined in the Rights
Agreement) equal to two times the then current exercise price of the Right. For
example, at a Purchase Price of $1.87 per Right, each Right not owned by an
Acquiring Person following an event set forth in the preceding paragraph would
entitle its holder to purchase $3.74 worth of Common Stock (or other
consideration, as noted above) for $1.87. Assuming that the Common Stock had a
per share value of $0.41 at such time, the holder of each valid Right would be
entitled to purchase 9.1 shares of Common Stock for $1.87. Once a Person becomes
an Acquiring Person, all Rights that are, or under certain circumstances were,
beneficially owned by such Acquiring Person (or certain related parties) will be
null and void.
In the event that, at any time following the date on which there has been
public announcement or disclosure that a person has become an Acquiring Person
or of facts indicating that such person has become an Acquiring Person (the
"Stock Acquisition Date"), (i) the Company merges or consolidates with another
corporation or association in a transaction in which the holders of all of the
outstanding shares of Common Stock immediately prior to the consummation of the
transaction are not the holders of all of the surviving corporation's voting
power, or (ii) more than 50% of the Company's assets or earning power is sold or
transferred, in either case with or to an Acquiring Person or any Affiliate or
Associate or any other person in which such Acquiring Person, Affiliate or
Associate has an interest or any person acting on behalf of or in concert with
such Acquiring Person, Affiliate or Associate, or, if in such transaction all
holders of Common Stock are not treated alike, any other person, then each
holder of a Right (except Rights which previously have been voided as set forth
above), shall thereafter have the right to receive upon exercise of the Right,
common stock of the acquiring company having a value equal to two times the
Purchase Price of the Right. The events set forth in this paragraph and in the
preceding paragraph are referred to as the "Triggering Events."
Exchange of Rights
At any time after any Person becomes an Acquiring Person, the Board of
Directors of the Company may, at its option, exchange the Rights (except Rights
which previously have been voided as set forth above), in whole or in part, at
an exchange ratio of one share of Common Stock for each Right, subject to
adjustment for any stock split, stock dividend or similar transaction occurring
after February 26, 2010. The Board of Directors may not cause the exchange of
Rights at any time after any Person, together with such person's Affiliates and
Associates, becomes the beneficial owner of 50% or more of the shares of Common
Stock then outstanding, with certain exceptions.
Redemption of Rights
At any time prior to the close of business on the tenth business day after
the Stock Acquisition Date, the Company may order that all Rights be redeemed at
a price of $.001 per Right (payable in cash, Common Stock or other consideration
deemed appropriate by the Board of Directors), subject to adjustment for any
46
stock split, stock dividend or similar transaction occurring after March 10,
2010 (the "Redemption Price"). Immediately upon the effectiveness of the action
of the Board of Directors ordering redemption of the Rights, the right to
exercise the Rights will terminate and the holders of the Rights will only be
entitled to receive the Redemption Price for each Right so held.
Amendment of Rights
Any of the provisions of the Rights Agreement may be amended by resolution
of the Company's Board of Directors so long as the Rights are redeemable prior
to the Distribution Date. After the Rights are no longer redeemable, the
provisions of the Rights Agreement, other than those provisions relating to the
principal economic terms of the Rights, may be amended from time to time by
resolution of the Company's Board of Directors in order to cure any ambiguity,
to make changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person or its affiliates or
associates), or to shorten or lengthen any time period under the Rights
Agreement.
Terms of Preferred Stock
Each Unit of Preferred Stock (consisting of one ten-thousandth of a share
of Preferred Stock) that is issuable upon exercise of the Rights after the
Distribution Date and prior to the occurrence of a Triggering Event is intended
to have approximately the same economic rights and voting power as a share of
Common Stock, and the value of a Unit of Preferred Stock should approximate the
value of one share of Common Stock. Each share of Preferred Stock will be
entitled to dividend payments equal to 10,000 times the other cash dividends
plus 1000 times the aggregate per share amount of all non-cash dividends (other
than a dividend payable in Common Stock) declared per share of Common Stock. In
the event of liquidation, the holders of shares of Preferred Stock will be
entitled to the greater of a minimum preferential liquidation payment of $1,000
per share. Each share of Preferred Stock will have 10,000 votes, voting together
with, and on the same matters as, the Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are exchanged
for or changed into other stock, securities, cash and/or other property, each
share of Preferred Stock will be entitled to receive 10,000 times the amount
received per share of Common Stock. These rights are protected by customary
anti-dilution provisions. Shares of Preferred Stock are not redeemable. Pursuant
to the Rights Agreement, the Company reserves the right to require, prior to the
occurrence of a Triggering Event, that upon any exercise of Rights a number of
Rights be exercised so that only whole shares of Preferred Stock will be issued.
Adjustment of Rights and Securities Upon Certain Events
The Purchase Price payable, and the number of Units of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (1) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, or (2) upon the distribution to holders of the Preferred Stock of certain
47
rights, options, warrants, evidences of indebtedness or assets (excluding
regular quarterly cash dividends). No adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price.
The number of outstanding Rights attached to each share of Common Stock and
the number of Units of Preferred Stock purchasable upon exercise of a Right are
also subject to adjustment in the event of a stock split of the Common Stock or
a stock dividend on the Common Stock payable in shares of Common Stock or a
subdivision or combination of the shares of Common Stock, occurring prior to the
Distribution Date.
The Company is not required to issue fractional Units; in lieu thereof, the
Company may pay cash for such fractional Units based on the market price of the
Preferred Stock on the last trading date prior to the date of issuance.
Rights Holder Not a Stockholder
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. The holders of Rights will be able to vote and
receive dividends on the Common Stock that they hold.
Tax Consequences
While the current distribution of the Rights will not be taxable to
stockholders or to the Company, stockholders might, depending upon the
circumstances, realize taxable income in the event that the Rights become
severable from the Common Stock and will likely realize taxable income in the
event such Rights become exercisable for Common Stock of the acquiring company
as set forth above or are exchanged as provided above.
Expiration of Rights
The Rights will expire at the close of business on February 26, 2020,
unless the Company redeems or exchanges the Rights prior to such date, in each
case as described above.
Number of Rights to be Outstanding
As of February 26, 2010, approximately 19,402,853 shares of Common Stock
were issued and outstanding. Each share of Common Stock outstanding at the close
of business on March 10, 2010 will receive one Right. Rights will also be issued
with respect to shares of Common Stock issued or transferred by the Company
after March 10, 2010 and prior to the Distribution Date, and, under certain
circumstances, Rights will be issued with respect to shares of Common Stock
issued or transferred by the Company after the Distribution Date.
48
Rights Agreement
This summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement and the
exhibits thereto.
49
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _______ Rights
NOT EXERCISABLE AFTER FEBRUARY 26, 2020 OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT
$.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) 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.]*
RIGHTS CERTIFICATE
GATEWAY ENERGY CORPORATION
This certifies that _________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of February 26, 2010 (the "Rights
Agreement"), between Gateway Energy Corporation, a Delaware corporation (the
"Company"), and American Stock Transfer and Trust Company, LLC (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and at any time prior to 5:00
p.m. (New York City time) on February 26, 2020 at the office or offices of the
Rights Agent designated for such purpose, or its successors as Rights Agent, one
ten-thousandth of a fully paid, nonassessable share of Series A Preferred Stock
(the "Preferred Stock") of the Company, at a purchase price of $1.87 per one
ten-thousandth of a share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certification duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of one ten-thousandths of a share of
Preferred Stock which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of ________, 20___, based on the Preferred Stock as constituted at such
date. As provided in the Rights Agreement, the Purchase Price and the number and
* The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.
50
kind of shares of Preferred Stock or other securities of the Company or any
other Person (as such term is defined in the Rights Agreement), which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events
including a Triggering Event (as such term is defined in the Rights Agreement).
Upon the occurrence of a 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 an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Affiliate or Associate, 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 such Section 11(a)(ii) Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, 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 Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one ten-thousandths of a share of Preferred Stock as the
Rights evidenced by the Rights Certificate or Rights Certificates surrendered
shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised 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 $.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth Business Day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. In addition, subject to the provisions of the Rights
Agreement, each Right evidenced by this Certificate may be exchanged by the
Company at its option for one share of Common Stock of the Company (subject to
adjustment for any stock split, stock dividend or similar transaction) following
the Stock Acquisition Date and prior to the time an Acquiring person owns 50% or
more of the shares of Common Stock then outstanding.
51
No fractional shares of Preferred Stock or other securities will be issued
upon the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of one ten-thousandth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of , GATEWAY ENERGY CORPORATION
------------------- ----
By: /s/
--------------------------------
[SEAL] Name:
Title:
ATTEST:
----------------------------------
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER AND TRUST COMPANY, LLC, as Rights Agent
By: /s/
-------------------------------
Name:
Title:
52
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the record 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: ,
---------------------------- ----
/s/
-----------------------------------
Signature
Signature Guaranteed:
Signatures must be medallion signature guaranteed by an Eligible Guarantor
Institution as defined by SEC Rule 17Ad-15 (12 C.F.R. 240.17Ad-15) or any
similar rule which the Rights Agent deems applicable.
53
[Form of Reverse Side of Rights Certificate (continued)]
Certification
-------------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate is not being sold, assigned and transferred by
or on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned 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: ,
--------------- ---- -----------------------------------
Signature
Signature Guaranteed:
Signatures must be medallion signature guaranteed by an Eligible Guarantor
Institution as defined by SEC Rule 17Ad-15 (12 C.F.R. 240.17Ad-15) or any
similar rule which the Rights Agent deems applicable.
NOTICE
------
The signature to the foregoing Assignment and Certification must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not or cannot be
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Certificate) and such
Assignment will not be honored.
54
[Form of Reverse Side of Rights Certificate (continued)]
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: Gateway Energy Corporation:
The undersigned hereby irrevocably elects to exercise____________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other Person (as such term is defined in the
Rights Agreement) which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
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: , /s/
--------------- ---- -----------------------------------
Signature
Signature Guaranteed:
Signatures must be medallion signature guaranteed by an Eligible Guarantor
Institution as defined by SEC Rule 17Ad-15 (12 C.F.R. 240.17Ad-15) or any
similar rule which the Rights Agent deems applicable.
55
[Form of Reverse Side of Rights Certificate (continued)]
Certification
-------------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned 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: , /s/
--------------- ---- -----------------------------------
Signature
Signature Guaranteed:
Signatures must be medallion signature guaranteed by an Eligible Guarantor
Institution as defined by SEC Rule 17Ad-15 (12 C.F.R. 240.17Ad-15) or any
similar rule which the Rights Agent deems applicable.
NOTICE
------
The signature to the foregoing Election to Purchase and Certification must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above is not or cannot be
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Certificate) and such
Election to Purchase will not be honored.
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