Exhibit 99.2
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PHARMOS CORPORATION
and
AMERICAN STOCK TRANSFER & TRUST CO.,
as Rights Agent
Rights Agreement
Dated as of October 23, 2002
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TABLE OF CONTENTS
Page
Number
Section 1 Certain Definitions ................................................................ 1
Section 2 Appointment of Rights Agent ........................................................ 3
Section 3 Issue of Rights Certificates ....................................................... 4
Section 4 Form of Rights Certificates ........................................................ 6
Section 5 Countersignature and Registration .................................................. 6
Section 6 Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates ........................... 7
Section 7 Exercise of Rights; Purchase Price; Expiration Date of Rights ...................... 7
Section 8 Cancellation and Destruction of Rights Certificates ................................ 9
Section 9 Reservation and Availability of Preferred Stock .................................... 10
Section 10 Preferred Stock Record Date ........................................................ 11
Section 11 Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights ............................................................................. 11
Section 12 Certificate of Adjusted Purchase Price or Number of Shares ......................... 17
Section 13 Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or Earning
Power .............................................................................. 18
Section 14 Additional Covenants ............................................................... 20
Section 15 Fractional Rights and Fractional Shares ............................................ 20
Section 16 Rights of Action ................................................................... 22
Section 17 Agreement of Rights Holders ........................................................ 22
Section 18 Rights Certificate Holder Not Deemed a Stockholder ................................. 23
Section 19 Concerning the Rights Agent ........................................................ 23
Section 20 Merger or Consolidation or Change of Name of Rights Agent .......................... 23
Section 21 Duties of Rights Agent ............................................................. 24
Section 22 Change of Rights Agent ............................................................. 26
Section 23 Issuance of New Rights Certificates ................................................ 27
Xxxxxxx 00 Xxxxxxxxxx, Xxxxxxxxxxx and Exchange ............................................... 27
Section 25 Notice of Certain Events ........................................................... 30
Section 26 Notices ............................................................................ 31
Section 27 Supplements and Amendments ......................................................... 31
Section 28 Determination and Actions by the Board of Directors, etc ........................... 32
Section 29 Successors ......................................................................... 32
Section 30 Benefits of This Agreement ......................................................... 32
Section 31 Severability ....................................................................... 32
Section 32 Governing Law ...................................................................... 33
Section 33 Counterparts ....................................................................... 33
Section 34 Descriptive Headings ............................................................... 33
Signatures .................................................................................... 34
Exhibit A - Form of Certificate of Designation
Exhibit B - Form of Rights Certificate
Exhibit C - Summary of Rights to Purchase Preferred Stock
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RIGHTS AGREEMENT
THIS AGREEMENT is dated as of October 23, 2002 between PHARMOS CORPORATION, a
Nevada corporation (the "Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY,
a New York corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, effective October 23, 2002, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as hereinafter
defined) for each share of Common Stock, $0.03 par value per share, of the
Company (the "Common Stock") outstanding as of the close of business on November
6, 2002 (the "Record Date"), and contemplates the issuance of one Right (subject
to adjustment as provided herein) for each share of Common Stock of the Company
issued between the Record Date and the earlier of the Distribution Date and the
Expiration Date, as such terms are hereinafter defined (with Rights also to be
issued in connection with certain issuances of Common Stock after the
Distribution Date, as provided more fully herein), each Right representing the
right to purchase one one-thousandth of a share of Series D Participating
Preferred Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation attached hereto as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth (the
"Rights"):
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto hereby agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates (as such term is hereinafter
defined) and Associates (as such term is hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or
more of the shares of Common Stock then outstanding or who was such a Beneficial
Owner at any time after the date hereof, whether or not such Person continues to
be the Beneficial Owner of 15% or more of the outstanding shares of Common
Stock. Notwithstanding the foregoing, (i) in no event shall a Person who or
which, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of less than 15% of the Company's outstanding shares of Common
Stock become an Acquiring Person solely as a result of a reduction of the number
of shares of outstanding Common Stock, including repurchases of outstanding
shares of Common Stock by the Company, which reduction increases the percentage
of outstanding shares of Common Stock beneficially owned by such Person
(provided that any subsequent increase in the amount of Common Stock
beneficially owned by such Person, together with all Affiliates and Associates
of such Person, without the prior approval of the Company shall cause such
Person to be an Acquiring Person); (ii) the term Acquiring Person shall not mean
(A) the Company, (B) any subsidiary of the Company (as such term is hereinafter
defined), (C) any employee benefit plan of the Company or any of its
subsidiaries, or (D) any
entity holding securities of the Company organized, appointed or established by
the Company or any of its subsidiaries for or pursuant to the terms of any such
plan; and (iii) no Person shall be deemed to be an Acquiring Person if (A)
within five business days after such Person would otherwise have become an
Acquiring Person (but for the operation of this clause (iii)), such Person
notifies the Board of Directors that such Person did so inadvertently and,
within two business days after such notification, such Person is the Beneficial
Owner of less than 15% of the outstanding shares of Common Stock, (B) by reason
of such Person's Beneficial Ownership of 15% or more of the outstanding shares
of Common Stock on the date hereof if, prior to the Record Date, such Person
notifies the Board of Directors that such Person is no longer the Beneficial
Owner of 15% or more of the then outstanding shares of Common Stock or (C) the
Board of Directors determines in good faith that a Person who would otherwise be
an Acquiring Person, as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person divests Beneficial
Ownership as promptly as practicable of a sufficient number of shares of Common
Stock so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this paragraph (a).
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to beneficially own, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right or obligation to acquire (whether such right
or obligation is exercisable or effective immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding
(whether or not in writing) (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities) or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
otherwise; provided, however, that a Person shall not be deemed under this
clause (A) the "Beneficial Owner" of, or to "beneficially own," securities
tendered pursuant to a tender or exchange offer made by such Person or any
of such Person's Affiliates or Associates until such tendered securities
are accepted for payment or exchange; or (B) the right to vote pursuant to
any agreement, arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed under this clause (B)
the "Beneficial Owner" of, or to "beneficially own," any security if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations of the Exchange Act and (2) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
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(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) (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), or
with which such Person or any of such Person's Affiliates have otherwise
formed a group, for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in clause (B) of subparagraph
(ii) of this paragraph (c)) or disposing of any securities of the Company.
(d) "Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(e) "Close of business" on any given date shall mean 5:00 P.M., Eastern
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., Eastern time, on the next succeeding Business Day.
(f) "Common Stock" shall have the meaning set forth in the Recitals
hereof, except that Common Stock when used with reference to stock issued by any
Person other than the Company shall mean the capital stock with the greatest
voting power, or the equity securities or other equity interest having power to
control or direct the management, of such Person or, if such Person is a
subsidiary of another Person, of the Person which ultimately controls such
first-mentioned Person and which has issued and outstanding such capital stock,
equity securities or equity interests.
(g) "Person" shall mean any individual, firm, corporation, partnership,
joint venture, association, trust or other entity.
(h) "Preferred Stock" shall mean the Series D Participating Preferred
Stock, $0.03 par value, of the Company.
(i) "Stock Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.
(j) A "subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power of the voting equity securities
or voting interests is owned, directly or indirectly, by such Person, or which
is otherwise controlled by such Person.
(k) "Voting power" shall mean the voting power of all securities of the
Company then outstanding and generally entitled to vote for the election of
directors of the Company.
2. Appointment of Rights Agent. The Company hereby appoints the Rights
Agent to act as agent for the Company and the holders of the Rights (who, in
accordance with Section 3 hereof, shall, prior to the Distribution Date, also be
the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such
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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 shall in
no event be liable for, the acts or omissions of any such Co-Rights Agent. In
the event the Company appoints one or more Co-Rights Agents, the respective
duties of the Rights Agents and any Co-Rights Agents shall be as the Company
shall determine.
3. Issue of Rights Certificates.
(a) One Right shall be associated with each share of Common Stock
outstanding on the Record Date, each additional share of Common Stock that shall
become outstanding between the Record Date and the earliest of the Distribution
Date and the Expiration Date (as such term is defined in Section 7 hereof) and
each additional share of Common Stock with which Rights are issued after the
Distribution Date but prior to the Expiration Date as provided in Section 23;
provided, however, that if the number of outstanding Rights are combined into a
smaller number of outstanding Rights pursuant to Section 11(a), the appropriate
fractional Right determined pursuant to such Section shall thereafter be
associated with each such share of Common Stock.
(b) Upon the earlier of:
(i) the Close of business on the tenth day after the Stock
Acquisition Date, or
(ii) the tenth Business Day (or such specified or unspecified later
date as may be determined by action of the Board of Directors of the
Company prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than the Company,
any subsidiary of the Company, or any employee benefit plan of the Company
or any of its subsidiaries) of a tender or exchange offer which would
result in such Person becoming an Acquiring Person (including any such
date which is on or after the date of this Agreement and prior to the
issuance of the Rights (or if the tenth Business Day (or such later date)
after the Stock Acquisition Date occurs before the Record Date, the Close
of business on the Record Date))(the earlier of such dates in clauses (i)
and (ii) being herein referred to as the "Distribution Date"),
(x) the Rights shall be evidenced (subject to the provisions of paragraph (c) of
this Section 3) by the certificates for Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) shall be
transferable only in connection with the transfer of the underlying shares of
Common Stock. As soon as practicable after the Distribution Date, the Rights
Agent shall send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, a certificate
for Rights, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held. As
of and after the Distribution Date, the Rights shall be evidenced solely by such
Rights Certificates.
As soon as practicable following the Record Date, and in any event no later than
30 days after
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the Record Date, the Company shall send a copy of a Summary of Rights, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Common Stock
as of the close of business on the Record Date, at the address of such holder
shown on the records of the Company. With respect to certificates for the Common
Stock outstanding as of the Record Date, until the Distribution Date (or earlier
redemption, expiration or termination of the Rights), the Rights shall be
evidenced by such certificates for the Common Stock and the registered holders
of the Common Stock shall also be the registered holders of the associated
Rights. Until the Distribution Date (or earlier redemption, expiration or
termination of the Rights), the surrender for transfer of any of the
certificates for the Common Stock outstanding on the Record Date, even without a
copy of the Summary of Rights attached thereto, shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate.
(c) Certificates issued for Common Stock (including, without limitation,
certificates issued upon transfer or exchange of Common Stock) after the Record
Date, but prior to the earlier of the Distribution Date or the Expiration Date,
shall have impressed, printed, stamped, written or otherwise affixed onto them
the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN PHARMOS CORPORATION (THE
"COMPANY") AND AMERICAN STOCK TRANSFER & TRUST COMPANY DATED AS OF OCTOBER
23, 2002 (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICES OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET
FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS MAY BE REDEEMED, MAY EXPIRE, OR
MAY BE EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED
BY THIS CERTIFICATE. THE COMPANY WILL MAIL TO THE HOLDER OF THIS
CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE WITHIN FIVE DAYS
AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES,
RIGHTS ISSUED TO ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR
CERTAIN RELATED PERSONS AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
Distribution Date (or earlier redemption, expiration or termination of the
Rights), the Rights associated with the Common Stock represented by such
certificates shall be evidenced by such certificates alone, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificate.
Notwithstanding the requirements of this paragraph 3(c), neither the omission of
this legend nor the inclusion of a legend that refers to a rights agreement
other than the Rights Agreement shall affect the enforceability of any part of
this Rights Agreement or the rights of any holder of Rights.
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4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase shares
and of assignment and certificates to be printed on the reverse thereof) shall
each be substantially in the form set forth in Exhibit B hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or national
quotation system on which 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 23
hereof, the Rights Certificates, whenever distributed, shall be dated as of the
Record Date, and on their face shall entitle the holders thereof to purchase
such number of one one-thousandths of a share of Preferred Stock as shall be set
forth therein at the price per one one-thousandth of a share set forth therein,
such price to be initially equal to the amount set forth in Section 7(b) below
(the Purchase Price), but the number of such shares and the Purchase Price shall
be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(b) hereof that
represents Rights beneficially owned by an Acquiring Person or any Associate or
Affiliate thereof, any Rights Certificate issued at any time upon the transfer
of any Rights to such an Acquiring Person or any Associate or Affiliate thereof
or to any nominee of such Acquiring Person, Associate or Affiliate, and any
Rights Certificate issued pursuant to Section 6 or Section 11 upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE WERE HELD BY A PERSON
WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID UNDER
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights Certificate.
5. Countersignature and Registration. The Rights Certificates shall be
executed on behalf of the Company by its Chairman of the Board, any Vice
Chairman of the Board, its President or any Vice President, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent, either manually or by
facsimile signature, and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent, and
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issued and delivered by the Company with the same force and effect as though the
Person who signed such Rights Certificates had not ceased to be such officer of
the Company; and any Rights Certificates may be signed on behalf of the Company
by any Person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such Person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be kept,
at its office designated for such purpose, books for registration and transfer
of the Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject to the
provisions of Section 15 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Certificates may be transferred, split up,
combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of shares of Preferred
Stock as the Rights Certificate or Rights Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights Certificate or
Rights Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate and such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company shall execute and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon presentation of the Rights
Certificate, with the appropriate form of election to purchase on the reverse
side thereof duly executed, to the Rights Agent at the
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principal office of the Rights Agent, together with payment of the Purchase
Price for each one one-thousandth of a share of Preferred Stock (or such other
number of shares or other securities) as to which the Rights are exercised, at
or prior to the earliest of (i) the close of business on October 22, 2012 (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 24 hereof, (iii) the consummation of a transaction
contemplated by Section 13(d) hereof or (iv) the time at which the Rights are
exchanged as provided in Section 24(c) hereof (such earliest time being herein
referred to as the "Expiration Date"). Notwithstanding any other provision of
this Agreement, any Person who prior to the Distribution Date becomes a record
holder of shares of Common Stock may exercise all of the rights of a registered
holder of a Rights Certificate with respect to the Rights associated with such
shares of Common Stock in accordance with and subject to the provisions of this
Agreement, including the provisions of Section 7(e) hereof, as of the date such
Person becomes a record holder of shares of Common Stock.
(b) The Purchase Price for each one one-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right initially shall be $15.00, shall be
subject to adjustment from time to time as provided in Sections 11 and 13 hereof
and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the appropriate form of election to purchase duly executed, accompanied by
payment of the Purchase Price for the shares (or other securities or property)
to be purchased and an amount equal to any applicable transfer tax (as
determined by the Rights Agent) in the form of a certified check or bank draft
payable to the order of the Company, the Rights Agent shall, subject to Section
21(k), thereupon promptly (i)(A) requisition from any transfer agent of the
shares of Preferred Stock (or make available, if the Rights Agent is the
transfer agent) certificates for the number of one one-thousandths of a share of
Preferred Stock to be purchased, and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company, in
its sole discretion, shall have elected to deposit the shares of Preferred Stock
issuable upon exercise of the Rights hereunder into a depositary, requisition
from the depositary agent depositary receipts representing such number of one
one-thousandths of a share of Preferred Stock as are to be purchased (in which
case certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company shall direct the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 15, (iii)
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate after receipt, deliver such cash to or upon the
order of the registered holder of such Rights Certificate. In the event that the
Company is obligated to issue other securities of the Company and/or distribute
other property pursuant to Section 11(a), the Company shall make all
arrangements necessary so that such other securities and/or property are
available for distribution by the Rights Agent, if and when appropriate. In
addition, in the case of an exercise of the Rights by a holder pursuant to
Section 11(a)(ii), the Rights Agent shall return such Rights Certificate to the
registered holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Rights Certificate no longer include
the
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rights provided by Section 11(a)(ii) of this Agreement and if less than all the
Rights represented by such Rights Certificate were so exercised, the Rights
Agent shall indicate on the Rights Certificate the number of Rights represented
thereby which continue to include the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Rights Certificate shall exercise
(except pursuant to Section 11(a)(ii)) less than all the Rights evidenced
thereby, a new Rights Certificate evidencing Rights equivalent to the Rights
remaining unexercised shall be issued by the Rights Agent and delivered to the
registered holder of such Rights Certificate or to such holder's duly authorized
assigns, subject to the provisions of Section 15 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, if there
occurs any of the events set forth in Section 11(a)(ii) or Section 13(a), then
any Rights that are or were on or after the Distribution Date beneficially owned
by (i) an Acquiring Person, (ii) any Associate or Affiliate of an Acquiring
Person 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's becoming such and receiving such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred rights or (B) a transfer which the Board of Directors
of the Company has determined is part of an agreement, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void, without any further action, and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights, whether under any provision of this Agreement or otherwise.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless the certificate contained in the appropriate
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise shall have been properly completed and
duly executed by the registered holder thereof and the Company shall have been
provided with such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
8. Cancellation and Destruction of Rights Certificates. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights 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 Certificates purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company or shall, at the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
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9. Reservation and Availability of Preferred Stock. The Company covenants
and agrees that it shall cause to be reserved and kept available out of its
authorized and unissued shares of Preferred Stock, or any authorized and issued
shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights and, after the occurrence of an event specified in Sections
11 or 13, shall so reserve and keep available a sufficient number of shares of
Common Stock (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the shares of Preferred Stock (and, after the occurrence of an event
specified in Section 11 or 13, any other securities) issuable upon the exercise
of the Rights may be listed on any national securities exchange or automated
quotation system, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares (or other
securities) reserved for such issuance to be listed on such exchange upon
official notice of issuance upon such exercise.
The Company covenants and agrees that it shall take all such action as may be
necessary to ensure that all shares of Preferred Stock and/or other securities
delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such shares or other securities (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable shares or securities.
The Company further covenants and agrees that it shall pay when due and payable
any and all federal and state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Rights Certificates or of any
certificates for shares of Preferred Stock and/or other securities upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or in respect of the issuance or
delivery of the shares of Preferred Stock and/or other securities in a name
other than that of, the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for
shares of Preferred Stock, and/or other securities in a name other than that of
the registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Rights Certificate
at the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
The Company shall use its best efforts to (i) file, if required by law, as soon
as practicable following the Distribution Date, a registration statement on an
appropriate form under the Securities Act of 1933, as amended (the Act), with
respect to the securities purchasable upon exercise of the Rights, (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 and the
rules and regulations thereunder) until the Expiration Date (unless and until
the Company shall have received an opinion of counsel to the effect that the
maintenance of such registration statement in effect is no longer necessary).
The Company also will take such action as may be appropriate under the blue sky
laws of the various states.
10
10. Preferred Stock Record Date. Each Person in whose name any certificate
for shares of Preferred Stock (or other securities) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the shares of Preferred Stock (or other securities) represented thereby on,
and such certificate shall be dated as of, the date upon which the Rights
Certificate evidencing such Rights was duly presented and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such presentation and payment is a date upon which the
Preferred Stock (or other securities) transfer books of the Company are closed,
such Person shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated as of, the next succeeding Business Day on
which the Preferred Stock (or other securities) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights. The Purchase Price, the number of shares covered by each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and in Section 7(e), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable upon exercise of a Right on
such date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock and other securities which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Stock transfer books of the Company were open, such holder would have owned upon
such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24(c) of this Agreement, in the event any Person,
alone or together with its Affiliates and Associates, shall become an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock at a price and on terms determined, prior to the date of the
first acceptance of payment for any of such shares, by at least a majority of
the members of the Board of Directors who are not officers of the Company and
are not Acquiring Persons, or the offeror, or Affiliates or Associates thereof
to be in the best interests
11
of the Company and its stockholders (other than the Person or an Affiliate or
Associate thereof on whose behalf the offer is being made) (a "Permitted
Offer")), then, promptly following the first occurrence of an event described in
this Section 11(a)(ii), proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e) hereof, shall, for a period of sixty
(60) days after the later of the occurrence of any such event and the effective
date of an appropriate registration statement pursuant to Section 9, have a
right to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, in lieu of shares of Preferred
Stock, such number of shares of Common Stock of the Company as shall equal the
result obtained by (x) multiplying the then current Purchase Price by the then
number of one one-thousandths of a share of Preferred Stock for which a Right is
then exercisable and (y) dividing that product by fifty percent (50%) of the
current market price per one share of Common Stock (determined pursuant to
Section 11(d)) on the date of the occurrence of the event set forth in this
subparagraph (ii) (such number of shares being referred to as the "number of
Adjustment Shares"); provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of Section 13 hereof
shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii);
and provided, further, that such 60 day period shall not be deemed to run during
any period in which the exercise of the Rights or the fulfillment by the Company
or the Rights Agent of its or their obligations under their Agreement shall be
enjoined or otherwise prohibited in full or in part by any court or other
governmental agency or body.
(iii) In lieu of issuing shares of Common Stock in accordance with Section
11(a)(ii) hereof, the Company may, if a majority of the Board of Directors then
in office determines that such action is necessary or appropriate and not
contrary to the interests of holders of Rights, elect to (and, in the event that
the Board of Directors has not exercised the exchange right contained in Section
24(c) hereof and there are not sufficient treasury shares and authorized but
unissued shares of Common Stock to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company shall) take all
such action as may be necessary to authorize, issue or pay, upon the exercise of
the Rights, cash (including by way of a reduction of the Purchase Price),
property, shares of Common Stock, other securities or any combination thereof
having an aggregate value equal to the value of the shares of Common Stock which
otherwise would have been issuable pursuant to Section 11(a)(ii), which
aggregate value shall be determined by a nationally recognized investment
banking firm selected by a majority of the Board of Directors. For purposes of
the preceding sentence, the value of the Common Stock shall be determined
pursuant to Section 11(d) hereof and the value of any preferred stock or
preference stock which a majority of the Board of Directors determines to be a
"common stock equivalent" shall be deemed to have the same value as the Common
Stock. Any such election by the Board of Directors must be made and publicly
announced within sixty (60) days following the date on which the event described
in Section 11(a)(ii) shall have occurred. Following the occurrence of the event
described in Section 11(a)(ii) hereof, a majority of the Board of Directors then
in office may suspend the exercisability of the Rights for a period of up to
sixty (60) days following the date on which the event described in Section
11(a)(ii) shall have occurred to the extent that such directors have not
determined whether to exercise their rights of election under this Section
11(a)(iii). In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended.
12
(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them (for a
period expiring within forty five (45) calendar days after such record date) to
subscribe for or purchase Preferred Stock (or shares having the same or more
favorable rights, privileges and preferences as the Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as defined in Section 11(d)) per share of
Preferred Stock on such record date, the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock and/or equivalent
preferred stock 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 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
in a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be determined reasonably and with good faith
to the holders of Rights by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and conclusive for all purposes. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
subscription rights, options or warrants (excluding those referred to in Section
11(b)), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as defined in Section 11(d)) per share of Preferred Stock on such record
date, less the fair market value (as determined reasonably and with good faith
to the holders of Rights by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and conclusive for all purposes) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such subscription rights, options or warrants distributable in respect of one
share of Preferred Stock and the denominator of which shall be the current
market price (as defined in Section 11(d)) per share of the Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed; and in
13
the event that such distribution is not so made, the Purchase Price shall again
be adjusted to be the Purchase Price which would be in effect if such record
date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other than in
Section 11(a)(iii), the current market price per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the thirty (30) consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that in
the event that the current per share market price of the Common Stock is
determined in whole or in part during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution on such Common
Stock payable in shares of such Common Stock or securities convertible into
shares of such Common Stock or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of thirty
(30) Trading Days after the exdividend date for such dividend or distribution,
or the record date for such subdivision, combination or reclassification, then,
and in each such case, the current market price shall be properly adjusted to
take into account exdividend trading. The closing price for each day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the shares of Common Stock are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by Nasdaq or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Stock, the fair value of such shares on such date as
determined reasonably and with good faith by the Board of Directors of the
Company shall be used and shall be binding on the Rights Agent. 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 determined reasonably and
with good faith to the holders of Rights by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent.
(ii) For the purpose of any computation hereunder, the current market
price per share (or one one-thousandth of a share) of Preferred Stock shall be
determined in the same manner as set forth above for the Common Stock in Section
11(d) (i) (other than the last sentence thereof). If the current market price
per share (or one one-thousandth of a share) of Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is not
publicly held or listed or traded in a manner described in Section 11(d)(i), the
current market price per share of
14
Preferred Stock shall be conclusively deemed to be an amount equal to one
thousand (1,000) (as such number may be appropriately adjusted for such events
as stock splits, stock dividends and recapitalization with respect to the Common
Stock occurring after the date of this Agreement) multiplied by the current
market price per share of the Common Stock and the current market price per one
one-thousandth of a share of Preferred Stock shall be equal to the current
market price per share of the Common Stock (as appropriately adjusted). If
neither the Common Stock nor the Preferred Stock is publicly held or so listed
or traded, current market price per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(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 hundredth 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.
(f) If as a result of any provision of Section 11(a), the holder of any
Right shall become entitled to receive any shares of capital stock of the
Company other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 15 hereof with
respect to the Preferred Stock shall apply on like terms to any such other
shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares 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 Section 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 one-thousandths of
a share of Preferred Stock (calculated to the nearest one one-millionth)
obtained by (i) multiplying (x) the number of one one-thousandth of a share of
Preferred Stock covered by a Right immediately prior to this adjustment by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price
15
to adjust the number of Rights, in substitution for any adjustment in the number
of shares of Preferred Stock purchasable upon the exercise of a Right. Each of
the Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandth of a share of Preferred Stock
for which a Right was exercisable immediately prior to such adjustment. Each
Right held of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one millionth) obtained
by dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
ten days later than the date of the public announcement. If Rights Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 15 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the adjusted
Purchase Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of shares 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 share and the number of shares 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 shares of Preferred
Stock, Common Stock or other securities issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
legal counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock, Common Stock or
other securities at such adjusted Purchase Price. If upon any exercise of the
Rights, a holder is to receive a combination of Common Stock and common stock
equivalents, a portion of the consideration paid upon such exercise, equal to at
least the then par value of a share of Common Stock of the Company, shall be
allocated as the payment for each share of Common Stock of the Company so
received.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date the shares
of Preferred Stock and other capital
16
stock or securities of the Company, if any, issuable upon such exercise over and
above the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due xxxx or other appropriate instrument evidencing
such holders right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(m) Anything to the contrary in this Section 11 notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (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, (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 hereinabove in this Section 11, hereafter made
by the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the date of this Agreement and
prior to the Distribution Date (i) declare a dividend on the outstanding shares
of Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares or (iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock, the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
(o) The exercise of Rights under Section 11(a)(ii) shall only result in
the loss of rights under Section 11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Rights
Agreement, including the rights represented by Section 13.
12. Certificate of Adjusted Purchase Price or Number of Shares. Whenever
an adjustment is made as provided in Sections 11 and 13 hereof, the Company
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Preferred Stock and
the Common Stock a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any adjustment unless and until it shall have received such certificate.
13. Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
Earning Power.
17
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person, (y) any Person shall consolidate with the Company, or merge with
and into the Company and the Company shall be the continuing or surviving
corporation of such merger (other than, in the case of either (x) or (y), a
merger or consolidation which would result in all of the voting power
represented by the securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting power
represented by the securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation and the holders of
such securities not having changed as a result of such merger or consolidation),
or (z) the Company shall sell, mortgage or otherwise transfer (or one or more of
its subsidiaries shall sell, mortgage or otherwise transfer), in one or more
transactions, assets, cash flow or earning power aggregating more than fifty
percent (50%) of the assets, cash flow or earning power of the Company and its
subsidiaries (taken as a whole and calculated on the basis of the Company's most
recent regularly prepared financial statements for the preceding 12 month
period) to any other Person, then, and in each such case, proper provision shall
be made so that (i) following the Distribution Date, each holder of a Right
(other than as provided in Section 7(e) hereof) shall have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of shares of freely tradable Common
Stock of the Principal Party (as hereinafter defined), free and clear of liens,
rights of call or first refusal, encumbrances or other adverse claims, as shall
be equal to the result obtained by (x) multiplying the then current Purchase
Price by the number of one one-thousandths of a share of Preferred Stock for
which a Right is then exercisable (without taking into account any adjustment
previously made pursuant to Section 11(a)(ii) hereof) and (y) dividing that
product by fifty percent (50%) of the current market price per share of the
Common Stock of such Principal Party (determined pursuant to Section 11(d)
hereof) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
Company shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall apply to
such Principal Party; and (iv) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of shares
of its Common Stock in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to ensure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (x) or (y) of the
first sentence of this Section 13, the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted
in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to the merger or consolidation (including,
if applicable, the Company, if it is the surviving corporation); and
(ii) in the case of any transaction described in (z) of the first
sentence in this
18
Section 13, the Person that is the party receiving the greatest portion of
the assets or earning power transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect subsidiary or Affiliate 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, or
Affiliate of more than one Person, the Common Stock of two or more of which are
and have been so registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Stock having the greatest aggregate market
value; and (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 joint venture were a Subsidiary of each such joint venturer
and the Principal Parties in each such chain shall bear the obligations set
forth in this Section 13 in the same ratio as their direct or indirect interests
in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock that have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and each Principal Party and
each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
paragraphs (a) and (b) of this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger, sale or transfer of
assets mentioned in paragraph (a) of this Section 13, the Principal Party at its
own expense shall:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, will use its best efforts to cause such
registration statement to become effective as soon as practicable after
such filing and will use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all material respects with the requirements for registration on Form 10
under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. The rights under this Section 13
shall be in addition to the rights to
19
exercise Rights and adjustments under Section 11(a)(ii) and shall survive any
exercise thereunder.
(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 Permitted Offer (or a wholly
owned subsidiary of any such Person or Persons) and such transaction and the
Permitted Offer are related transactions, (ii) the price per share of Common
Stock offered in such transaction is not less than the price per share of Common
Stock paid to all holders of Common Stock whose shares were purchased pursuant
to such Permitted Offer and (iii) the form of consideration being offered to the
remaining holders of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such Permitted Offer. Upon
consummation of any such transaction contemplated by this subsection (d), all
Rights hereunder shall expire.
14. Additional Covenants.
(a) The Company covenants and agrees that after the Stock Acquisition Date
it shall not (i) consolidate with, (ii) merge with or into, or (iii) sell or
transfer to any other Person, in one or more transactions, assets, cash flow or
earning power aggregating more than fifty percent (50%) of the assets, cash flow
or earning power of the Company and its subsidiaries taken as a whole, if at the
time of or after such consolidation, merger or sale there are any charter or
bylaw provisions or any rights, warrants or other instruments outstanding or any
other action taken which would diminish or otherwise eliminate the benefits
intended to be afforded by the Rights. The Company shall not consummate any such
consolidation, merger or sale unless prior thereto the Company and such other
Person shall have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this subsection.
(b) The Company covenants and agrees that, after the Stock Acquisition
Date, it will not, except as permitted by Section 24 hereof, take any action the
purpose or effect of which is to diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
15. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(n), or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Rights Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 15(a), the current market value of a
whole Right shall be, except as otherwise provided in the last sentence of this
paragraph (a), the closing price of the Rights for the Trading Day immediately
prior to the date on which such fractional Rights would have been otherwise
issuable. The closing price of the Rights for any day shall be the last sale
price, the last quoted price or, if not so quoted, the average of the high bid
and low asked prices in the over-the-counter market, as reported by Nasdaq or
such other system then in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid
20
and asked prices as furnished by a professional market maker making a market in
the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights the fair value of the
Rights on such date as determined reasonably and with good faith to the holders
of Rights by the Board of Directors of the Company shall be used and shall be
binding on the Rights Agent.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the shares of Preferred Stock represented by
such depositary receipts. In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 15(b), the current market value of
one one-thousandth of a share of Preferred Stock shall be one one-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 one of the transactions or events
specified in Section 11 or Section 13 giving rise to the right to receive common
stock equivalents (other than Preferred Stock) or other securities upon the
exercise of a Right, the Company shall not be required to issue fractions of
shares or units of such common stock equivalents or other securities upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of such common stock equivalents or other securities. In lieu of
fractional shares or units of such common stock equivalents or other securities,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of a share or unit of such common stock
equivalent or other securities. For purposes of this Section 15(c), the current
market value shall be the closing price thereof determined in the same manner
set forth in Section 11(d)(i) hereof with respect to Common Stock for the
Trading Day immediately prior to the date of such exercise, provided that, if
such common stock equivalent or other security is not traded, the current market
value thereof shall instead equal the current market value of one one-thousandth
of a share of Preferred Stock for such Trading Day as determined pursuant to
Section 15(b) hereof.
(d) Except as otherwise expressly provided herein, the holder of a Right
by the acceptance of the Right expressly waives such holders right to receive
(other than as provided in Section 11(n)) any fractional Rights or any
fractional shares (other than, in the case of Preferred Stock, fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock)
21
upon exercise of a Right.
16. Rights of Action. All rights of action in respect of this Agreement,
except those rights of action vested in the Rights Agent pursuant to Section 21,
are vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of the Common Stock), and
any registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in such holders own behalf and for such holders own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, such holders
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Holders of Rights shall be entitled to recover the reasonable costs and
expenses, including attorneys fees, incurred by them in any action to enforce
the provisions of this Agreement.
17. Agreement of Rights Holders. Every holder of a Right by accepting the
same consents and agrees with the Company and the Rights Agent and with every
other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent and only if surrendered at the
principal office of the Rights Agent, duly endorsed or accompanied by a proper
instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in
whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
18. Rights Certificate Holder Not Deemed a Stockholder. No holder, as
such, of any Rights Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the shares of Preferred Stock, Common
Stock or any other securities of the Company which may at any time be issuable
upon exercise of the Rights represented thereby, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting
22
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 25 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions thereof.
19. Concerning the Rights Agent. The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and disbursements and other disbursements reasonably incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the reasonable costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly.
The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
20. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust or
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 corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 22 hereof. In case
at the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Rights Certificates shall have been countersigned but
not delivered, any such successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates in this Agreement.
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;
23
and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
21. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it (who
may be legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of current market price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, any Vice Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company only, for
its negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except as to the fact that it has countersigned the Rights
Certificates) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11 or
13 hereof or responsible for the manner, method or amount of any such adjustment
or the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt of a certificate pursuant to Section 12 describing
any such adjustment); nor shall it be responsible for any determination by the
Board of Directors of the Company of the current market value of the Rights or
Preferred Stock or Common Stock pursuant to the provisions of Section 15 hereof;
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Preferred Stock
or other securities to be issued pursuant to this Agreement or any
24
Rights Certificate or as to whether any shares of Preferred Stock or other
securities will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further other acts, instruments and assurances as may reasonably be required by
the Rights Agent for the carrying out or performance by the Rights Agent of the
provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from the Chairman of the
Board, any Vice Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of
the Company, and is authorized to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
written instructions of any such officer. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by the
Rights Agent with respect to its duties or obligations under this Rights
Agreement and the date on and/or after which such action shall be taken or
omitted and the Rights Agent shall not be liable for any action taken or omitted
in accordance with a proposal included in any such application on or after the
date specified therein (which date shall not be less than three Business Days
after the date any such officer actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking or omitting any such action, the Rights Agent has received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not 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.
(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 any of clauses l, 2 or,
if applicable, 3 thereof, the Rights Agent shall not take any further action
with
25
respect to such requested exercise or transfer without first consulting with the
Company.
22. Change of Rights Agent. The Rights Agent or any successor Rights Agent
may resign and be discharged from its duties under this Agreement upon thirty
(30) days' notice in writing mailed to the Company and to each transfer agent of
the Common Stock and Preferred Stock by registered or certified mail, and to
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock and Preferred Stock by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit such holders Rights Certificate for inspection by the
Company), then the registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of the
United States or of the State of New York (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of New York), in good standing, having a principal
office in the State of New York, which is authorized under such laws to exercise
corporate trust or stockholder services powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock
and Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 22, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
23. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or otherwise under any employee plan or
26
arrangement, which plan or arrangement is existing as of the Distribution Date,
or upon the exercise, conversion or exchange of any other securities issued by
the Company on or prior to the Distribution Date, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Right Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
Rights Certificates shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificates would be issued, (ii) no such Rights Certificates shall be
issued if and to the extent that appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof, and (iii) no such Rights Certificate
shall be issued to an Acquiring Person or an Affiliate or Associate of any
Acquiring Person.
24. Redemption, Termination and Exchange.
(a) (i) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (x) the Stock Acquisition Date or (y) 5:00 P.M.,
Pacific time, on the Final Expiration Date, redeem all but not less than all of
the then outstanding Rights at a redemption price of $0.0005 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"), and the Company, at its
option, may pay the Redemption Price either in cash or in Common Stock or other
securities of the Company deemed by the Board of Directors, in the exercise of
its sole discretion, to be at least equivalent in value to the Redemption Price.
The redemption of the Rights by the Board of Directors 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.
(ii) In addition, and notwithstanding the provisions of Section
24(a)(i), the Board of Directors of the Company, at its option at any time
after the time a Person becomes an Acquiring Person, after the expiration
of any period during which the holder of Rights may exercise the rights
under Section 11(a)(ii) and before any event described in clauses (x), (y)
or (z) of Section 13(a) hereof, may redeem all but not less than all of
the then outstanding Rights at the Redemption Price on or after the Stock
Acquisition Date:
(x) in connection with any event specified in Section 13(a) in
which all holders of Common Stock are treated alike and not
involving (other than as a holder of Common Stock being treated like
all other such holders) an Acquiring Person or an Affiliate or
Associate thereof or any other Person in which such Acquiring Person
or Affiliate or Associate thereof has any interest, or any other
Person acting directly or indirectly on behalf of or in association
with any such Acquiring Person or Affiliate or Associate thereof, or
(y) if and for as long as any Acquiring Person having
triggered such event is not thereafter the Beneficial Owner of
securities representing fifteen percent (15%) or more of the
outstanding shares, and at the time of redemption there are no other
Persons who are Acquiring Persons.
27
The Redemption Price may be paid either in cash or in Common Stock or
other securities of the Company deemed by the Board of Directors, in the
exercise of its sole discretion, to be at least equivalent in value to the
Redemption Price.
(b) In the case of a redemption permitted under Section 24(a)(i),
immediately upon the action of the Board of Directors of the Company ordering
the redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price, in the form determined by
the Board of Directors. In the case of a redemption permitted only under Section
24(a)(ii), evidence of which shall have been filed with the Rights Agent, the
right to exercise the Rights will terminate and represent only the right to
receive the Redemption Price, in the form determined by the Directors, only
after ten (10) days following the giving of notice of such redemption to the
holders of such Rights. Within ten (10) days after the action of the Board of
Directors ordering any such redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to the Rights Agent and to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
In the case of a redemption permitted under Section 24(a)(i) or (ii), the
Company may, at its option, discharge all of its obligations with respect to the
Rights by (i) issuing a press release announcing the manner of redemption of the
Rights and (ii) mailing payment of the Redemption Price to the registered
holders of the Rights at their last addresses as they appear on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the Transfer Agent of the Common Stock, and upon such action, all
outstanding Rights Certificates shall be null and void without any further
action by the Company.
(c) (i) Subject to the limitations of applicable law, the Board of
Directors of the Company may, at its option, at any time after any Person
becomes an Acquiring Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 7(e) hereof) for (A) shares of Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (the "Exchange Shares") or (B) Substitute
Consideration (as that term is defined below). The Board of Directors may
determine, in its sole discretion, whether to deliver Exchange Shares or
Substitute Consideration. Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after any Person
(other than the Company, any subsidiary of the Company, any employee benefit
plan of the Company or any such subsidiary, or any entity holding Common Stock
for or pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of fifty percent (50%)
or more of the Common Stock then outstanding.
(ii) In the event the Board of Directors shall determine to deliver
Substitute
28
Consideration in exchange for Rights, the Company shall (1) determine the
value of the Exchange Shares (the "Exchange Value"), and (2) with respect
to each Right to be exchanged, make adequate provision to substitute for
Exchange Shares the following (the "Substitute Consideration"): (v) cash,
(w) Common Stock or common stock equivalents (as that term is defined in
Section 11(a)(iii) hereof) or Preferred Stock or equivalent preferred
stock (as that term is defined in Section 11(b) hereof), (x) debt
securities of the Company, (y) other assets or (z) any combination of the
foregoing, having an aggregate value equal to the Exchange Value, where
such aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company. For
purposes of this Section 24(c), the value of a share of Common Stock shall
be the current market price (as determined pursuant to Section 11(d)
hereof) per share of Common Stock on the day that is the later of (x) the
first occurrence of an event described in Section 11(a)(ii) hereof and (y)
the date on which the Company's right of redemption pursuant to Section
24(a) expires; and the value of any common stock equivalent shall be
deemed to have the same value as the Common Stock on such date.
(iii) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to this Section
24(c), and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive Exchange Shares or Substitute
Consideration for each Right exchanged by such holder. The Company shall
promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the
validity of such exchange. The Company promptly shall mail a notice of any
such exchange to all of the holders of such Rights at their last address
as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange 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 pro rata based on the number of Rights (other than Rights which
have become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.
(iv) In the event that there shall not be sufficient shares of
Common Stock or Preferred Stock issued but not outstanding or authorized
but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 24(c), the Company shall take all such action
as may be necessary to authorize additional shares of Common Stock or
Preferred Stock for issuance upon exchange of the Rights.
(v) The Company shall not be required to issue fractions of shares
of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock,
the Company shall pay to the registered holders of the Rights Certificates
with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock. For the purposes of
this
29
Section 24(c)(v), the current market value of a whole share of Common
Stock shall be the closing price of a share of Common Stock (as determined
pursuant to Section 11(d) hereof) for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24(c).
(d) Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 24, and other than in
connection with the purchase of Common Stock prior to the Distribution Date.
25. Notice of Certain Events. In case the Company shall propose (a) 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), (b) 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, (c) to effect
any reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock), (d) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than fifty percent (50%)
of the assets or earning power of the Company and its subsidiaries (taken as a
whole) to, any other Person or (e) to effect the liquidation, dissolution or
winding up of the Company, then, in each such case, the Company shall give to
each holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least ten (10) days prior to the
record date for determining holders of the shares of Preferred Stock for
purposes of such action, or such greater number of days required by applicable
law, and in the case of any such other action, at least ten (10) 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, or such greater number
of days required by applicable law, whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) or 13(a) of this
Agreement shall occur, then, in any such case, the Company or the Principal
Party, as the case may be, shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) or 13(a)
hereof, as the case may be.
26. Notices. Notices or demands authorized by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
30
Pharmos Corporation
00 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Secretary
Subject to the provisions of Section 22, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
00 Xxxxxx Xxxx, Xxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Client Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
27. Supplements and Amendments.
(a) The Company and the Rights Agent may from time to time supplement or
amend this Agreement without approval of any holders of Rights or Right
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) prior to the Distribution Date, to change or
supplement any provision hereunder in any manner which the Company may deem
necessary or desirable or (iv) on or following the Distribution Date, to change
or supplement any provision hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment unless the Rights Agent shall have
determined in good faith that such supplement or amendment would adversely
affect its interests under this Agreement. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
(b) Without limiting the foregoing, the Company may at any time prior to
such time as any Person becomes an Acquiring Person amend this Agreement to
lower the thresholds set forth in Section 1(a), 3(b) and 24(a)(ii) hereof to not
less than 10% (the "Reduced Threshold"); provided, however, that no Person who
beneficially owns a number of Common Stock equal to or greater than the Reduced
Threshold shall become an Acquiring Person unless such Person shall, after the
public announcement of the Reduced Threshold, increase its beneficial ownership
of the then outstanding Common Stock (other than as a result of an acquisition
of Common Stock by the Company) to an amount equal to or greater than the
greater of (x) the Reduced
31
Threshold or (y) the sum of (i) the lowest beneficial ownership of such Person
as a percentage of the outstanding Common Stock as of any date on or after the
date of the public announcement of such Reduced Threshold plus (ii) .001%.
28. Determination 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 or any
other securities of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act as in effect on the date of this Agreement.
Except as otherwise provided herein, the Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend 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 in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights Certificates
and all other parties, and (y) not subject the Board to any liability to the
holders of the Rights Certificates.
29. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
30. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, the Common Stock) any legal or equitable right, remedy
or claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common Stock).
31. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
32. Governing Law. This Agreement, each Right and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Nevada and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and to
be performed entirely within such state; provided, however, that all provisions
regarding the rights, duties and obligations of the Rights Agent shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such state.
32
33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
34. 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.
33
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.
PHARMOS CORPORATION
By: /s/ XXXXXX X. XXXX
----------------------------------
Xxxxxx X. Xxxx
Executive Vice President and
Chief Financial Officer
AMERICAN STOCK TRANSFER
& TRUST COMPANY,
as Rights Agent
By: /s/ XXXXXXX X. XXXXXX
----------------------------------
Xxxxxxx X. Xxxxxx
Vice President
34
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
PHARMOS CORPORATION
Certificate of Designation
Of the Voting Powers, Designation,
Preferences and Relative, Participating,
Optional or Other Special Rights and Qualifications,
Limitations and Restrictions of the
Series D Preferred Stock
----------
Pursuant to Sections 78.195 and 78.1955 of the
General Corporation Law of the State of Nevada
----------
Pharmos Corporation, a corporation organized and existing under the General
Corporation Law of the State of Nevada (the "Corporation"), DOES HEREBY CERTIFY:
that, pursuant to authority conferred upon the Board of Directors of the
Corporation by its Articles of Incorporation, as amended (the "Certificate"),
and, pursuant to the provisions of Section 78.195 and 78.1955 of the General
Corporation Law of the State of Nevada, said Board of Directors, at a duly
called meeting held on October 23, 2002, at which a quorum was present and acted
throughout, adopted the following resolutions, which resolutions remain in full
force and effect on the date hereof creating a series of 100,000 shares of
Preferred Stock having a par value of $0.03 per share, designated as Series D
Preferred Stock (the "Series D Participating Preferred Stock") out of the class
of 1,250,000 shares of preferred stock of the par value of $0.03 per share (the
"Preferred Stock"):
RESOLVED, that pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate, the Board of Directors does
hereby create, authorize and provide for the issuance of the Series D
Participating Preferred Stock having the voting powers, designation, relative,
participating, optional and other special rights, preferences, and
qualifications, limitations and restrictions thereof that are set forth as
follows:
1. Designation and Amount. The shares of such series shall be designated
as Series D Participating Preferred Stock, $0.03 par value per share, and the
number of shares constituting such series shall be One Hundred Thousand
(100,000). Such number of shares may be increased
1
or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series D Participating Preferred Stock to a
number less than that of the shares then outstanding plus the number of shares
issuable upon exercise of any outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation convertible into
shares of Series D Participating Preferred Stock.
2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series D Participating Preferred Stock with respect to dividends, the holders of
shares of Series D Participating Preferred Stock in preference to the holders of
shares of Common Stock, par value $0.03 per share (the "Common Stock"), of the
Corporation and any other junior stock, shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the first day of March, June,
September and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series D Participating Preferred Stock in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $10.00, or (b) subject to the
provision for adjustment hereinafter set forth, one thousand (1,000) times the
aggregate per share amount of all cash dividends, and one thousand (1,000) times
the aggregate per share amount (payable in kind) of all noncash dividends or
other distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series D Participating Preferred Stock. In the event the Corporation
shall at any time after the close of business on October 23, 2002 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the amount to which holders of shares of
Series D Participating Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
D Participating Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $10.00 per share on the Series D
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series D
2
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series D Participating Preferred
Stock unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series D Participating
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series D Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series D Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
3. Voting Rights. The holders of shares of Series D Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series D Participating Preferred Stock shall entitle the holder thereof
to one thousand (1,000) votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock
into a greater number of shares or (iii) combine the outstanding Common Stock
into a smaller number of shares, by reclassification or otherwise, then in each
such case the number of votes per share to which holders of shares of Series D
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series D Participating Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, holders of Series D Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series D Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series
3
D Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series D Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series D Participating
Preferred Stock except dividends paid ratably on the Series D
Participating Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series D Participating Preferred Stock
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to the Series D Participating
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series
D Participating Preferred Stock or any shares of stock ranking on a parity with
the Series D Participating Preferred Stock except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series D Participating Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation or in any other Certificate of Designation creating a series of
Preferred Stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock
4
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series D Participating Preferred Stock unless, prior thereto,
the holders of shares of Series D Participating Preferred Stock shall have
received $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment,
provided that the holders of shares of Series D Participating Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 1,000 times the
aggregate amount to be distributed per share to holders of shares of Common
Stock, or (2) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series D
Participating Preferred Stock, except distributions made ratably on the Series D
Participating Preferred Stock and all such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Series D Participating Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series D
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to one thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series D Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that are
outstanding immediately prior to such event.
8. Redemption. The shares of Series D Participating Preferred Stock shall
not be redeemable.
9. Ranking. The Series D Participating Preferred Stock shall rank junior
to all other series of the Corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
5
10. Amendment. The Articles of Incorporation and the Bylaws of the
Corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series D
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least 66 2/3% of the outstanding shares of
Series D Participating Preferred Stock voting separately as a class.
11. Fractional Shares. Series D Participating Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holders fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series D Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Designation Of the Voting Powers, Designation, Preferences and Relative,
Participating, Optional or Other Special Rights and Qualifications, Limitations
and Restrictions of the Series D Preferred Stock of PHARMOS CORPORATION on this
23rd day of October, 2002.
_____________________________
Xxx Xxxxxxxxxx,
President
_____________________________
Xxxxxx X. Xxxx,
Secretary
6
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R-_____ _____ Rights
Rights
NOT EXERCISABLE AFTER OCTOBER 22, 2012 OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $0.0005 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE WERE ISSUED
TO A PERSON WHO WAS AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID UNDER THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
RIGHTS CERTIFICATE
PHARMOS 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 October 23, 2002 (the "Rights Agreement") between Pharmos
Corporation, a Nevada corporation (the "Company"), and American Stock Transfer &
Trust Company, a New York corporation (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. Eastern time on October 22, 2012 unless
earlier redeemed or exchanged by the Company as set forth in the Rights
Agreement, at the office of the Rights Agent designated for such purpose, one
one-thousandth of a fully paid, nonassessable share of Series D Participating
Preferred Stock, par value $0.03 per share (the "Preferred Stock") of the
Company, at a purchase price of $15.00 per one one-thousandth of a share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the appropriate Form of Election to purchase and certificate duly executed.
The number of Rights evidenced by this Rights Certificate (and the number of
shares which may be purchased upon exercise thereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of the
close of business on November 6, 2002, based on the Preferred Stock as
constituted at such date.
* The portion of the legend in brackets shall be inserted only if
applicable.
1
As provided in the Rights Agreement, the Purchase Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal office of the Company and are
also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Preferred Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised (other than pursuant
to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised. If this Rights
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement to purchase Common Stock, par value $0.03 ("Common
Stock") in lieu of Preferred Stock, the holder shall be entitled to receive this
Rights Certificate duly marked to indicate that such exercise has occurred as
set forth in the Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at its option at a
redemption price of $0.0005 per Right (in cash or shares of Common Stock or
other securities of the Company deemed by the Company's Board of Directors to be
at least equivalent in value) or (ii) may be exchanged in whole or in part for
shares of Common Stock or substitute consideration. Subject to the provisions of
the Rights Agreement, the Company, at its option, may elect to mail payment of
the redemption price to the registered holder of the Right at the time of
redemption, in which event this certificate may become void without any further
action by the Company.
No fractional shares of Preferred Stock will be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of 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
2
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated:______________, 20__.
ATTEST: PHARMOS CORPORATION
By: ________________________ By: ________________________
Title: ________________________ Title: ________________________
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Rights Agent
By: ________________________
3
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED, ______________________________________________________
hereby sells, assigns and transfers unto
________________________________________________________________________________
________________________________________________________________________________
(please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated:______________, 20__.
____________________________
Signature
____________________________
Signature
Signature(s) Guaranteed:
____________________________
4
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate |_| are |_| are not being
sold, assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it |_| did
|_| did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:______________, 20__.
____________________________
Signature
NOTICE
The signature to the foregoing Assignment must correspond to the name as written
upon the face of this Rights Certificate in every particular, without alteration
or enlargement or any change whatsoever.
5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate
to purchase shares of Common Stock,
or other securities, pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To PHARMOS CORPORATION:
The undersigned hereby irrevocably elects to exercise ______________
Rights represented by this Rights Certificate to purchase the shares of Common
Stock (or such other securities of the Company) issuable upon the exercise of
the Rights and requests that certificates for such shares be issued in the name
of:
________________________________________________________________________________
(Please insert social security or other identifying number)
________________________________________________________________________________
(Please print name and address)
The Rights Certificate indicating the balance, if any, of such Rights which may
still be exercised pursuant to Section 11(a)(ii) of the Rights Agreement shall
be returned to the undersigned unless such Person requests that the Rights
Certificate be registered in the name of and delivered to: (Complete only if
Rights Certificate is to be registered in a name other than the undersigned.)
________________________________________________________________________________
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
Dated:______________, 20__.
_________________________ ____________________________
Signature Signature
Signature(s) Guaranteed:
_________________________
6
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate |_| are |_| are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) this Rights Certificate |_| is |_| is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned, it |_| did
|_| did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:______________, 20__.
_____________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond to the name
as written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
7
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
the Rights Certificate other than pursuant to
Section 11(a)(ii) of the Rights Agreement.)
To PHARMOS CORPORATION:
The undersigned hereby irrevocably elects to exercise ______________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
(or such other securities of the Company or any other Person) issuable upon the
exercise of the Rights and requests that certificates for such shares be issued
in the name of:
________________________________________________________________________________
(Please insert social security or other identifying number)
________________________________________________________________________________
(Please print name and address)
The Rights Certificate indicating the balance, if any, of such Rights which may
still be exercised pursuant to Section 11(a)(ii) of the Rights Agreement shall
be returned to the undersigned unless such Person requests that the Rights
Certificate be registered in the name of and delivered to: (Complete only if
Rights Certificate is to be registered in a name other than the undersigned.)
________________________________________________________________________________
Please insert social security or other identifying number
________________________________________________________________________________
(Please print name and address)
Dated:______________, 20__.
_________________________ ____________________________
Signature Signature
Signature(s) Guaranteed:
_________________________
8
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate |_| are |_| are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) the Rights evidenced by this Rights Certificate |_| are |_| are not being
sold, assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement);
(3) after due inquiry and to the best knowledge of the undersigned, it |_| did
|_| did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:______________, 20__.
_____________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase must correspond to the name
as written upon the fact of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
9
Exhibit C
Summary of Rights to Purchase Preferred Stock
Introduction
On October 23, 2002, the Board of Directors of our Company, Pharmos
Corporation, a Nevada corporation, declared a dividend of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par value
$0.03 per share. The dividend is payable on November 6, 2002 to the stockholders
of record on November 6, 2002.
Our Board has adopted this Rights Agreement to protect stockholders from
coercive or otherwise unfair takeover tactics. In general terms, it works by
imposing a significant penalty upon any person or group that acquires 15% or
more of our outstanding common stock without the approval of our Board. The
Rights Agreement should not interfere with any merger or other business
combination approved by our Board.
For those interested in the specific terms of the Rights Agreement as made
between our Company and American Stock Transfer & Trust Co., as the Rights
Agent, on October 23, 2002, we provide the following summary description. Please
note, however, that this description is only a summary, and is not complete, and
should be read together with the entire Rights Agreement, which will be filed
with the Securities and Exchange Commission as an exhibit to a Current Report on
Form 8-K dated October 24, 2002. A copy of the agreement is available free of
charge from our Company.
The Rights
Our Board authorized the issuance of a Right with respect to each
outstanding share of common stock on November 6, 2002. The Rights will initially
trade with, and will be inseparable from, the common stock.
The Rights are evidenced only by certificates that represent shares of
common stock. New Rights will accompany any new shares of common stock we issue
after November 6, 2002 until the Distribution Date described below, and in
certain circumstances, new shares of common stock we issue after the
Distribution Date.
New common stock certificates we issue after November 6, 2002 as a result
of transfers of stock by existing stockholders or of new issuances by us will
contain a notation referring to the Rights and the Rights Agreement.
Exercise Price
Each Right will allow its holder to purchase from our Company one
one-
thousandth of a share of Series D Participating Preferred Stock ("Preferred
Stock") for $15.00, once the Rights become exercisable. This portion of a share
of Preferred Stock will give the stockholder approximately the same dividend,
voting, and liquidation rights as would one share of common stock. Prior to
exercise, the Right does not give its holder any dividend, voting, or
liquidation rights as a stockholder of our Company.
Exercisability
The Rights will not be exercisable until:
o 10 days after the public announcement that a person or group has
become an "Acquiring Person" by obtaining beneficial ownership of
15% or more of our outstanding common stock, or, if earlier,
o 10 business days (or a later date determined by our Board before any
person or group becomes an Acquiring Person) after a person or group
begins a tender or exchange offer which, if completed, would result
in that person or group becoming an Acquiring Person.
We refer to the date when the Rights become exercisable as the
"Distribution Date." Until that date, the common stock certificates will also
evidence the Rights, and any transfer of shares of common stock will constitute
a transfer of Rights. After that date, the Rights will separate from the common
stock and be evidenced by book-entry credits or by Rights certificates that we
will mail to all eligible holders of common stock.
Any Rights held by an Acquiring Person are void and may not be exercised.
Our Board may reduce the threshold at which a person or group becomes an
Acquiring Person from 15% to not less than 10% of the outstanding common stock.
Consequences of a person or group becoming an Acquiring Person
o Flip In. If a person or group becomes an Acquiring Person, all
holders of each Right except the Acquiring Person may, for a period
of 60 days, for $15.00, purchase shares of our common stock with a
market value of $30.00, based on the market price of the common
stock prior to such acquisition.
o Flip Over. If our Company is later acquired in a merger or similar
transaction after the Rights Distribution Date, all holders of each
Right except the Acquiring Person may, for $15.00, purchase shares
of the acquiring corporation with a market value of $30.00 based on
the market price of the acquiring corporation's stock, prior to such
merger.
2
Preferred Stock Provisions
Each one one-thousandth of a share Preferred Stock, if issued:
o will not be redeemable;
o will be junior to any other series of preferred stock we may issue;
o will entitle holders to quarterly dividend payments of $0.01, or an
amount equal to the dividend paid on one share of common stock,
whichever is greater, so that one full share of Preferred Stock
would entitle the holder to receive a quarterly dividend payment of
the greater of $10.00 per share or 1,000 times the dividend paid on
one share of common stock;
o will entitle holders upon liquidation either to receive $1.00, or an
amount equal to the payment made on one share of common stock,
whichever is greater, so that one full share of Preferred Stock
would entitle to holder to receive upon liquidation the greater of
$1,000 per share or 1,000 times the payment made on one share of
common stock;
o will have the same voting power as one share of common stock, so
that one full share of Preferred Stock would have 1,000 times the
votes of one share of common stock; and
o if shares of our common stock are exchanged via merger,
consolidation, or a similar transaction, will entitle holders to a
per share payment equal to the payment made on one share of common
stock, so that one full share of Preferred Stock would be entitled
to receive a payment 1,000 times greater than the per share payment
to a share of common stock.
The value of one one-thousandth interest in a share of Preferred Stock
should approximate the value of one share of common stock.
Expiration
The Rights will expire on October 22, 2012 or on an earlier date if we
redeem or exchange them, as discussed below. The Rights will also expire on an
earlier date if our Company enters into a merger transaction approved by a
majority of our disinterested directors and the form of consideration received
by any remaining stockholders is the same as that received in the transaction
approved by our Board of Directors.
Redemption
Our Board may redeem the Rights for $0.0005 per Right at any time before
any person or group becomes an Acquiring Person. If our Board redeems any
Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only
right of the holders of Rights will be to receive the redemption price of
$0.0005 per Right, in cash, common stock or other securities, as determined by
our Board. The redemption price will be
3
adjusted if we have a stock split or stock dividends of our common stock.
Our Board may also redeem all outstanding Rights for the same redemption
price after a person or group has become an Acquiring Person. This will only
affect holders of Rights who failed to purchase shares of common stock during
the 60 day period following the "flip in" event described above. For those
holders, our ability to redeem their Rights can only occur if we are entering
into a merger transaction with a party other than the original Acquiring Person,
of if the original Acquiring Person no longer is a beneficial owner of 15% of
our outstanding common stock and there are no other such Acquiring Persons at
the time.
Exchange
After a person or group becomes an Acquiring Person, but before an
Acquiring Person owns 50% or more of our outstanding common stock, our Board may
extinguish the Rights by exchanging one share of common stock or an equivalent
security for each Right, other than Rights held by the Acquiring Person.
Anti-dilution provisions
Our Board may adjust the purchase price of the Preferred Stock, the number
of shares of Preferred Stock issuable and the number of outstanding Rights to
prevent dilution that may occur from a stock dividend, a stock split, a
reclassification of the Preferred Stock or common stock, or otherwise. No
adjustments to the Exercise Price of less than 1% will be made.
Amendments
The terms of the Rights Agreement may be amended by our Board without the
consent of the holders of the Rights. However, our Board may not amend the
Rights Agreement to lower the threshold at which a person or group becomes an
Acquiring Person to below 10% of our outstanding common stock. In addition, the
Board may not cause a person or group to become an Acquiring Person by lowering
this threshold below the percentage interest that such person or group already
owns. After a person or group becomes an Acquiring Person, our Board may not
amend the agreement in a way that adversely affects holders of the Rights.
4
