EXHIBIT 1
RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT, dated as of February 16, 2001, is made between
Biospherics Incorporated, a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Co., a __________________ corporation (the "Rights
Agent").
RECITALS
The Board of Directors of the Company has authorized and declared the
payment of a dividend of one preferred share purchase right (a "Right") for each
share of Common Stock (as defined in Section 1) outstanding on the Record Date
(as defined in Section 1) and has authorized the issuance of one Right for each
share of Common Stock issued after the Record Date and before the earliest of
the Distribution Date, the Redemption Date, the Exchange Date and the Expiration
Date (as such terms are defined in Section 1) and in certain cases following the
Distribution Date. Each Right will represent, as of the Record Date, the right
to purchase one one-hundredth of one share of Preferred Stock (as defined in
Section 1) upon the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" means any Person who or which, together with all
Affiliates and Associates of such Person, is (or has previously been, at any
time after the date of this Agreement, whether or not such Person(s) continues
to be) the Beneficial Owner of 10 percent or more of the Common Stock then
outstanding (determined without taking into account any securities exercisable
or exchangeable for, or convertible into, Common Stock, other than any such
securities beneficially owned by the Acquiring Person and Affiliates and
Associates of such Person). However, "Acquiring Person" shall not include any
Exempt Person.
Notwithstanding the foregoing, a Person shall not become an "Acquiring
Person" solely as the result of an acquisition of Common Stock by the Company or
any Subsidiary which, by reducing the number of shares outstanding, increases
the proportionate number of shares beneficially owned by such Person to 10
percent or more of the Common Stock then outstanding as determined above;
provided, however, that if a Person becomes the Beneficial Owner of 10 percent
or more of the Common Stock then outstanding as determined above solely by
reason of such a share acquisition by the Company and such Person shall, after
becoming the Beneficial Owner of such Common Stock, become the Beneficial Owner
of any additional shares of Common Stock by any means whatsoever (other than as
a result of the subsequent occurrence of a stock dividend or a subdivision of
the Common Stock into a larger number of shares or a similar transaction), then
such Person shall be deemed to be an "Acquiring Person."
Notwithstanding the foregoing, if a majority of the Board of Directors
of the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
Section 1(a), has become such inadvertently, and such Person divests as promptly
as practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person," as defined pursuant to the foregoing provisions
of this Section 1(a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement. The determination of whether such
Person's becoming an Acquiring Person shall have been inadvertent and the
determination of whether the divestment of sufficient shares shall have been
made as promptly as practicable shall be made by a majority of the Board of
Directors of the Company.
(b) "Adjustment Number" has the meaning set forth in, and shall be
calculated in accordance with, the Certificate of Designation, Preferences and
Rights of Series A Participating Preferred Stock attached as Exhibit A hereto.
(c) "Affiliate" has the meaning given to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Agreement; provided that, for purposes of this Agreement, the term
"Affiliate" shall not include any Person that is an Exempt Person.
(d) "Associate" has the meaning given to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Agreement; provided that, for purposes of this Agreement, the term
"Associate" shall not include any Person that is an Exempt Person.
(e) Except as provided below, a Person shall be deemed to be the
"Beneficial Owner" of, and shall be deemed to "beneficially own," any
securities:
(1) which such Person or any Affiliate or Associate of such Person
beneficially owns, directly or indirectly;
(2) which such Person or any Affiliate or Associate of such Person has,
directly or indirectly, the right or obligation (whether or not then exercisable
or effective) to acquire pursuant to any agreement, arrangement or understanding
(whether or not in writing), or upon the exercise of conversion rights, exchange
rights, rights (other than these Rights), warrants or options, or otherwise;
provided, however, that a Person will not be deemed the Beneficial Owner of, or
to beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any Affiliate or Associate of such Person
until such tendered securities are accepted for purchase or exchange;
(3) which such Person or any Affiliate or Associate of such Person has,
directly or indirectly, the right (whether or not then exercisable) to vote, or
to direct the voting of, pursuant to any agreement, arrangement or understanding
(whether or not in writing); provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security pursuant to
this clause (3) if the agreement, arrangement or understanding to vote, or to
direct the
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voting of, such security (A) arises solely from a revocable proxy or consent
given in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the Exchange Act and applicable rules and regulations
thereunder and (B) is not also then reportable under Item 6 (or any comparable
or successor item) of Schedule 13D under the Exchange Act (or any comparable or
successor schedule or report);
(4) which such Person or any Affiliate or Associate of such Person has
"beneficial ownership" of as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act or any successor provision; or
(5) which are beneficially owned, directly or indirectly, by any other
Person or any Affiliate or Associate of such other Person with whom such Person
or any Affiliate or Associate of such Person has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in clause (3) of this
Section 1(e) or disposing of any securities of the Company.)
Nothing in the preceding sentence shall cause a Person engaged in
business as an underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's participation
in good faith in a firm commitment underwriting until the expiration of 40 days
after the date of such acquisition.
Notwithstanding anything in this Agreement to the contrary, for
purposes of this Agreement, no Person shall be treated as the "Beneficial Owner"
of, or be deemed to "beneficially own," any securities solely by reason of the
ownership of those securities by any other Person that is an Exempt Person.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, the phrase "then outstanding," when used with reference to a
Person's Beneficial Ownership of securities of the Company, shall mean the
number of such securities then issued and outstanding together with the number
of such securities not then actually issued and outstanding which such Person
would be deemed to own beneficially under the preceding provisions in this
definition.
(f) "Business Combination" has the meaning set forth in Section 13 of
this Agreement.
(g) "Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in the State of Maryland are authorized or
obligated by law or executive order to close.
(h) "Close of Business" on any given date means 5:00 p.m., Baltimore,
Maryland time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m. Baltimore, Maryland time, on the next
succeeding Business Day.
(i) "Common Equivalent Share" has the meaning set forth in Section
11(c)(1)(B) of this Agreement.
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(j) "Common Share" has the meaning set forth in Section 11(c)(1)(B) of
this Agreement.
(k) "Common Stock" when used with reference to the Company means the
Common Stock, par value $0.005 per share, of the Company (as the same may be
changed by reason of any combination, subdivision or reclassification of the
Common Stock). "Common Stock" when used with reference to any Person (other than
the Company prior to a Business Combination) means shares of capital stock of
such Person (if such Person is a corporation) of any class or series, or units
of equity interests in such Person (if such Person is not a corporation) of any
class or series, the terms of which shares or units do not limit (as a fixed
amount and not merely in proportional terms) the amount of dividends or income
payable or distributable on such shares or units or the amount of assets
distributable on such shares or units upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide that
such shares or units are subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; provided, however, that if at any
time there are more than one such class or series of capital stock of or equity
interests in such Person, "Common Stock" of such Person will include all such
classes and series substantially in the proportion of the total number of shares
or other units of each such class or series outstanding at such time.
(l) "Current Market Price" per share or unit of Common Stock, Common
Equivalent Share or any other security on any date is the average of the daily
closing prices per share or unit of such Common Stock, Common Equivalent Share
or any other security for the 30 consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date for the purpose of any
computation under this Agreement; provided, however, that in the event that the
Current Market Price per share of Common Stock, Common Equivalent Share or any
other security is determined during a period following the announcement by the
issuer of such Common Stock, Common Equivalent Share or any other security of
(i) a dividend or distribution on such Common Stock, Common Equivalent Share or
any other security other than a regular quarterly cash dividend, or (ii) any
subdivision, combination or reclassification of such Common Stock, Common
Equivalent Share or any other security, and prior to the expiration of 30
Trading Days after the "ex-dividend" date for such dividend or distribution or
the record date for such subdivision, combination or reclassification, then, and
in each such case, the "Current Market Price" must be appropriately adjusted to
take into account such dividend, distribution, subdivision, combination or
reclassification. The closing price for each Trading Day shall be the last sale
price, regular way, on such day, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, on such day,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NASDAQ
National Market System ("NASDAQ") or, if the Common Stock, Common Equivalent
Share or any other security is not listed or admitted to trading on the NASDAQ,
as reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal United States national securities
exchange on which the Common Stock, Common Equivalent Share or any other
security is listed or admitted to trading or, if the Common Stock, Common
Equivalent Share or any other security is not listed or
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admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System or such other system then in use, or,
if on any such date the Common Stock, Common Equivalent Share or any other
security is 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 security selected by a majority of the Board of Directors of the Company. If
no such market maker is making a market, the fair market value of such shares or
units on such day shall be determined in good faith by a majority of the Board
of Directors of the Company, which determination shall be described in a
statement filed with the Rights Agent and shall be binding and conclusive for
all purposes. The term "Trading Day" means a day on which the principal United
States national securities exchange on which the Common Stock, Common Equivalent
Share or any other security is listed or admitted to trading is open for the
transaction of business or, if the Common Stock, Common Equivalent Share or any
other security is not listed or admitted to trading on any United States
national securities exchange, but is traded in the over-the-counter market, then
any day for which the high bid and low asked prices in the over-the-counter
market are reported, or if the Common Stock, Common Equivalent Share or any
other security is not traded in the over-the-counter market, then a Business
Day. If the Preferred Stock is not publicly traded, the "Current Market Price"
of the Preferred Stock shall be conclusively deemed to be the Current Market
Price of the Common Stock as determined pursuant to this paragraph of Section 1
(appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof), multiplied by the Adjustment
Number. Each Common Equivalent Share consisting of preferred stock other than
Preferred Stock shall be conclusively deemed to have the same "Current Market
Price" as a Common Equivalent Share consisting of Preferred Stock.
(m) "Distribution Date" means the earlier of (i) the tenth (10th) day
after the Stock Acquisition Date and (ii) the tenth (10th) Business Day after
commencement of or public disclosure of an intention to commence (including,
without limitation, any such commencement or public disclosure which occurs
before or after the date of this Agreement and prior to the issuance of the
Rights) a tender offer or exchange offer by a Person if, after acquiring the
maximum number of securities sought pursuant to such offer, such Person, or any
Affiliate or Associate of such Person, would be an Acquiring Person. A majority
of the Board of Directors of the Company may defer the date set forth in clause
(ii) of the preceding sentence to a specified later date or to an unspecified
later date to be determined by a subsequent action or event.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute.
(o) "Exchange Date" means the time at which Rights are exchanged
pursuant to Section 11(c)(2).
(p) "Exempt Event" means with respect to any Person, the acquisition by
such Person of Beneficial Ownership of Common Stock solely as a result of the
occurrence of a Triggering Event and the effect of such Triggering Event on the
last proviso of clause (ii) of the definition of
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Beneficial Owner, other than a Triggering Event in which such Person becomes an
Acquiring Person.
(q) "Exempt Person" means (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan of the Company or of any Subsidiary of
the Company, (iv) any Person holding Common Stock for any such employee benefit
plan or for employees of the Company or of any Subsidiary of the Company
pursuant to the terms of any such employee benefit plan, (v) Xxxxxxx X. Xxxxx
and/or Xxxxx X. Xxxxx and (vi) RCG International Investors, LDC ("RCG") to the
extent of its ownership Common Stock and/or of stock purchase warrants as long
as RCG is in compliance with its agreements with the Company concerning maximum
stock ownership.
(r) "Exercise Amount" means the amount payable by the holder as a
condition to the exercise of one Right. Until and unless it shall be adjusted in
accordance with this Agreement, the Exercise Amount shall be $16.00.
(s) "Expiration Date" means the Close of Business on December 31, 2010.
(t) "Person" means any individual, firm, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity, and shall include any "group" as that term is used
in Rule 13d-5(b) under the Exchange Act (or any successor provision).
(u) "Preferred Stock" means the Company's Series A Participating
Preferred Stock, par value $1.00 per share, having the rights and preferences
set forth in the Certificate of Designation, Preferences and Rights of Series A
Participating Preferred Stock, attached hereto as Exhibit A.
(v) "Principal Party" means (i) in the case of any Business Combination
described in clause (i), (ii) or (iii) of the first sentence of Section 13(a),
(A) the Person that is the issuer of any securities into which shares of Common
Stock of the Company are converted or for which they are exchanged in such
Business Combination or, if there is more than one such issuer, the issuer of
the Common Stock which has the greatest aggregate market value or (B) if no
securities are so issued, the Person that survives or results from the Business
Combination or, if there is more than one such Person, the Person the Common
Stock of which has the greatest aggregate market value, and (ii) in the case of
any Business Combination described in clause (iv) of the first sentence in
Section 13(a), the Person that receives the greatest portion of the assets or
earning power transferred pursuant to such Business Combination or, if each
Person that is a party to such Business Combination receives the same portion of
the assets or earning power so transferred or if the Person receiving the
greatest portion of the assets or earning power cannot reasonably be determined,
whichever of such Persons is the issuer of the Common Stock which has the
greatest aggregate market value; provided, however, that in any such case, 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 of one or
more other Persons, then (x) "Principal Party" refers to
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whichever of such other Persons has Common Stock that is and has been
continuously over the preceding 12-month period registered under Section 12 of
the Exchange Act; (y) if the Common Stocks of two or more of such other Persons
are and have been so registered, "Principal Party" refers to whichever of such
other Persons is the issuer of the Common Stock which has the greatest aggregate
market value; or (z) if the Common Stock of none of such other Persons has been
so registered, "Principal Party" refers to whichever of such other Persons
(other than an individual) is the Person which has the equity securities with
the greatest aggregate market value. 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 above apply to
each of the chains of ownership having an interest in such joint venture as if
such Person were a Subsidiary of both or all of such joint ventures and the
Principal Parties in each such chain shall bear the obligations set forth in
Section 13 in the same ratio as their direct or indirect interests in such
Person bear to the total of such interests.
(w) "Purchase Price" means: (i) the price at which one one-hundredth of
a share of Preferred Stock shall be purchasable with the Rights (the Purchase
Price shall be $16.00 per one one-hundredth of a share of Preferred Stock until
and unless it shall be adjusted pursuant to this Agreement) and (ii) immediately
after the Trigger Date, the price per Common Share for which Common Shares shall
be purchasable with the Rights. Thereafter the term "Purchase Price" as applied
with respect to each kind of stock or other property purchasable with the Rights
as a result of adjustments prescribed by this Agreement shall mean the price at
which each share of such stock or the smallest available unit of such other
property is purchasable with the Rights.
(x) "Record Date" means the Close of Business on March 1, 2001.
(y) "Redemption Date" means the time at which the Rights are scheduled
to be redeemed as provided in Section 23.
(z) "Redemption Price" has the meaning given to such term in
Section 23.
(aa) "Securities Act" means the Securities Act of 1933, as amended, and
any successor statute.
(bb) "Stock Acquisition Date" means the first date of public disclosure
by the Company, an Acquiring Person or otherwise that an Acquiring Person has
become such.
(cc) "Subsidiary" has the meaning given to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
(dd) "Trigger Date" means the first date upon which a Person becomes an
Acquiring Person.
(ee) "Triggering Event" shall mean a Person becoming an Acquiring
Person.
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Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date: (i) the Rights shall be issued in
respect of and shall be evidenced by the certificates representing the shares of
Common Stock issued and outstanding on the Record Date and shares of Common
Stock issued or which become outstanding after the Record Date and prior to the
earliest of the Distribution Date, the Redemption Date, the Exchange Date and
the Expiration Date (which certificates for Common Stock shall be deemed to also
be certificates evidencing the Rights), and not by separate certificates; (ii)
the registered holders of such shares of Common Stock shall also be the
registered holders of the Rights associated with such shares; and (iii) the
Rights shall be transferable only in connection with the transfer of shares of
Common Stock, and the surrender for transfer of any certificate for such shares
of Common Stock shall also constitute the surrender for transfer of the Rights
associated with such shares. As soon as practicable after the Company has
notified the Rights Agent of the occurrence of the Distribution Date, the Rights
Agent shall, at the expense of the Company (except as otherwise provided in
Section 7(e)), mail, 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, as shown by the records of the Company, at the address of
such holder shown on such records, one or more certificates evidencing the
Rights ("Rights Certificates"), in substantially the form of Exhibit B hereto,
evidencing one Right (as adjusted from time to time pursuant to this Agreement)
for each share of Common Stock so held. From and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) Rights shall be issued in respect of all shares of Common Stock
which are issued or sold by the Company after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date, the Exchange Date and
the Expiration Date. In addition, in connection with the issuance or sale of
Common Stock by the Company following the Distribution Date and prior to the
earliest of the Redemption Date, the Exchange Date and the Expiration Date, the
Company shall, with respect to Common Stock so issued or sold (i) pursuant to
the exercise of stock options issued prior to the Distribution Date or under any
employee plan or arrangement created prior to the Distribution Date, or (ii)
upon the exercise, conversion or exchange of securities issued by the Company
prior to the Distribution Date, issue Rights and Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (x) no such Rights and Rights Certificate shall
be issued if, and to the extent that, the Company shall be advised by counsel
that such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Rights Certificate would
be issued and (y) no such Rights and Rights Certificates shall be issued if, and
to the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof. Certificates issued after the Record Date
representing shares of Common Stock outstanding on the Record Date and shares of
Common Stock issued after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date, the Exchange Date and
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the Expiration Date shall have impressed, printed, or written on, or otherwise
affixed to them a legend substantially in the following form:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Biospherics
Incorporated (the "Company") and American Stock Transfer & Trust Co. as
Rights Agent, dated as of February 16, 2001 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a
copy of which is on file at the principal executive offices of the
Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. The Company will mail
to the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefore. Under
certain circumstances, Rights that were, are or become beneficially
owned by Acquiring Persons or their Associates or Affiliates (as such
terms are defined in the Rights Agreement) may become null and void and
the holder of any of such Rights (including any subsequent holder)
shall not have any right to exercise such Rights.
(c) Notwithstanding any other provision of this Agreement, neither the
Company, the Rights Agent nor anyone else shall have any obligation to issue any
Rights Certificate to an Acquiring Person or to anyone else in whose hands the
Rights nominally represented by such Certificate shall be null and void either
initially or in connection with a request to register a transfer of Rights
represented by a certificate previously issued. Furthermore, neither the
Company, the Rights Agent nor anyone else shall be obligated to issue Rights
Certificates to any person making a tender offer which if consummated could
render such person an Acquiring Person or to any Affiliate or Associate of such
person until and unless the tender offer is withdrawn and the person shall have
established to the Company's reasonable satisfaction that such person does not
intend to become an Acquiring Person. The Company shall be entitled to require
any person claiming the right to receive a Rights Certificate to present such
evidence as the Company shall require in good faith to establish to the
Company's satisfaction that the Rights represented by that Certificate have not
become null and void under the provisions in Section 7(e) or that the Company is
not entitled to withhold such Certificate under the provisions of the preceding
sentence.
Section 4. FORM OF RIGHTS CERTIFICATES. The Rights Certificates (and
the form of election to purchase shares and form of assignment to be printed on
the reverse thereof) shall be in substantially the form of 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
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required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of this Agreement, the Rights Certificates, whenever issued, shall be
dated as of the Distribution Date, and on their face shall entitle the holders
thereof to purchase such number of shares of Preferred Stock as shall be set
forth therein at the Purchase Price set forth therein, but the number and kind
of such securities and the Purchase Price shall be subject to adjustment as
provided in this Agreement.
Section 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION.
(a) Each Rights Certificate shall be executed on behalf of the Company
by the Company's Chief Executive Officer, 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 Company's
Secretary or an Assistant Secretary, either manually or by facsimile signature.
Each Rights Certificate shall be countersigned by the Rights Agent either
manually or, if permitted by the Company, 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 a Rights Certificate shall cease to be such
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificate nevertheless may be
countersigned by the Rights Agent and issued and delivered with the same force
and effect as though the Person who signed such Rights Certificate had not
ceased to be such officer of the Company; and any Rights Certificate may be
signed on behalf of the Company by any Person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the Company
to sign such Rights Certificate, although at the date of the execution of this
Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent shall keep or
cause to be kept, at its principal stock transfer office, 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 by each Rights Certificate, and the certificate
number and the date of issuance of each Rights Certificate.
Section 6. TRANSFER, DIVISION, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 3(c) and Section 14, at any
time after the Close of Business on the Distribution Date and at or prior to the
Close of Business on the earliest of the Redemption Date, the Exchange Date and
the Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, divided, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of shares of Preferred Stock (or following a Triggering Event or a Business
Combination, other securities, cash or other property, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, divide, 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
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be transferred, divided, combined or exchanged at the principal corporate 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. As a condition to such transfer, division,
combination or exchange, the Company may require payment by the surrendering
holder of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection therewith. Neither the Rights Agent nor the Company shall
be obligated to take any action whatsoever with respect to the transfer of any
such surrendered Rights Certificate until the registered holder shall have duly
completed and executed the form of assignment on the reverse side of such Rights
Certificate and shall have provided such additional evidence of the identity of
the Beneficial Owner (or such former or proposed Beneficial Owner) thereof or
such Beneficial Owner's Affiliates or Associates as the Company shall reasonably
request.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will make and deliver a new Rights Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Each Right shall entitle (except as otherwise provided in this
Agreement) the registered holder thereof, upon the exercise thereof as provided
in this Agreement, to purchase, for the Purchase Price, at any time after the
Distribution Date and prior to the earliest of the Expiration Date, the Exchange
Date and the Redemption Date, one one-hundredth (1/100) of a share of Preferred
Stock, subject to adjustment from time to time as provided in Sections 11 and
13.
(b) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided in this Agreement) in
whole or in part (except that no fraction of a Right may be exercised) at any
time after the Distribution Date and prior to the earliest of the Expiration
Date, the Exchange Date and the Redemption Date, by surrendering the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal stock transfer office of the
Rights Agent, together with payment of the Exercise Amount for each Right
exercised.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Amount for each Right exercised and an amount equal to
any applicable transfer tax required to be paid by the surrendering holder
pursuant to Section 9(d), the Rights Agent shall, subject to the provisions of
this Agreement, thereupon promptly (i)(A) requisition from any transfer agent
for the Preferred Stock (or make available, if the Rights Agent is the transfer
agent for such shares)
11
certificates for the Preferred Stock (or other securities, as the case may be)
to be purchased (and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests), or (B) if the Company shall have
elected to deposit the total number of shares of Preferred Stock (or other
securities, as the case may be) issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing such Preferred Stock (or other securities, as the case may be) as
are to be purchased (in which case certificates for the Preferred Stock (or
other securities, as the case may be) represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company shall
direct the depositary agent to comply with such request; (ii) 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 (iii) if
appropriate, requisition from the Company the amount of cash to be paid in lieu
of issuance of fractional shares in accordance with Section 14 of this Agreement
and, promptly after receipt thereof, cause the same to be delivered 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 (including shares of Common
Stock) of the Company, pay cash and/or distribute other property pursuant to
this Agreement, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 3(c) and Section 14.
(e) Notwithstanding anything in this Agreement to the contrary, any
Rights that are or were formerly beneficially owned on or after the earlier of
the Distribution Date and the Trigger Date by (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a direct or indirect
transferee of an Acquiring Person (or of an Associate or Affiliate of such
Acquiring Person) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a direct or indirect transferee of an Acquiring Person (or of an
Associate or Affiliate of such Acquiring Person) who becomes a transferee prior
to or concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a direct or indirect transfer (whether or not for
consideration) from the Acquiring Person (or from an Associate or Affiliate of
such Acquiring Person) to holders of equity interests in such Acquiring Person
(or to holders of equity interests in any Associate or Affiliate of such
Acquiring Person) or to any Person with whom the Acquiring Person (or an
Associate or Affiliate of such Acquiring Person) has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a direct or
indirect transfer which a majority of the Board of Directors of the Company
determines is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall, immediately
upon the occurrence of a Triggering Event and without any further action, be
null and void and no holder of such Rights shall have any rights whatsoever with
respect to such Rights whether under this Agreement or otherwise; provided,
however, that, in the case of transferees under clause (ii) or clause (iii)
above, any Rights beneficially owned by
12
such transferee shall be null and void only if and to the extent such Rights
were formerly beneficially owned by a Person who was, at the time such Person
beneficially owned such Rights, or who later became, an Acquiring Person or an
Affiliate or Associate of such Acquiring Person. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) are
complied with, but shall have no liability to any holder of a Rights Certificate
or to any other Person as a result of the Company's failure to make, or any
delay in making (including any such failure or delay by the Board of Directors
of the Company) any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to the registered holder of a Rights Certificate upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former or proposed Beneficial Owner)
thereof or the Affiliates or Associates of such Beneficial Owner (or former or
proposed Beneficial Owner) as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, division,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
the provisions of this Agreement. The Company shall deliver to the Rights Agent
for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF PREFERRED STOCK.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available at all times out of its authorized and unissued shares of
Preferred Stock or its authorized and issued shares of Preferred Stock held in
its treasury (and, following the occurrence of a Triggering Event or a Business
Combination, out of its authorized and unissued shares of Common Stock and/or
other securities or out of its authorized and issued shares of Common Stock
and/or other securities held in its treasury) free from preemptive rights or any
right of first refusal, a sufficient number of shares of Preferred Stock (and,
following the occurrence of a Triggering Event, shares of Common Stock and/or
other securities) to permit the exercise in full of all Rights from time to time
outstanding.
13
(b) The Company further covenants and agrees, so long as the Preferred
Stock (and, following the occurrence of a Triggering Event or a Business
Combination, shares of Common Stock and/or other securities) issuable upon the
exercise of Rights may be listed on any United States national securities
exchange or quoted on any automated quotation system, to use its best efforts to
cause, from and after the time that the Rights become exercisable, all such
shares and/or other securities reserved for such issuance to be listed on such
exchange or quoted on such automated quotation system upon official notice of
issuance upon such exercise.
(c) The Company further covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (and,
following the occurrence of a Triggering Event or a Business Combination, shares
of Common Stock and/or other securities) delivered upon the exercise of Rights
shall, at the time of delivery of the certificates for such shares and/or such
other securities (subject to payment of the Purchase Price), be duly and validly
authorized and issued, fully paid, nonassessable, freely tradable, not subject
to liens or encumbrances, and free of preemptive rights, rights of first refusal
or any other restrictions or limitations on the transfer or ownership thereof,
of any kind or nature whatsoever.
(d) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the original issuance or delivery of the Rights
Certificates or of any certificates for shares of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon the exercise of Rights.
The Company shall not, however, be required to (i) pay any transfer tax which
may be payable in respect of any transfer involved in the issuance or delivery
of any Rights Certificates or the issuance or delivery of any certificates for
shares of Preferred Stock (or Common Stock and/or other securities as the case
may be) to a Person other than, or in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
(ii) transfer or deliver any Rights Certificate or issue or deliver any
certificates for shares of Preferred Stock (or Common Stock and/or other
securities as the case may be) upon the exercise of any Rights until any such
tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.
(e) The Company shall (i) as soon as practicable following a Triggering
Event (or such earlier time following the Distribution Date as may be required
by law), prepare and file a registration statement on an appropriate form under
the Securities 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
Securities Act) until the earlier of (A) the date as of which Rights are no
longer exercisable for such securities and (B) the Expiration Date. The Company
shall also take such action as may be necessary or appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercise of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 120 days after the date of a
Triggering Event, the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective. Upon any such
suspension, the Company shall make a public
14
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect.
Section 10. PREFERRED STOCK RECORD DATE. Each Person in whose name any
certificate for shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Stock (or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (and/or such other securities, as the
case may be) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or other
securities, as the case may be) transfer books of the Company are open.
Section 11. ADJUSTMENTS TO PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number and kind of securities, cash and other
property obtainable upon exercise of each Right and the number of Rights
outstanding shall be subject to adjustment from time to time as provided in this
Section 11.
(a) Adjustments Prior to Trigger Date:
(1) In the event the Company shall at any time after the date
of this Agreement and prior to the Trigger Date (i) pay a dividend or make a
distribution on the Common Stock payable in shares of Common Stock, (ii)
subdivide (by a stock split or otherwise) the outstanding Common Stock into a
larger number of shares, (iii) combine (by a reverse stock split or otherwise)
the outstanding Common Stock into a smaller number of shares (any of the actions
described in clauses (i), (ii) or (iii) are herein called a "stock split") then:
(A) The number of Rights outstanding shall be
adjusted so that after giving effect to such stock split the number of Rights
outstanding shall be exactly equal to the number of shares of Common Stock
outstanding (and so that prior to the Distribution Date one Right shall be
associated with every share of Common Stock outstanding after such stock split);
(B) The Exercise Amount shall be adjusted by
multiplying the Exercise Amount in effect immediately prior to such stock split
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such stock split and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such stock split;
(C) The Purchase Price for each one one-hundredth of
a share of Preferred Stock shall not change; and
15
(D) The fraction of a share of Preferred
Stock purchasable with each Right immediately after such stock split shall be
equal to the product derived by multiplying the fraction of a share of Preferred
Stock purchasable with each Right immediately prior to such stock split times
the fraction cited in clause (B) above.
The following example illustrates the intended operation of the
preceding provisions. Assume that initially each Right would (when and if it
became exercisable) entitle its holder to purchase one one-hundredth of a share
of Preferred Stock for $200 (and accordingly the initial Exercise Amount and the
initial Purchase Price per one one-hundredth of a share of Preferred Stock are
each $200). Assume further that prior to the Distribution Date, the Company
splits its Common Stock two for one (thereby doubling the number of shares of
Common Stock outstanding). The intended operation of the preceding adjustment
provisions is that: (i) the number of Rights outstanding would also double; (ii)
one Right would be associated with each share of Common Stock outstanding after
the stock split; (iii) each Right would have an Exercise Amount equal to $100;
(iv) each Right will entitle its holder (when and if the Right becomes
exercisable) to purchase one two-hundredth of one share of Preferred Stock; and
(v) the Purchase Price for each one one-hundredth of a share of Preferred Stock
would remain $200 so that the price for each one two-hundredth of a share of
Preferred Stock purchasable with each Right would be $100.
(2) Adjustment in Rights Certificates: In the event
the Distribution Date shall occur and the Company shall issue separate
certificates to represent the Rights, the following provisions shall thereafter
apply:
(A) In the event the number of Rights outstanding are
increased pursuant to Section 11(a)(1), the Company shall as promptly as
reasonably possible distribute to the record holders of the Rights on the record
date for the stock split giving rise to the increase in the number of Rights
certificates representing the additional Rights issuable by reason of such stock
split.
(B) In the event the number of Rights outstanding are
reduced pursuant to Section 11(a) by reason of the occurrence of a reverse stock
split or its functional equivalent, then each Rights Certificate outstanding
prior to such reverse stock split shall thereafter represent the reduced number
of Rights into which the Rights represented by such certificate immediately
prior to such reverse stock split shall have been converted by reason of the
occurrence of that reverse stock split.
(b) Basic Triggering Event Adjustments: Upon the first occurrence of a
Triggering Event (except as otherwise provided in this Agreement), each Right
shall be changed so that immediately after the Triggering Event:
(1) it shall no longer be exercisable for Preferred Stock but
rather shall be exercisable for Common Stock (subject to adjustment as provided
in Section 11(c));
16
(2) the number of shares of Common Stock which may be acquired
(upon exercise of each Right and payment of the Exercise Amount) shall be equal
to the result obtained by dividing (x) 50 percent of the Current Market Price
per share of Common Stock on the date of the occurrence of the Triggering Event
into (y) the Exercise Amount in effect immediately prior to the Triggering
Event; and
(3) the Purchase Price per Common Share purchasable with each
Right shall be equal to 50 percent of the Current Market Price per share of
Common Stock on the date of the occurrence of the Triggering Event.
(c) Other Post Triggering Event Adjustments.
(1) Use of Common Equivalent Shares or Cash: In the event that
the number of shares of Common Stock which are authorized by the Company's
certificate of incorporation, but which are not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights ("Available Common
Stock"), is not sufficient to permit the exercise in full of the Rights after
the adjustment made in accordance with Section 11(b), then:
(A) First, the Available Common Stock shall be
allocated among all of the then-outstanding and exercisable Rights so that each
Right shall entitle its holder to receive (upon exercise of the Right and
payment of the Exercise Amount) the same amount of Available Common Stock and
(ii) second, the Board of Directors of the Company shall promptly take
appropriate action to declare that each Right shall additionally entitle its
holder to receive (x) a number of Common Equivalent Shares equal to the
remainder derived by subtracting the number of shares of Available Common Stock
allocated to each Right in the preceding clause (i) from the total number of
shares of Common Stock which would have been purchasable with such Right if the
Corporation had a sufficient number of shares of Common Stock to permit the
Right to be exercisable entirely for Common Stock (such remainder being referred
to herein as the "Unallocated Shares"), (y) cash in an amount equal to the
Current Value of the Unallocated Shares, or (z) any combination of the foregoing
determined by the Board of Directors of the Company so long as each Right
entitles its holder to receive the same kind and amount of Common Equivalent
Shares and the same amount of cash as the holder of each other Right. For
purposes of the preceding sentence, the "Current Value" of a particular number
of Unallocated Shares shall be equal to the product derived by multiplying that
particular number times the greater of (i) the Current Market Price (calculated
as prescribed in Section 1) for the Common Stock on the day on which the Board
of Directors determines to make a substitution of cash for such Unallocated
Shares (the "Substitution Date") or (ii) the closing price per share (calculated
as prescribed in Section 1) for the Common Stock on the Trading Day immediately
prior to the Substitution Date.
(B) For purposes of this Agreement, a "Common
Equivalent Share" shall be a share or fraction of a share of preferred stock
(including, but not limited to, Preferred Stock), as follows: (i) with respect
to Preferred Stock, a Common Equivalent Share shall be the fraction of a share
of Preferred Stock equal to the reciprocal of the Adjustment Number in effect at
the time the term shall be applied and/or the unit of Preferred Stock issued
17
and (ii) with respect to preferred stock other than Preferred Stock, a Common
Equivalent Share shall be a share or fraction of a share of such preferred stock
that the Board of Directors of the Company deems to represent substantially the
same proportionate interest in the Company as a Common Equivalent Share
represented by such fraction of a share of Preferred Stock and to have a
dividend rate and other characteristics as similar as possible to such fraction
of a share of Preferred Stock. The term "Common Share" whenever it is used in
this Agreement means both a share of Common Stock and a Common Equivalent Share.
(C) If circumstances after the initial Trigger Date
require the use of Common Equivalent Shares, the Company shall use its best
efforts to obtain authorization to issue (i) a sufficient quantity of Common
Stock to permit Common Stock to be issued upon exercise of the Rights and/or any
exercise of the exchange right under the following Section and (ii) a sufficient
quantity of Common Equivalent Shares as may be necessary or appropriate to
permit Common Equivalent Shares to be issued upon exercise of the Rights and/or
any exercise of the exchange right under the following Section. Each time the
Company's authorized Common Stock shall be increased, the adjustment required
under the preceding paragraphs shall be redone to maximize the amount of Common
Stock issuable upon exercise of the Rights. To the extent excess authorized
Common Stock remains after the readjustment required by the preceding sentence,
the holder of any outstanding Common Equivalent Share shall have the right at
any time to require the Company to exchange that share for a share of Common
Stock.
(D) In no event, however, shall the Company be
obligated to reserve any Common Stock for issuance under the Rights until and
unless a Triggering Event actually occurs.
(E) In no event shall the Company issue any Preferred
Stock except for issuances caused by exercise of the Rights and except for
issuances required by this Section 11(c)(1), Section 11(c)(2) or Section
11(d)(6).
(2) Exchange Option:
(A) At any time after the occurrence of a Triggering
Event and prior to (i) the time any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50 percent or more of the Common Stock then outstanding and
(ii) the occurrence of a Business Combination, the Board of Directors of the
Company may, at its option, cause the Company to exchange for all or part of the
then-outstanding and exercisable Rights, Common Shares at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date of this Agreement
(such exchange ratio being referred to herein as the "Exchange Ratio"). Any
partial exchange shall be effected on a pro rata basis 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.
(B) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any particular Rights pursuant
to this Section 11(c)(2)
18
and without any further action and without any notice, the right to exercise
those particular Rights shall terminate and the only right a holder shall have
thereafter with respect to any of those particular Rights shall be to receive
the number of Common Shares equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange and in addition, the Company shall promptly mail a
notice of any such exchange to all of the holders of such Rights in accordance
with Section 25 of this Agreement; provided, however, that the failure to give,
any delay in giving or any defect in, such notice shall not affect the validity
of such exchange. Each such notice of exchange will state the method by which
the exchange of the Common Shares for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company shall pay to the registered holders of the
Rights Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the product derived by
multiplying (x) the subject fraction, by (y) the last sale price of the Common
Shares on the fifth Trading Day following the public announcement of the
exchange by the Company, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices on such day, in either case on a
when issued basis (taking into account the exchange), as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the NASDAQ (or, if the Common Shares are not so
listed or traded, then as determined in the manner provided under the definition
of "Current Market Price," adjusted to take into account the exchange). In
determining whether any particular holder shall be obligated to receive cash in
lieu of a fractional share, the holder shall be entitled to have all Rights
beneficially owned by such holder aggregated so that only one fractional share
shall be attributable to all the Rights so beneficially owned.
(d) Antidilution Adjustments After the Trigger Date:
(1) In the event the Company shall at any time after the
Trigger Date effect any stock split with respect to its Common Stock, then the
Purchase Price to be in effect after such stock split shall be determined by
multiplying the Purchase Price in effect immediately prior to such action by a
fraction, the numerator of which shall be the number of Common Shares
outstanding immediately prior to such stock split and the denominator of which
shall be the number of Common Shares outstanding immediately after such stock
split.
(2) In case the Company shall at any time after the Trigger
Date fix a record date for the making of a distribution to holders of Common
Stock (including any such distribution made in connection with a
reclassification of the Common Stock or a consolidation or merger in which the
Company is the surviving corporation) of securities (other than Common Stock and
rights, options or warrants referred to in Section 11(d)(3), cash (other than a
regular periodic cash dividend at an annual rate not in excess of (x) 125
percent of the annual rate of the regular cash dividend paid on the Common Stock
during the immediately preceding fiscal year or (y) in the event that a regular
cash dividend was not paid on the Common Stock during such preceding fiscal
year, 5 percent of the Current Market Price of the Common Stock on the date
19
such regular cash dividend was first declared), property, evidences of
indebtedness or assets, 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 per share of Common Stock on such record date, less the
fair market value (as determined in good faith by a majority of the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of such securities, cash, property, evidences of
indebtedness or assets to be so distributed in respect of one share of Common
Stock, and the denominator of which shall be such Current Market Price per share
of Common Stock on such record date. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not made following such adjustment, the Purchase Price shall be readjusted to be
the Purchase Price which would have been in effect if such record date had not
been fixed.
(3) If the Company shall at any time after the Trigger Date
fix a record date for the issuance of rights, options or warrants to holders of
Common Shares entitling them to subscribe for or purchase Common Shares (or
securities convertible into Common Shares) at a price per Common Share (or, in
the case of a convertible security, having a conversion price per Common Share)
less than the Current Market Price per share of Common Stock on such record date
and requiring that the conversion or purchase right be exercised within 45
calendar days after 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 Common Shares outstanding on such record date,
plus the number of Common Shares which the aggregate exercise and/or conversion
price for the total number of Common Shares which are obtainable upon exercise
and/or conversion of such rights, options, warrants or convertible securities
would purchase at such Current Market Price, and the denominator of which shall
be the number of shares of Common Shares outstanding on such record date, plus
the number of additional Common Shares which may be obtained upon exercise
and/or conversion of such rights, options, warrants or convertible securities.
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 as determined in good faith by a majority of 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. Common Shares owned by or
held for the account of the Company or any Subsidiary 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 issued following such
adjustment, the Purchase Price shall be readjusted to be the Purchase Price
which would have been in effect if such record date had not been fixed.
(4) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any combination or subdivision of the Common
Stock, issuance wholly for cash of any Common Stock at less than the Current
Market Price, issuance wholly for cash of Common Stock or securities which by
their terms are convertible
20
into or exchangeable or exercisable for Common Shares, stock dividends or
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Common Shares, shall not be
taxable to such stockholders.
(5) After each adjustment of the Purchase Price pursuant to
any of subsections (1) - (4) immediately above, the number of Common Shares
purchasable with each Right shall be adjusted to the quotient derived by
dividing the Purchase Price as constituted after giving effect to such
adjustment into the Exercise Amount.
(6) The Company shall not take any of the actions described in
any of subsections (1) - (3) above at a time when any Common Equivalent Shares
are outstanding unless the Company shall take substantively identical actions
with respect to the outstanding Common Stock and outstanding Common Equivalent
Shares. Conversely, the Company shall not take any actions with respect to
outstanding Common Equivalent Shares analogous to those described in any of
subsections (1) - (3) above unless the Company shall take substantively
identical actions with respect to the outstanding Common Stock and outstanding
Common Equivalent Shares.
(e) Recapitalizations.
(1) In the event that after the Trigger Date, the Company
shall issue any securities in a reclassification of the Common Stock or in any
other recapitalization (including any such reclassification in connection with a
consolidation or merger in which the Company is the surviving corporation), then
in each such event:
(A) the property purchasable with each Right shall be
adjusted to be whatever the owner of that Right would have owned by reason of
both (i) the exercise of that Right immediately prior to such recapitalization
or reclassification and (ii) the effect of that recapitalization or
reclassification on the property assumed to have been received in such exercise.
(B) The Exercise Amount shall be allocated among the
shares of stock and/or other units of property for which the Right shall be
exercisable after giving effect to the adjustment cited in clause (A) based on
the fair market value of such property to determine the Purchase Price for each
such share and/or unit.
(2) To illustrate the intended operation of this provision,
assume that: (i) immediately prior to a reclassification, each Right were
exercisable for 10 Common Shares and the Exercise Amount were $200 (resulting in
a purchase price of $20 per Common Share); (ii) as a result of the
Reclassification, each outstanding Common Share is reclassified into two New
Common Shares and one Series C Share; and (iii) immediately after the
reclassification, the market value of each New Common Share was $15 and the
market value of each Series C share was $10. Immediately after the assumed
reclassification, each Right would be exercisable for 20 New Common Shares at a
purchase price of $7.50 per share and ten Series C Shares at a purchase price of
$5 per share.
21
(f) In the event a Triggering Event shall occur, or in the event there
shall be a recapitalization or reclassification pursuant to Section 11(e), or in
the event there shall be any merger or other action which shall cause a change
in the property purchasable with the Rights under Section 13, or in the event
there shall be any other occurrence or development which shall cause the
property purchasable with the Rights to consist in whole or in part of anything
other than Preferred Stock, then and in any such event:
(1) The certificates representing the Rights shall
automatically be deemed to represent the adjusted terms of the Rights without
the need to replace such certificates. The Company shall thereafter make
arrangements for the production of certificates representing the revised terms
of the Rights resulting from such adjustment and shall use such certificates to
represent Rights for which new certificates shall be issuable by reason of a
transfer of record ownership or by reason of a request by the existing record
owner for a replacement certificate representing the revised terms of the
Rights.
(2) The principles underlying the adjustment provisions in
this Section 11 and elsewhere in this Agreement shall be applied to fairly and
proportionately adjust the shares or other property purchasable with the Rights
and the purchase price for each share or other property unit purchasable with
the Rights after giving effect to the adjustments required by reason of such
event to reflect any subsequent capital changes or other events. Without
limiting by implication the generality of the preceding sentence, the provisions
of Sections 7, 9, 10, 12, 13, 14 and 24 of this Agreement which related to the
Preferred Stock shall after the occurrence of any such event apply in a
substantively identical manner to the shares or other property purchasable with
the Rights after giving effect to such event.
(g) Before taking any action that would cause an adjustment reducing
the Purchase Price per share at which shares are purchasable with the Rights
below the par value of those shares, the Company shall take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares at such
adjusted Purchase Price.
(h) In any case in which this Section 11 shall require that an
adjustment be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the shares of Common
Stock and other securities, cash or property of the Company, if any, issuable
upon such exercise over and above the shares of Common Stock and other
securities, cash or property of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due xxxx or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or other securities, cash or property upon the
occurrence of the event requiring such adjustment.
(i) The Company covenants and agrees that on and after the Trigger Date
neither it nor any combination of it and its subsidiaries shall (i) consolidate
with any other Person, or (ii)
22
merge with or into any other Person or (iii) directly or indirectly sell, lease,
or otherwise transfer or dispose of (in one transaction or a series of related
transactions) assets or earning power aggregating more than 50 percent of the
assets or earning power of the Company and its Subsidiaries taken as a whole to
any other Person if (A) at the time of or immediately after such consolidation,
merger, sale, lease, transfer, or disposition there are any rights, warrants,
securities or other instruments outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights, (B) prior to, simultaneously with or immediately after
such consolidation, merger, sale, lease, transfer, or disposition the
stockholders (or equity holders) of the Person who constitutes, or would
constitute, the Principal Party in such transaction shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
or Associates or (C) the form or nature of organization of the Principal Party
would preclude or limit the exercisability of the Rights. The Company shall not
consummate any such consolidation, merger, sale, lease, transfer, or disposition
unless prior thereto the Company and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(i).
(j) The Company covenants and agrees that, after the Trigger Date it
will not, except as permitted by Section 11(c)(3) of this Agreement, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will, directly or indirectly,
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
Section 12. CERTIFICATION OF ADJUSTMENTS. Whenever an adjustment is
made as provided in Sections 11 and 13, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the stock then purchasable with the Rights a copy of
such certificate and (c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if no Rights Certificates have been issued, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 25.
Notwithstanding the foregoing sentence, the failure of the Company to give such
notice shall not affect the validity of or the force or effect of or the
requirement for such adjustment. Any adjustment to be made pursuant to Sections
11 and 13 of this Agreement shall be effective as of the date of the event
giving rise to such adjustment. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall not be obligated or responsible for calculating any adjustment nor shall
it be deemed to have knowledge of such adjustment unless and until it shall have
received such certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) A "Business Combination" shall be deemed to occur in the event
that, in or following a Triggering Event, (i) the Company shall, directly or
indirectly, consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(i) and Section 11(j) of this Agreement) in a transaction in which the Company
is not the continuing, resulting or surviving corporation of such merger or
consolidation, (ii) any Person (other than a Subsidiary of the Company in a
transaction that
23
complies with Section 11(i) and Section 11(j) of this Agreement) shall, directly
or indirectly, consolidate with the Company, or shall merge with and into the
Company, in a transaction in which the Company is the continuing, resulting or
surviving corporation of such merger or consolidation and, in connection with
such merger or consolidation, all or part of the Common Stock shall be changed
(including, without limitation, any conversion into or exchange for securities
of the Company or of any other Person, cash or any other property), (iii) the
Company shall, directly or indirectly, effect a share exchange in which all or
part of the Common Stock shall be changed (including, without limitation, any
conversion into or exchange for securities of any other Person, cash or any
other property) or (iv) the Company shall, directly or indirectly, sell, lease,
exchange, mortgage, pledge or otherwise transfer or dispose of (or one or more
of its Subsidiaries shall directly or indirectly sell, lease, exchange,
mortgage, pledge or otherwise transfer or dispose of), in one transaction or a
series of related transactions, assets or earning power aggregating more than 50
percent of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person (other than the Company or any of its
Subsidiaries in one or more transactions each and all of which comply with
Section 11(i) and Section 11(j) of this Agreement).
In the event of a Business Combination, proper provision shall be made
so that each holder of a Right (except as otherwise provided in this Agreement)
shall thereafter have the right to receive, upon the exercise of each Right,
such number of shares of Common Stock of the Principal Party as shall be equal
to the result obtained by dividing the Exercise Amount in effect prior to the
Business Combination by 50 percent of the Current Market Price per share of the
Common Stock of such Principal Party immediately prior to the consummation of
such Business Combination. All shares of Common Stock of any Person for which
any Right may be exercised after consummation of a Business Combination as
provided in this Section 13(a) shall, when issued upon exercise thereof in
accordance with this Agreement, be duly and validly authorized and issued, fully
paid, nonassessable, freely tradable, not subject to liens or encumbrances, and
free of preemptive rights, rights of first refusal or any other restrictions or
limitations on the transfer or ownership thereof of any kind or nature
whatsoever. The Purchase Price per share for such Common Stock immediately after
such Business Combination shall be equal to 50 percent of the Current Market
Price per share of the Common Stock of such Principal Party immediately prior to
the consummation of such Business Combination.
(b) After consummation of any Business Combination, (i) the Principal
Party shall be liable for, and shall assume, by virtue of such Business
Combination and without the necessity of any further act, all the obligations
and duties of the Company pursuant to this Agreement, (ii) the term "Company" as
used in this Agreement shall thereafter be deemed to refer to such Principal
Party and (iii) such Principal Party shall take all steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common Stock
in accordance with Section 9) in connection with such Business Combination as
necessary to ensure that the provisions of this Agreement shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of its
Common Stock thereafter deliverable upon the exercise of the Rights.
(c) The Company shall not consummate any Business Combination unless
prior thereto (i) the Principal Party shall have a sufficient number of
authorized shares of its Common
24
Stock which have not been issued or reserved for issuance (other than shares
reserved for issuance pursuant to this Agreement to the holders of Rights) to
permit the exercise in full of the Rights in accordance with this Section 13,
(ii) the Company and such Principal Party shall have executed and delivered to
the Rights Agent a supplemental agreement providing for the fulfillment of the
Principal Party's obligations and the terms as set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable on or
after the date of such Business Combination, the Principal Party, at its own
expense, shall (A) prepare and file, if necessary, a registration statement on
an appropriate form under the Securities Act with respect to the Rights and the
securities purchasable upon exercise of the Rights, (B) use its best efforts to
cause such registration statement to become effective as soon as practicable
after such filing and remain effective (with a prospectus at all times meeting
the requirements of the Securities Act) until the Expiration Date, (C) deliver
to holders of the Rights historical financial statements for the Principal Party
and each of its Affiliates which comply in all respects with the requirements
for registration on Form 10 (or any successor form) under the Exchange Act, (D)
use its best efforts to qualify or register the Rights and the securities
purchasable upon exercise of the Rights under the state securities or "blue sky"
laws of such jurisdictions as may be necessary or appropriate, (E) use its best
efforts to list the Rights and the securities purchasable upon exercise of the
Rights on a United States national securities exchange and (F) obtain waivers of
any rights of first refusal or preemptive rights in respect of the Common Stock
of the Principal Party subject to purchase upon exercise of outstanding Rights,
(iii) the Company and the Principal Party shall have furnished to the Rights
Agent an opinion of independent counsel stating that such supplemental agreement
is a legal, valid and binding agreement of the Principal Party enforceable
against the Principal Party in accordance with its terms, and (iv) the Company
and the Principal Party shall have filed with the Rights Agent a certificate of
a nationally recognized firm of independent accountants setting forth the number
of shares of Common Stock of such issuer which may be purchased upon the
exercise of each Right after the consummation of such Business Combination.
(d) The provisions of this Section 13 shall similarly apply to
successive Business Combinations. In the event a Business Combination shall be
consummated at any time after the occurrence of a Triggering Event, the Rights
which have not theretofore been exercised shall thereafter be exercisable for
the consideration and in the manner described in Section 13(a). The provisions
of Section 11(b) of this Agreement shall be applicable to events which occur
after a Business Combination.
(e) Notwithstanding any other provision of this Agreement, no
adjustment to the number or kind of shares (or fractions of a share), cash or
other property for which a Right is exercisable or the number of Rights
outstanding or associated with each share of Common Stock or any similar or
other adjustment shall be made or be effective if such adjustment would have the
effect of reducing or limiting the benefits the holders of the Rights would have
had absent such adjustment, including, without limitation, the benefits under
Sections 11 and 13, unless the terms of this Agreement are amended so as to
preserve such benefits, provided that this paragraph shall not prevent any
change prior to the Trigger Date permitted by Section 26(a) and provided that
this Section 13(e) shall not be deemed to limit or impair the right to engage in
an exchange pursuant to Section 11(c)(2).
25
(f) The Company covenants and agrees that it shall not effect any
Business Combination if at the time of, or immediately after such Business
Combination, there are any rights, options, warrants or other instruments
outstanding which would diminish or otherwise eliminate the benefits intended to
be afforded by the Rights.
(g) Without limiting the generality of this Section 13, in the event
the nature of the organization of any Principal Party shall preclude or limit
the acquisition of Common Stock of such Principal Party upon exercise of the
Rights as required by Section 13(a) as a result of a Business Combination, it
shall be a condition to such Business Combination that such Principal Party
shall take such steps (including, but not limited to, a reorganization) as may
be necessary to ensure that the benefits intended to be derived under this
Section 13 upon the exercise of the Rights are assured to the holders thereof.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractional Rights or to
distribute Rights Certificates which evidence fractional Rights.
(b) The Company shall permit the issuance and trading of Preferred
Stock in fractional shares such that the smallest fractional share tradable at
any particular time shall equal the reciprocal of the Adjustment Number in
effect at that particular time. The Company shall not be required to issue
fractions of shares of Preferred Stock (other than fractions which are integral
multiples of the reciprocal of the Adjustment Number) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of the
reciprocal of the Adjustment Number). Fractions of shares 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 Preferred Stock. In lieu
of fractional shares of Preferred Stock that are not integral multiples of the
reciprocal of the Adjustment Number, the Company may at its option (i) issue
scrip or warrants in registered form (either represented by a certificate or
uncertificated) or in bearer form (represented by a certificate) which shall
entitle the holder to receive the reciprocal of the Adjustment Number of one
share of Preferred Stock upon the surrender of such scrip or warrants
aggregating the reciprocal of the Adjustment Number of one share of Preferred
Stock, or (ii) pay to the registered holders of Rights Certificates at the time
such Rights Certificates are exercised as provided in this Agreement an amount
in cash equal to the same fraction of the relevant closing price of a share of
Preferred Stock. For purposes of this Section 14(b), the relevant closing price
of a share of Preferred Stock shall be the closing price of a share of Preferred
Stock (as determined pursuant to the second sentence of the definition of
"Current Market Price" in Section 1) for the Trading Day immediately prior to
the date of such exercise.
(c) The Company shall not be required to issue fractions of shares of
Common Stock or Common Equivalent Shares or to distribute certificates which
evidence fractional shares of
26
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 product derived by multiplying (x) the subject
fraction, by (y) the closing price of a share of Common Stock (as determined
pursuant to the second sentence of the definition of "Current Market Price" in
Section 1) for the Trading Day immediately prior to the date of such exercise.
(d) The holder of a Right by his acceptance thereof expressly waives
any right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as otherwise provided in this Agreement).
Section 15. RIGHTS OF ACTION. Except as otherwise provided, all rights
of action in respect of this Agreement are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, any
registered holders of associated Common Stock); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, any share of associated
Common Stock), without the consent of the Rights Agent or of the holder of any
other Right, may, on his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his rights pursuant to 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 will be
entitled to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any Person subject
to, this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS CONCERNING TRANSFER AND
OWNERSHIP OF RIGHTS. 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 will be
transferable on the registry books of the Rights Agent only if surrendered at
the principal stock transfer 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 Certificate or the associated Common Stock certificate
made by anyone other than the Company, the transfer agent for the stock
purchasable with such Right or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be affected by any notice to
the contrary.
Section 17. RIGHTS HOLDER NOT DEEMED A STOCKHOLDER. No holder, as such,
of any Rights Certificate shall be entitled to vote or to receive dividends or
distributions or shall be
27
deemed for any purpose the holder of Preferred Stock or any other securities,
cash or other property which may at any time be issuable on the exercise of the
Rights represented thereby, nor shall anything contained in this Agreement or in
any Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company,
including, without limitation, any right (i) to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
(ii) to give or withhold consent to any corporate action, (iii) to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 24), (iv) to receive dividends, distributions or subscription rights,
(v) to institute, as a holder of Preferred Stock or other securities issuable on
exercise of the Rights represented by any Rights Certificate, any derivative
action on behalf of the Company, or otherwise, until and only to the extent that
the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions of this Agreement.
Section 18. 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 other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith, willful misconduct or breach of this Agreement on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises. The costs and expenses of enforcing this right of indemnification
shall also be paid by the Company. The indemnification provided for hereunder
shall survive the expiration of the Rights and the termination of this
Agreement.
The Rights Agent may conclusively rely upon and 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 Preferred Stock or
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 reasonably believed
by it to be genuine and to be signed, executed and, when necessary, verified or
acknowledged, by the proper Person or Persons.
Notwithstanding anything in this Agreement to the contrary, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action.
Section 19. 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
stock transfer business of the Rights Agent or any successor
28
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any document 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 21.
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
Certificate 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 Certificate either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement (and no implied duties or
obligations shall be read into this Agreement against the Rights Agent) upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, the Rights
Agent may consult with legal counsel (who may be legal counsel for the Company),
and the opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or 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 specifically prescribed in this Agreement) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman,
the Chief Executive Officer, the President, the Chief Financial Officer, the
Treasurer, any Vice President or the 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.
29
(c) The Rights Agent shall be liable hereunder only for the negligence,
bad faith, willful misconduct or breach of this Agreement by it or its attorneys
or agent.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution and delivery of this Agreement by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any change or
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13 or 23 or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice of any change or adjustment is required); 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, Common Stock or
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock, Common Stock or
other securities will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or 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 from the
Chief Executive Officer, the President, the Chief Financial Officer, the
Treasurer, any Vice President or the Secretary of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer. Any application by
the Rights Agent for written instructions from the Company may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken of such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than ten Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application subject to the proposed action or
omission and/or specifying the action to be taken or omitted.
30
(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 the Rights Agent were not
serving as such under this Agreement. Nothing in this Agreement shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
(k) 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.
(l) The Rights Agent shall not be required to take notice or be deemed
to have notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate) under this Agreement
unless and until the Rights Agent shall be specifically notified in writing by
the Company of such fact, event or determination.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon notice of 30 days in writing mailed to the Company and to each transfer
agent of the Common Stock or Preferred Stock by registered or certified mail
and, at the expense of the Company, to the holders of the Rights Certificates by
either (i) first-class mail or (ii) by disclosure in a periodic report of the
Company required to be filed under the Exchange Act, any permitted report under
the Exchange Act, a press release of the Company or in any proxy or other
communication of the Company with its stockholders. The Company may remove the
Rights Agent or any successor Rights Agent upon notice of 30 days 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 or Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by either (i)
first-class mail or (ii) by disclosure in a periodic report of the Company
required to be filed under the Exchange Act, any permitted report under the
Exchange Act, a press release of the Company or in any proxy or other
communication of the Company with its stockholders. 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. Notwithstanding any other
provision of this Agreement,
31
in no event shall the resignation or removal of a Rights Agent be effective
until a successor Rights Agent shall have been appointed and have accepted such
appointment. If the Company shall fail to make such appointment within a period
of 30 days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
any holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the incumbent Rights
Agent or the 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 (i) a corporation organized and doing business under the laws of the
United States or of the State of Maryland (or of any other state of the United
States so long as such corporation is authorized to conduct a banking, corporate
trust or stock transfer business) in good standing, which is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $25,000,000 or (ii) a subsidiary of a corporation described in clause (i)
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 such 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 or Preferred Stock; the Company shall also either (i) mail a
notice thereof in writing to the registered holders of the Rights Certificates
or (ii) make a disclosure with respect thereto in a periodic report of the
Company required to be filed under the Exchange Act, any permitted report under
the Exchange Act, a press release of the Company or in any proxy or other
communication of the Company with its stockholders. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights Certificates to the contrary,
the Company may, at its option, issue new Rights Certificates evidencing Rights
in such form as may be approved by a majority of the Board of Directors of the
Company to reflect any adjustment or change in the Purchase Price per share and
the number or kind or class of securities, cash or other property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Trigger Date and (ii) the Expiration Date,
redeem all but not less than all of the then-outstanding Rights at a redemption
price of $.001 per Right (the "Redemption Price") appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date of this Agreement. The Company may, at its option, pay the Redemption
Price in
32
cash, shares (including fractional shares) of Common Stock (based on the Current
Market Price of the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights by the Board of Directors of the Company may be made effective at
such time, on such basis and with such conditions as the Board of Directors of
the Company in its sole discretion may establish.
(b) At the time and date of effectiveness set forth in any resolution
of the Board of Directors of the Company ordering the redemption of the Rights,
without any further action and without any further 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; provided, however, that such
resolution of the Board of Directors of the Company may be revoked, rescinded or
otherwise modified at any time prior to the time and date of effectiveness set
forth in such resolution, in which event the right to exercise will not
terminate at the time and date originally set for such termination by the Board
of Directors of the Company. The Company shall promptly give public notice of
any such redemption; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. The
Company shall also give notice of such redemption to the Rights Agent. The
Company may elect to give notice of such redemption to the holders of the
then-outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the issuance of Rights Certificates, on the registry books of the transfer
agent for the Common Stock. Any notice which is mailed in the manner provided in
this Agreement shall be deemed given, whether or not the holder receives the
notice. In connection with any redemption permitted under this Section 23, 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 issuance of the Rights Certificates,
on the registry books of the transfer agent for the Common Stock, and upon such
action, all outstanding Rights Certificates shall be null and void without any
further action by the Company. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23, and other
than in connection with the purchase of shares of Common Stock prior to the
earlier of the Trigger Date and the Expiration Date.
Section 24. NOTICE OF CERTAIN EVENTS. In case the Company, on or after
the Distribution Date, shall propose to (a) pay any dividend payable in stock of
any class to the holders of its Common Shares or to make any other distribution
to the holders of its Common Shares (other than a regular periodic cash dividend
at an annual rate not in excess of 125 percent of the annualized rate of the
cash dividend paid on the Common Shares during the immediately preceding fiscal
year), or (b) offer to the holders of its Common Shares rights, options or
warrants to subscribe for or to purchase any additional shares of Common Shares
or shares of stock of any class or any other securities, rights or options, or
(c) effect any reclassification of the Common Shares (other than a
reclassification involving only the subdivision of outstanding shares of Common
Shares, a change in the par value of such Common Shares or a change from par
value to no par value), or (d) directly or indirectly effect any consolidation
or merger into or
33
with, or effect any sale, lease, exchange, or other transfer or disposition (or
to permit one or more of its Subsidiaries to effect any sale, lease, exchange or
other transfer or disposition), in one transaction or a series of related
transactions, of more than 50 percent of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person, or (e)
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of a Right, in accordance with
Section 25, a notice of such proposed action, which shall specify any record
date for the purposes of such stock dividend or distribution of rights, or the
date on which such reclassification, consolidation, merger, sale, lease,
exchange, transfer, disposition, liquidation, dissolution or winding up is to
take place and if such holders will or may participate therein, the date of
participation therein by the holders of Common Shares, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (a) or (b) above at least 20 days prior to the record date for
determining holders of the Common Shares for purposes of such action, and in the
case of any such other action, at least 20 days prior to the date of the taking
of such proposed action or the date of participation therein, if any, by the
holders of Common Shares, whichever shall be the earlier. The failure to give
notice as required by this Section 24 or any defect therein shall not affect the
legality or validity of the action taken by the Company or the vote upon any
such action.
In case any Triggering Event or Business Combination shall occur, then,
in any such case, the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, in accordance with Section 25, notice of
the occurrence of such Triggering Event or Business Combination, which shall
specify the Triggering Event or Business Combination and include a description
of the consequences of such event to holders of Rights under Section 11 or 13.
Section 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the 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:
Biospherics Incorporated
00000 Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Chairman of the Board
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by registered or certified mail and shall be deemed given upon receipt and
addressed (until another address is filed in writing with the Company) as
follows:
American Stock Transfer & Trust Co.
---------------------
---------------------
34
---------------------
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 (or, if no Rights Certificates have been issued, if sent by
first-class mail, postage prepaid, addressed to each holder of a certificate
representing shares of Common Stock at the address of such holder as shown on
the Company's Common Stock registry books).
Section 26. SUPPLEMENTS AND AMENDMENTS.
(a) At any time prior to the Trigger Date, a majority of the Board of
Directors of the Company may, and the Rights Agent shall, if so directed,
supplement or amend any provision of this Agreement (including, without
limitation, (i) the Beneficial Ownership percent as set forth in Section 1 at
which a Person becomes an Acquiring Person, (ii) the definition of Exempt Person
as set forth in Section 1 to include any Person in addition to the Persons
described therein, and (iii) to the extent permitted by applicable law, the
number, designation, preferences and rights of shares of the Preferred Stock as
set forth in Exhibit A) without the approval of any holders of Rights.
(b) Except as otherwise provided in Section 26(c):
(1) The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors or 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, to exchange or not exchange the Rights for
Common Stock, or to amend or supplement this Agreement).
(2) All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors of
the Company in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other Persons and
(y) not subject the Board of Directors of the Company to any liability to the
holders of the Rights.
(c) From and after the Trigger Date:
(1) No amendment or other change shall be made in this
Agreement or the terms of the Rights (including the number, designation,
preferences and rights of shares of the Preferred Stock as set forth in Exhibit
A) which would have an effect prohibited by Section 11(j) or Section 13(f) or
which would otherwise adversely affect the interests of the holders of
35
Rights Certificates (other than an Acquiring Person or any other Person in whose
hands the Rights are void under the provisions of Section 7(e)). Notwithstanding
the foregoing, a majority of the Board of Directors may, and the Rights Agent
shall, if so directed, amend this Agreement prior to the Trigger Date effective
upon the Trigger Date.
(2) The Board of Directors of the Company shall not be
entitled to exercise the powers specified in Section 26(b) after the Trigger
Date unless the Board of Directors can establish by clear and convincing
evidence that its action satisfies the requirement in Section 26(c)(1).
(d) Notwithstanding anything in this Agreement to the contrary, no
supplement or amendment that changes the rights and duties of the Rights Agent
under this Agreement will be effective against the Rights Agent without the
execution of such supplement or amendment by the Rights Agent.
Section 27. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of Rights any legal or equitable right, remedy or claim
under this Agreement; and this Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered holders of the
Rights.
Section 29. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid and enforceable
under applicable law, but if any provision of this Agreement shall be held to be
prohibited by or unenforceable under applicable law, (i) such provision shall be
applied to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (ii) all other provisions of this
Agreement shall remain in full force and effect. No rule of strict construction,
rule resolving ambiguities against the person who drafted the provision giving
rise to such ambiguities, or other such rule of interpretation shall be applied
against any party with respect to this Agreement.
Section 30. GOVERNING LAW. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the internal laws of Delaware applicable to contracts to be made
and performed entirely within Delaware.
Section 31. COUNTERPARTS. This Agreement may be executed in
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and both such counterparts shall together constitute but one and
the same instrument.
36
Section 32. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.
Section 33. GRAMMATICAL CONSTRUCTION. Throughout this Agreement, where
such meanings would be appropriate, (a) any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms (e.g., references to "he"
shall also include "she" and "it" and references to "who" and "whom" shall also
include "which") and (b) the plural form of nouns and pronouns shall include the
singular and vice-versa.
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.
BIOSPHERICS INCORPORATED
By:
-------------------------------------
Xxxxxxx X. Xxxxx, Ph.D., Chairman of
the Board and Chief Executive Officer
American Stock Transfer & Trust Co.
as Rights Agent
By:
-------------------------------------
Title:
-----------------------------------
37
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A PARTICIPATING PREFERRED STOCK
OF
BIOSPHERICS INCORPORATED
Pursuant to Section 151 of the Corporation Law
of the State of Delaware
Biospherics Incorporated, a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with the
provisions of Section 151 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, as amended, the Board of
Directors on February 16, 2001, adopted the following resolution creating a
series of five hundred thousand (500,000) shares of Preferred Stock designated
as Series A Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of
Directors by ARTICLE FOURTH of the Certificate of Incorporation and out of the
Preferred Stock authorized therein, the Board hereby authorizes that a series of
Preferred Stock of the Corporation be, and it hereby is, created and approved
for issuance in accordance with the Rights Agreement dated as of February 16,
2001, between the Corporation and American Stock Transfer & Trust Co., and that
the designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof be, and
hereby are, as follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as Series A Participating Preferred Stock (the "Series A Preferred
Stock") and the number of shares constituting such series shall be five hundred
thousand (500,000). Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series A Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Corporation
convertible into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of any
outstanding shares of any series of Preferred Stock ranking prior and superior
to the shares of Series A Preferred Stock with respect to dividends, the holders
of shares of Series A Preferred Stock, in preference to the holders of Common
Stock and of any other junior stock, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the fifteenth 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 A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $0.005 or (b) the Adjustment Number
(as defined below) times the aggregate per share amount of all cash dividends,
and the Adjustment Number times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions other than a dividend payable
in shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. The "Adjustment Number" shall
initially be 100. In the event the Corporation shall at any time after February
16, 2001 (i) declare or pay 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, then in each such case the Adjustment Number in effect immediately prior
to such event shall be adjusted by multiplying such Adjustment Number by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, 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 $0.005 per share on
the Series A 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 A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A 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 A 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
2
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
A 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 A 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.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to a number of votes equal to the Adjustment Number (as adjusted from
time to time pursuant to Section 2(A) hereof) on all matters submitted to a vote
of the stockholders of the Corporation.
(b) Except as otherwise provided herein, by law or in the Certificate
of Incorporation or By-Laws, the holders of shares of Series A Preferred Stock
and the holders of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
occurrence of such contingency shall xxxx the beginning of a period (herein
called a "default period") that shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, (1) the number of Directors shall be increased by two,
effective as of the time of election of such Directors as herein provided, and
(2) the holders of Series A Preferred Stock and the holders of other Preferred
Stock upon which these or like voting rights have been conferred and are
exercisable (the "Voting Preferred Stock") with dividends in arrears equal to
six quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect such two Directors.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3 or at any annual
meeting of stockholders, and thereafter at annual meetings of stockholders,
provided that such voting right shall not be exercised unless the holders of at
least one-third in number of the shares of Voting Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of Voting Preferred
Stock of such voting right.
(iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their right to
elect Directors, the
3
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than 10 percent of the total number of shares of Voting
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Voting Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board, the President, an Executive
Vice President, a Vice President or the Secretary of the Corporation. Notice of
such meeting and of any annual meeting at which holders of Voting Preferred
Stock are entitled to vote pursuant to this paragraph 3(iii) shall be given to
each holder of record of Voting Preferred Stock by mailing a copy of such notice
to him at his last address as the same appears on the books of the Corporation.
Such meeting shall be called for a time not earlier than 10 days and not later
than 60 days after such order or request or, in default of the calling of such
meeting within 60 days after such order or request, such meeting may be called
on similar notice by any stockholder or stockholders owning in the aggregate not
less than 10 percent of the total number of shares of Voting Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph 3(iii), no such
special meeting shall be called during the period within 60 days immediately
preceding the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, after the holders of Voting
Preferred Stock shall have exercised their right to elect Directors voting as a
class, (x) the Directors so elected by the holders of Voting Preferred Stock
shall continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (y) any vacancy in
the Board of Directors may be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class or classes of stock
which elected the Director whose office shall have become vacant. References in
this paragraph 3 to Directors elected by the holders of a particular class or
classes of stock shall include Directors elected by such Directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of Voting
Preferred Stock as a class shall terminate and (z) the number of Directors shall
be such number as may be provided for in the Certificate of Incorporation or
By-Laws irrespective of any increase made pursuant to the provisions of this
Section 3 (such number being subject, however, to change thereafter in any
manner provided by law or in the Certificate of Incorporation or By-Laws). Any
vacancies in the Board of Directors effected by the provisions of clauses (y)
and (z) in the preceding sentence may be filled by a majority of the remaining
Directors.
(c) Except as set forth herein, holders of Series A 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.
Section 4. CERTAIN RESTRICTIONS.
4
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A 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 A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A 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 A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A 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.
Section 5. REACQUIRED SHARES. Any shares of Series A 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 Certificate
of Incorporation or By-laws or otherwise required by law.
5
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (A) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received the greater of (i) $1.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, and (ii) an aggregate amount per
share, equal to the Adjustment Number (as adjusted from time to time pursuant to
Section 2(a) hereof) times the aggregate amount to be distributed per share to
holders of Common Stock, or (B) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 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 A Preferred Stock then outstanding shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number (as
adjusted from time to time pursuant to Section 2(a) hereof) 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.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of
two-thirds of the outstanding shares of Series A Preferred Stock, if any, voting
together as a single class. At any time when there are no shares of Series A
Preferred Stock outstanding, the number, designation, preferences and rights of
the Series A Preferred Stock as set forth in this Certificate of Designation may
be amended by the Board of Directors in the manner provided in Section 151(g) of
the Delaware General Corporation Law.
IN WITNESS WHEREOF, I have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury as of the 16th
day of February, 2001.
BIOSPHERICS INCORPORATED
By:
------------------------------------------
Xxxxxxx X. Xxxxx, Ph.D., Chairman of the
Board and Chief Executive Officer
6
Exhibit B
[Form of Rights Certificate]
Certificate No. R- __________Rights
NOT EXERCISABLE AFTER DECEMBER 31, 2010 OR EARLIER IF
NOTICE OF REDEMPTION OR EXCHANGE IS GIVEN. THE RIGHTS ARE
SUBJECT TO REDEMPTION OR EXCHANGE, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Rights Certificate
BIOSPHERICS INCORPORATED
This certifies that _________________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement dated as of February 16, 2001 (the "Rights Agreement")
between Biospherics Incorporated, a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Co., a __________ corporation (the "Rights
Agent"), unless notice of redemption or exchange shall have been previously
given by the Company, 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. Baltimore, Maryland time) on December 31, 2010, at the principal
corporate trust office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-hundredth of a fully paid nonassessable share of the
Series A Participating Preferred Stock, no par value, of the Company (the
"Preferred Stock"), at a purchase price (the "Purchase Price") of $16.00 per one
one-hundredth share, upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase duly executed. The Purchase Price may be
paid in cash or by certified bank check or bank draft payable to the order of
the Company.
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.
Capitalized terms used but not defined in this Rights Certificate that are
defined in the Rights Agreement shall have the same meanings ascribed to them in
the Rights Agreement. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the above-mentioned office of the
Rights Agent.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Preferred Stock or other securities, cash or other property 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.
If the Rights evidenced by this Rights Certificate are or were formerly
beneficially owned, on or after the earlier of the Distribution Date and the
Trigger Date, by (i) an Acquiring Person or any Associate or Affiliate of an
Acquiring Person, (ii) a direct or indirect transferee of an Acquiring Person
(or of any Associate or Affiliate of an Acquiring Person) who becomes or becomes
entitled to be a transferee after the Acquiring Person becomes such, or (iii) a
direct or indirect transferee of an Acquiring Person (or of an Associate or
Affiliate of such Acquiring Person) who becomes or becomes entitled to be a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a direct or indirect transfer
(whether or not for consideration) from the Acquiring Person (or from an
Associate or Affiliate of such Acquiring Person) to holders of equity interests
in such Acquiring Person (or to holders of equity interests in any Associate or
Affiliate of such Acquiring Person) or to any Person with whom the Acquiring
Person (or an Associate or Affiliate of such Acquiring Person) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a direct or indirect transfer which a majority of the Board of
Directors of the Company determines is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(e) of the Rights Agreement, such Rights shall, immediately upon the occurrence
of a Triggering Event and without any further action, be null and void and no
holder of such Rights (including any subsequent holder) shall have any rights
whatsoever with respect to such Rights whether under the Rights Agreement or
otherwise, provided, however, that, in the case of transferees under clause (ii)
or clause (iii) above, any Rights beneficially owned by such transferee shall be
null and void only if and to the extent such Rights were formerly beneficially
owned by a Person who was, at the time such Person beneficially owned such
Rights, or who later became, an Acquiring Person or an Affiliate or Associate of
such Acquiring Person.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal corporate trust office of the Rights Agent, may
be exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Preferred Stock or other property as the Rights evidenced by
the Rights Certificate or Rights Certificates surrendered entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (a) may be redeemed by the Board of Directors of the Company
at its option at a redemption price of $.001 per Right, subject to adjustment,
payable, at the election of the Company, in cash or shares (including fractional
shares) of Common Stock or such other consideration as the Board of Directors of
the Company may determine, at any time prior to the earlier of (i) the Trigger
Date and (ii) the Expiration Date, or (b) may be exchanged by the Board of
Directors of the Company, at its option, in whole or in part, for shares of the
Company's Common Stock or other equivalent securities on a one-for-one basis, at
any time after the Trigger Date and prior to (i) any Person (other than an
Exempt Person), together with all Affiliates and Associates of such Person,
becoming the Beneficial Owner of 50 percent or more of the Common Stock then
outstanding and (ii) the occurrence of a Business Combination.
2
No fractional shares of Preferred Stock (other than fractions that are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depository receipts) are
required to be issued upon the exercise of any Right or Rights evidenced hereby,
but in lieu thereof the Company may elect to (i) evidence fractional shares by
depositary receipts, (ii) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or in bearer form (represented
by a certificate) which shall entitle the holder to receive a full share upon
the surrender of such scrip or warrants aggregating a full share, or (iii) make
a cash payment, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or to receive dividends on, or shall be deemed for any purpose the holder
of, Preferred Stock or any other securities, cash or property which may at any
time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or this Certificate be construed to confer upon the holder
hereof, as such, any of the rights of a stockholder of the Company, including,
without limitation, any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or to institute, as a holder of
Preferred Stock or other securities issuable on the exercise of the Rights
represented by this Certificate, any derivative action, or otherwise, until and
only to the extent the Right or Rights evidenced by this Rights Certificate
shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ___________________.
BIOSPHERICS INCORPORATED
By:
-----------------------------------
Title:
--------------------------------
Countersigned:
---------------------------------
By:
-----------------------------
Authorized Officer
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 the undersigned _________________________ hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
Rights evidenced by this Rights Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_______________________ with a power of Attorney to transfer the said Rights and
a Rights Certificate evidencing such Rights on the books of ______________, with
full power of substitution.
A new Rights Certificate evidencing the remaining balance, if any, of
such Rights not hereby sold, assigned and transferred shall be mailed to and
registered in the name of the undersigned unless such person requests that such
Rights Certificate be registered in the name of and mailed to (complete only if
a Rights Certificate evidencing any remaining balance of Rights is to be
registered in a name other than the undersigned):
Please insert Social Security or other identifying number of transferee: _______
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
4
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) his Rights Certificate or any Rights evidenced hereby __ are __ are
not being old, assigned and transferred by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned __ did __ did not acquire any of the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:
----------------------- --------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution with
membership in a recognized signature guarantee medallion program as approved by
the Stock Transfer Association.
NOTICE
The signature on the foregoing Form of 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.
In the event the certification set forth above in the Form of
Assignment is not completed, the Company will deem the beneficial owner of the
Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the
case of an assignment or other transfer of this Rights Certificate or any Rights
evidenced hereby, will affix a legend to that effect on any Rights Certificate
issued in whole or partial exchange for this Rights Certificate.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
the Rights represented by this Rights Certificate)
To: BIOSPHERICS INCORPORATED
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock or other
5
securities, cash or other property issuable upon the exercise of such Rights and
requests that certificates for such shares or other securities be issued in the
name of, and such cash or other property be paid to:
Please insert social security or other identifying number:
---------------------
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
A new Rights Certificate evidencing the remaining balance, if any, of
such Rights not hereby exercised shall be mailed to and registered in the name
of the undersigned unless such person requests that such Rights Certificate be
registered in the name of and mailed to (complete only if Rights Certificate
evidencing any remaining balance of Rights is to be registered in a name other
than the undersigned):
Please insert social security or other identifying number:
---------------------
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
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 an Acquiring Person (as such terms are defined in
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned __ did __ did not acquire the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated:
----------------------- ---------------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution with
membership in a recognized signature guarantee medallion program as approved by
the Stock Transfer Association.
6
NOTICE
The signature on the foregoing Form of 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.
In the event the certification set forth above in the Form of Election
to Purchase is not completed, the Company will deem the beneficial owner of the
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the
case of an assignment or other transfer of this Rights Certificate or any Rights
evidenced hereby, will affix a legend to that effect on any Rights Certificate
issued in whole or partial exchange for this Rights Certificate.
7
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
ADOPTION OF RIGHTS PLAN
On February 16, 2001, the Board of Directors of Biospherics
Incorporated (the "Company") authorized the issuance of one preferred share
purchase right (a "Right") for each outstanding share of common stock, par value
$0.005 per share (the "Common Shares"), of the Company. The distribution is
payable to stockholders of record at the close of business on March 1, 2001 (the
"Record Date"), and with respect to all Common Shares that become outstanding
after the Record Date and prior to the earliest of the Distribution Date (as
defined below), the redemption of the Rights, the exchange of the Rights, and
the expiration of the Rights (and, in certain cases, following the Distribution
Date).
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Series A Participating Preferred Stock, no par
value per share, of the Company (the "Preferred Shares") at a price of $16.00
per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (the "Rights Agreement") between the Company and American Stock
Transfer & Trust Co., as Rights Agent (the "Rights Agent").
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination approved by the
Board of Directors because of the Board of Directors ability to redeem the
Rights, as discussed below.
RIGHTS ATTACH TO COMMON SHARES INITIALLY
Initially and until a Distribution Date (as defined below) occurs, the
Rights are attached to all Common Shares and no separate Rights certificates
will be issued. During this initial period:
- The Rights are not exercisable;
- Holders, as such, have no voting rights;
- The Rights are transferred with the Common Shares and are not
transferable separately from the Common Shares;
- No dividends are paid on the Rights;
- New Common Share certificates or book entry shares issued will
contain a notation incorporating the Rights Agreement by reference;
- The transfer of any Common Shares will also constitute the transfer
of the Rights; and
The Rights expire December 31, 2010 (the "Expiration Date") unless
earlier redeemed or exchange by the Company as described below.
DISTRIBUTION OF RIGHTS
Separate certificates evidencing the Rights will be mailed to holders
of record of the Common Shares on the "Distribution Date." The Distribution Date
is the earlier to occur of the following two events:
- The tenth (10th) day after a public announcement that a person or
group of affiliated or associated persons has acquired or obtained the right to
acquire 10% or more of the outstanding Common Shares; or
- The tenth (10th) business day after the commencement or public
disclosure of an intention to commence a tender offer or exchange offer by a
person if, upon consummation of the offer, such person could acquire beneficial
ownership of 10% or more of the outstanding of Common Shares.
Inasmuch as Xx. Xxxxxxx X. Xxxxx and Xxx. Xxxxx X. Xxxxx own in excess
of the 10% threshold, they will not be deemed to be an Acquiring Person (as
defined below) and their ownership will not trigger a Distribution Date.
Similarly, RCG International Investors, LDC ("RCG") beneficially owns in excess
of the 10% threshold through the ownership of Common Shares and warrants. Such
warrants provide, however, that the stock ownership of RCG and its affiliates
may not exceed 9.9% of the outstanding Common Shares. Accordingly, RCG will not
be deemed to be an Acquiring Person by virtue of such ownership.
RIGHT TO PURCHASE BIOSPHERICS STOCK
If a person or group acquires or obtains the right to acquire 10% or
more of the outstanding Common Shares (thereby becoming an "Acquiring Person")
each holder of a Right (except those held by the Acquiring Person and its
affiliates and associates) will have the right to purchase, upon exercise,
Common Shares (or, in certain circumstances, Preferred Shares, Common Share
equivalents or cash) having a value equal to two times the exercise price of the
Right. In other words, the Rights holders other than the Acquiring Person may
purchase Common Shares at a 50 % discount.
For example, at the exercise price of $16.00 per Right, each Right not
owned by an Acquiring Person would entitle its holder to purchase $32.00 worth
of Common Shares (or other consideration, as noted above) for $16.00. Assuming a
value of $8.00 per Common Share at
2
such time, the holder of each valid Right would be entitled to purchase four (4)
Common Shares for $16.00.
RIGHTS TO PURCHASE ACQUIRING PERSON STOCK
In the event that, at the time or after a person becomes an Acquiring
Person, the Company is involved in a merger or other business combination in
which (i) the Company is not the surviving corporation, (ii) Common Stock is
changed or exchanged, or (iii) 50 % or more of the Company's consolidated assets
or earning power are sold, then each Right (other than Rights that are or were
owned by the Acquiring Person and certain related persons and transferees, which
will thereafter be void) shall thereafter be exercisable for a number of shares
of common stock of the acquiring company having a market value of two times the
exercise price of the Right. In other words, a Rights holder may purchase the
acquiring company's common stock at a 50 %discount.
EXCHANGE OF BIOSPHERICS STOCK FOR RIGHTS
At any time after any person or group becomes an Acquiring Person and
before the Acquiring Person acquires 50 % or more of the outstanding Common
Shares, the Board of Directors may exchange the Rights (other than Rights owned
by the Acquiring Person which will have become void), in whole or in part, at an
exchange ratio of one Common Share, or one one-hundredth of a Preferred Share
(or a Common Share equivalent), per Right (subject to adjustment).
REDEMPTION
The Rights are redeemable by the Company, at the direction of its Board
of Directors, in whole but not in part at a price of $.001 per Right at any time
prior to the time that a person or a group has become an Acquiring Person.
Immediately upon redemption, the right to exercise will terminate and the only
right of holders will be to receive the redemption price.
AMENDMENTS
As long as the Rights are redeemable, the terms of the Rights may be
amended by the Board of Directors in its discretion without the consent of the
Rights holders. After that time, no amendment may adversely affect the interests
of the Rights Holder (other than the Acquiring Person).
TERMS OF PREFERRED SHARES
The Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment equal to the greater of $0.005 per share and 100
times the dividend declared per Common Share. In the event of liquidation, the
holders of the Preferred Shares will be entitled to a minimum
3
preferential liquidation payment equal to the greater of $1.00 per share and 100
times the payment made per Common Share. Each Preferred Share will have 100
votes per share, voting together with the Common Shares. In the event of any
merger, consolidation or other transaction in which Common Shares are exchanged,
each Preferred Share will be entitled to receive 100 times the amount received
per Common Share.
MISCELLANEOUS
The Purchase Price payable, and the number and kind of securities, cash
or other property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend or distribution on, or a subdivision or combination of, the Common
Shares, (ii) upon the grant to holders of the Common Shares of rights, options
or warrants to subscribe for Common Shares or securities convertible into Common
Shares at less than the current market price, (iii) upon the distribution to
holders of the Common Shares of securities, cash, evidences of indebtedness or
assets (excluding regular periodic cash dividends out of earnings or retained
earnings) and (iv) in connection with recapitalizations of the Company or
reclassifications of the Common Shares.
No fractional Common Shares or Preferred Shares will be required to be
issued (other than fractions of Preferred Shares which are integral multiples of
one one-hundredth of a Preferred Share, which may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an adjustment
in cash will be made based on the market price of Common Shares or Preferred
Shares on the last trading date prior to the date of exercise.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share that may be purchased upon exercise of each Right should approximate the
value of one Common Share.
A copy of the Rights Agreement has been filed with the Securities and
Exchange commission as an Exhibit to an application for Registration on Form 8-A
and as an Exhibit to the Company's Current Report on Form 8-K. A copy of the
Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.
4
