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Exhibit 4.1
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eLoyalty Corporation
and
ChaseMellon Shareholder Services, L.L.C.
Rights Agent
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Rights Agreement
Dated as of [ ]
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Table of Contents
Section Page
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Section 1. Certain Definitions....................................... 1
Section 2. Appointment of Rights Agent............................... 5
Section 3. Issue of Rights Certificates.............................. 6
Section 4. Form of Rights Certificates............................... 8
Section 5. Countersignature and Registration......................... 9
Section 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates................ 10
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights......................... 11
Section 8. Cancellation and Destruction of Rights
Certificates...................................... 13
Section 9. Reservation and Availability of Capital
Stock............................................. 13
Section 10. Preferred Stock Record Date.............................. 15
Section 11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights............... 16
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares................................. 25
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power....................... 26
Section 14. Fractional Rights and Fractional Shares.................. 28
Section 15. Rights of Action......................................... 30
Section 16. Agreement of Rights Holders.............................. 30
Section 17. Rights Certificate Holder Not Deemed a
Stockholder...................................... 31
Section 18. Concerning the Rights Agent.............................. 32
Section 19. Merger or Consolidation or Change of Name
of Rights Agent.................................. 32
Section 20. Duties of Rights Agent................................... 33
Section 21. Change of Rights Agent................................... 36
Section 22. Issuance of New Rights Certificates...................... 37
Section 23. Redemption and Termination............................... 37
Section 24. Exchange................................................. 38
Section 25. Notice of Certain Events................................. 40
Section 26. Notices.................................................. 41
Section 27. Supplements and Amendments............................... 41
Section 28. Successors............................................... 42
Section 29. Determination and Actions by the Board of
Directors, etc................................... 42
Section 30. Benefits of this Agreement............................... 43
Section 31. Severability............................................. 43
Section 32. Governing Law............................................ 43
Section 33. Counterparts............................................. 43
Section 34. Descriptive Headings..................................... 43
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of [ ] (the "Agreement"),
between eLoyalty Corporation, a Delaware corporation (the "Company"), and
ChaseMellon Shareholder Services, L.L.C., a New Jersey limited liability company
(the "Rights Agent").
W I T N E S S E T H:
WHEREAS, on [ ] (the "Rights Dividend Declaration
Date"), the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on [ ], after giving effect to the distribution of shares of
Common Stock (the "Spin-off") by Technology Solutions to its stockholders (the
"Record Date"), each Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company having the rights, powers and preferences set forth in the form of
Certificate of Designations attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth (the "Rights"), and has further
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Record Date and the earlier of the
Distribution Date and the Expiration Date (as such terms are hereinafter
defined) or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding, but shall not include the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan.
Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result of an acquisition of shares of Common Stock by
the Company which, by reducing the number of shares outstanding,
increases
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the proportionate number of shares beneficially owned by such Person to
15% or more of the shares of Common Stock then outstanding; provided,
however, that if a Person shall become the Beneficial Owner of 15% or
more of the shares of Common Stock then outstanding by reason of share
purchases by the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or made
by the Company on the outstanding Common Stock or pursuant to a split
or subdivision of the outstanding Common Stock), then such Person shall
be deemed to be an "Acquiring Person". Notwithstanding the foregoing,
if 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 paragraph (a)) has become
such inadvertently, and such Person divests as promptly as practicable
a sufficient number of shares of Common Stock so that such Person would
no longer be an "Acquiring Person" (as defined pursuant to the
foregoing provisions of this paragraph (a)), then such Person shall not
be deemed to be an "Acquiring Person" for any purposes of this
Agreement.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended and
in effect on the date of this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or
any of such Person's
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Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable
upon exercise of Rights at any time prior to the occurrence of
a Triggering Event, or (C) securities issuable upon exercise
of Rights from and after the occurrence of a Triggering Event
which Rights were acquired by such Person or any such Person's
Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) hereof in connection
with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership" of
(as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "beneficially own," any
security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such security
if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public
proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the General
Rules and Regulations under the Exchange Act, and (B) is not
also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this
paragraph (d)) or disposing of any voting securities of the
Company;
provided, however, that nothing in this paragraph (d) 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
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through such Person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Illinois
are authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00
P.M., Chicago time, on such date, provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Chicago time, on the
next succeeding Business Day.
(g) "Common Stock" shall mean the common stock, par value $.01
per share, of the Company, except that "Common Stock" when used with
reference to any Person other than the Company shall mean the capital
stock of such Person with the greatest voting power, or the equity
securities or other equity interest having power to control or direct
the management, of such Person.
(h) "Person" shall mean any individual, firm, limited
liability company, corporation, partnership or other entity and shall
include any successor (by merger or otherwise) of such entity.
(i) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the
Company, and, to the extent that there is not a sufficient number of
shares of Series A Junior Participating Preferred Stock authorized to
permit the full exercise of the Rights, any other series of preferred
stock, par value $.01 per share, of the Company designated for such
purpose containing terms substantially similar to the terms of the
Series A Junior Participating Preferred Stock.
(j) "Section 11(a)(ii) Event" shall mean the event described
in Section 11(a)(ii) hereof.
(k) "Section 13 Event" shall have the meaning set forth in
Section 13(a) hereof.
(l) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d)
under the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such.
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(m) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which an amount of voting securities
sufficient to elect at least a majority of the directors of such
corporation or other entity is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.
(n) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
In addition, for purposes of this Agreement, the following
terms have the meanings indicated in specified sections of this Agreement: (i)
"Adjustment Shares" shall have the meaning set forth in Section 11(a)(ii)
hereof; (ii) "common stock equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof; (iii) "current market price" shall have the meaning
set forth in Section 11(d) hereof; (iv) "Current Value" shall have the meaning
set forth in Section 11(a)(iii) hereof; (v) "Distribution Date" shall have the
meaning set forth in Section 3(a) hereof; (vi) "equivalent preferred stock"
shall have the meaning set forth in Section 11(b) hereof; (vii) "Exchange Ratio"
shall have the meaning set forth in Section 24(a) hereof; (viii) "Expiration
Date" shall have the meaning set forth in Section 7(a) hereof; (ix) "Final
Expiration Date" shall have the meaning set forth in Section 7(a) hereof; (x)
"Nasdaq" shall have the meaning set forth in Section 11(d)(i) hereof; (xi)
"Principal Party" shall have the meaning set forth in Section 13(b) hereof;
(xii) "Purchase Price" shall have the meaning set forth in Section 4(a) hereof;
(xiii) "Record Date" shall have the meaning set forth in the recitals hereof;
(xiv) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof; (xv) "Rights" shall have the meaning set forth in the recitals hereof;
(xvi) "Rights Certificates" shall have the meaning set forth in Section 3(a)
hereof; (xvii) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof; (xviii) "Spread" shall have the meaning set forth
in Section 11(a)(iii) hereof; (xix) "Substitution Period" shall have the meaning
set forth in Section 11(a)(iii) hereof; (xx) "Summary of Rights" shall have the
meaning set forth in Section 3(b) hereof and (xxi) "Trading Day" shall have the
meaning set forth in Section 11(d)(i) hereof.
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. The Rights Agent shall have no duty to
supervise, and in no event shall be liable for, the acts or omissions of any
such co-Rights Agent.
Section 3. Issue of Rights Certificates.
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(a) Until the earlier of (i) the Close of Business on the
tenth day after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date) or (ii) the Close of Business on the tenth Business Day (or such
later date as may be determined by action of the Board of Directors of the
Company prior to such time as any Person becomes an Acquiring Person) after the
date that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding (the earlier of (i) and (ii) being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for the
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates and (y) the Rights will be transferable
only in connection with the transfer of the underlying shares of Common Stock
(including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent (to the extent provided with all necessary
information) will send by first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more Rights certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per share of Common Stock has been
made pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C (the "Summary of Rights"),
by postage prepaid mail, to each record holder of the Common Stock as of the
Close of Business on the Record Date, at the address of such holder shown on the
records of the Company. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced
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by such certificates registered in the names of the holders thereof together
with a copy of the Summary of Rights attached thereto. Until the earlier of the
Distribution Date or the Expiration Date, the surrender for transfer of any
certificate representing shares of Common Stock in respect of which Rights have
been issued, with or without a copy of the Summary of Rights attached thereto,
shall also constitute the transfer of the Rights associated with such shares of
Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued (whether originally issued or from the Company's
treasury) after the Record Date but prior to the earlier of the Distribution
Date or the Expiration Date or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates representing such shares of
Common Stock shall also be deemed to be certificates for Rights, and shall bear
a legend substantially in the following form:
This certificate also evidences and entitles the holder hereof
to certain rights as set forth in the Rights Agreement between eLoyalty
Corporation (the "Company") and ChaseMellon Shareholder Services,
L.L.C. (the "Rights Agent") dated as of [ ], as the same may be
amended from time to time (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a copy of which is on
file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will
be evidenced by separate certificates and will no longer be evidenced
by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, may become
null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates. In
the event the Company purchases or acquires any shares of its Common Stock after
the Record Date but prior to the Distribution Date, any Rights
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associated with such shares shall be deemed cancelled and retired so that the
Company shall not be entitled to exercise any Rights associated with shares of
Common Stock that are not outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (but which do not affect the
duties or responsibilities of the Rights Agent) and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date or, in the case of Rights with respect to shares of
Common Stock issued or becoming outstanding after the Record Date, the same date
as the stock certificate evidencing such shares, and on their face shall entitle
the holders thereof to purchase such number of one one-hundredths of a share of
Preferred Stock as shall be set forth therein at the price set forth therein
(such exercise price per one one-hundredth of a share, the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment from time to
time as provided in Sections 11 and 13(a) hereof.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by any Person known
to be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of Section 7(e) hereof, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this
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sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be countersigned manually or by
facsimile signature by the Rights Agent and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date and subject to receipt of
the relevant materials and information, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the certificate number and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time
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after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the Expiration Date, any Rights Certificate or Certificates
(other than Rights Certificates representing Rights that have become null and
void pursuant to Section 7(e) or that have been exchanged pursuant to Section 24
hereof) may be transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a like
number of one one-hundredths of a share of Preferred Stock (or, following a
Triggering Event, Common Stock, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Certificates surrendered then entitled
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates. The Rights Agent shall have no duty or
obligation to take any action under any Section of this Agreement which
requires the payment by a Rights holder of applicable taxes and governmental
charges unless and until the Rights Agent is satisfied that all such taxes
and/or charges have been paid.
(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 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 Certificates if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date
of Rights. (a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability
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set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole
or in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-hundredths of a share of Preferred Stock (or other securities, cash or other
assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earliest of (i) the Close of Business on
[ ] (the "Final Expiration Date"), (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof or (iii) the time at which such
Rights are exchanged pursuant to Section 24 hereof (the earliest of (i), (ii)
and (iii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-hundredth of a share
of Preferred Stock pursuant to the exercise of a Right shall initially be
$[ ], and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a share of Preferred Stock (or
other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax
required to be paid by the holder of the Rights Certificate in accordance with
Section 9(e) hereof, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) (A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of one one-hundredths of a
share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if the
Company shall have elected to deposit the total number of shares of Preferred
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-hundredths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with Section 14 hereof,
(iii) 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
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names as may be designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by
certified bank check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities (including Common
Stock) of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when necessary to comply with the terms of this
Agreement. The Company reserves the right to require prior to the occurrence of
a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a) (ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any Affiliate or Associate thereof) to holders of equity interests in
such Acquiring Person (or any Affiliate or Associate thereof) or to any Person
with whom the Acquiring Person (or any Affiliate or Associate thereof) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but neither the Company nor the Rights Agent shall have any
liability to any holder of Rights Certificates or other Person as a result of
the Company's
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failure to make any determinations with respect to an Acquiring Person or any of
its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) properly completed and signed the certificate contained in
the form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof, except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificates purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock. (a)
The Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities) or out of its
authorized and issued shares held in its treasury, the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock and/or other securities) that, as provided in this Agreement, including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange or The Nasdaq National Market (or any successor),
the
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Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange or The Nasdaq National Market (or any successor), upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Act with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the date of the expiration of the
Rights. The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or "blue sky" laws of the various
states in connection with the exercisability of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days after
the date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement at such
time as the suspension is no longer in effect. In addition, if the Company shall
determine that a registration statement is required following the Distribution
Date, and a Section 11(a)(ii) Event has not occurred, the Company may
temporarily suspend (and shall give the Rights Agent prompt notice thereof) the
exercisability of Rights until such time as a registration statement has been
declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification or exemption in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted under applicable law or a
registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all
such actions as may be necessary to ensure that all one one-hundredths of a
share of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
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(e) The Company further covenants and agrees that it will pay,
when due and payable, any and all transfer taxes and governmental charges which
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for a number of one one-hundredths of a share 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 pay
any transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-hundredths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-hundredths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose
name any certificate for a number of one one-hundredths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares or other securities for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Shares or Number of Rights. The Purchase Price, the
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number and kind of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in shares of Preferred Stock, (B) subdivide the outstanding
Preferred Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock
in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock
or capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of shares
of Preferred Stock or capital stock, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii) hereof.
(ii) Subject to Section 24 hereof, in the event any Person
becomes an Acquiring Person, then each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof at a price equal to the then
current Purchase Price in accordance with the terms of this Agreement,
in lieu of a number of one one-hundredths of a share of Preferred
Stock, such number of shares of Common Stock of the Company as shall
equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of one one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event and (y) dividing that product
(which, following such first
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occurrence shall thereafter be referred to as the "Purchase Price" for
each Right and for all purposes of this Agreement) by 50% of the
current market price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number
of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common Stock which
are authorized by the Company's certificate of incorporation, as
amended, but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights, is not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A)
determine the value of the Adjustment Shares issuable upon the exercise
of a Right (the "Current Value"), and (B) with respect to each Right,
make adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in
the Purchase Price, (3) Common Stock or other equity securities of the
Company (including, without limitation, shares, or units of shares, of
preferred stock, such as the Preferred Stock, which the Board of
Directors of the Company has deemed to have substantially the same
value or economic rights as shares of Common Stock (such shares of
preferred stock, "common stock equivalents")), (4) debt securities of
the Company, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has
been determined by the Board of Directors of the Company based upon the
advice of a nationally recognized investment banking firm selected by
the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y)
the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the excess of (i) the
Current Value over (ii) the Purchase Price. If the Board of Directors
of the Company shall determine in good faith that it is likely
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that sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek stockholder approval for the
authorization of such additional shares (such thirty (30) day period,
as it may be extended, the "Substitution Period"). To the extent that
action is to be taken pursuant to the first and/or third sentences of
this Section 11(a)(iii), the Company (x) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights, and (y) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
such stockholder approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made
pursuant to such first sentence and to determine the value thereof. In
the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect (with prompt notice of such
announcements to the Rights Agent). For purposes of this Section
11(a)(iii), the value of each Adjustment Share shall be the current
market price (as determined pursuant to Section 11(d) hereof) per share
of Common Stock on the Section 11(a)(ii) Trigger Date and the value of
any "common stock equivalent" shall be deemed to equal the current
market price (as determined pursuant to Section 11(d) hereof) per share
of the Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights (other than the Rights), options or warrants to all holders
of Preferred Stock entitling them to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record date) Preferred
Stock (or shares having the same rights, privileges and preferences as the
shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price per
share of Preferred Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
equivalent preferred stock) less than the current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of Preferred Stock outstanding on such record date, plus the number of shares of
Preferred Stock which the aggregate
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offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock so to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current market price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed, and in the event that such rights, options or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
periodic cash dividend out of the earnings or retained earnings of the Company),
assets (other than a dividend payable in Preferred Stock, but including any
dividend payable in stock other than Preferred Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock on
such record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such current market price (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Purchase Price shall be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
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(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"current market price" per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Stock for the thirty (30) consecutive Trading Days (as such term
is hereinafter defined) immediately prior to but not including such
date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock
on any date shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the ten (10) consecutive
Trading Days immediately following but not including such date;
provided, however, that in the event that the current market price per
share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such Common Stock (other
than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for
such dividend or distribution, or the record date for such subdivision,
combination or reclassification shall not have occurred prior to the
commencement of the requisite thirty (30) Trading Day or ten (10)
Trading Day period, as set forth above, then, and in each such case,
the "current market price" shall be properly adjusted to take into
account any trading during the period prior to such ex-dividend date or
record date. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which the shares of Common Stock are listed or admitted to
trading or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price or,
if not so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or such
other quotation system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of
the
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closing bid and asked prices as furnished by a professional market
maker making a market in the Common Stock selected by the Board of
Directors of the Company. If on any such date no market maker is making
a market in the Common Stock, the fair value of such shares on such
date as determined in good faith by the Board of Directors of the
Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed
or traded, "current market price" per share shall mean the fair value
per share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined
in the same manner as set forth above for the Common Stock in clause
(i) of this Section 11(d) (other than the last sentence thereof). If
the current market price per share of Preferred Stock cannot be
determined in the manner provided above, or if the Preferred Stock is
not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the "current market price" per share of
Preferred Stock shall be conclusively deemed to be an amount equal to
100 (as such number may be appropriately adjusted for such events as
stock splits, stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement) multiplied by
the current market price per share of the Common Stock. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or
traded, "current market price" per share of the Preferred Stock shall
mean the fair value per share as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. For all purposes of this
Agreement, the "current market price" of one one-hundredth of a share
of Preferred Stock shall be equal to the "current market price" of one
share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
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adjustment would require an increase or decrease of at least one percent (1%) in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest cent or to the nearest one
ten-thousandth of a share of Common Stock or other share or one one-millionth of
a share of Preferred Stock, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one-hundredths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths
of a share covered by a Right immediately prior to this adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
the adjustment in the number of Rights shall be exercisable for the number of
one
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one-hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one-ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement (with prompt notice thereof to the
Rights Agent) of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of one one-hundredths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
one-hundredth of a share and the number of one one-hundredths of a share which
were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one one-hundredths of a share of Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Preferred Stock at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of
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a record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date the number of one one-hundredths of a share of Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of one one-hundredths of a share of Preferred
Stock and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Purchase Price in effect prior to such
adjustment (and shall provide the Rights Agent prompt notice of such election);
provided, however, that the Company shall deliver to such holder a due xxxx or
other appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence of
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that the Board of Directors of the Company, in
its good faith judgment, shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly for
cash of any shares of Preferred Stock at less than the current market price,
(iii) issuance wholly for cash of shares of Preferred Stock or securities which
by their terms are convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger, sale or transfer there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the "Principal
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Party" for purposes of Section 13(a) hereof shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates and
Associates.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, Section 24 or
Section 27 hereof, take (or permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
(p) In the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number
of Shares. Whenever an adjustment is made as provided in Section 11 or Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts and computations accounting
for such adjustment, (b) promptly file with the Rights Agent, and with each
transfer agent for the Preferred Stock and the Common Stock, a copy of such
certificate, and (c) mail a brief summary thereof to each holder of a Rights
Certificate (or, if prior to the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of such adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate
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with, or merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section 11(o) hereof) (any event
described in clauses (x), (y) or (z) of this Section 13(a) following the Stock
Acquisition Date, a "Section 13 Event"), then, and in each such case, proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of a number of one one-hundredths of a share of
Preferred Stock, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (l) multiplying the then current Purchase Price by the number of one
one-hundredths of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
Section 11(a)(ii) Event has occurred prior to the first occurrence of a Section
13 Event, multiplying the number of such one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and dividing that product (which,
following the first occurrence of a Section 13 Event, shall be referred to as
the "Purchase Price" for each Right and for all purposes of this Agreement) by
(2) 50% of the current market price (determined pursuant to Section 11(d)(i)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of
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Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, and if no
securities are so issued, the Person that is the other party to such
merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, sale or transfer of assets mentioned in paragraph (a)
of this Section 13, the Principal Party will:
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(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise
of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) 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 under the Exchange Act.
(d) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered holders
of the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported to the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use
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or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock) upon exercise of the Rights or
to distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-hundredth of a share may, at the election of the Company,
be evidenced by depositary receipts pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, however, that such
agreement shall provide that the holders of such depositary receipts shall have
all the rights, privileges and preferences to which they are entitled as
beneficial owners of the shares represented by such depositary receipts. In lieu
of fractional shares of Preferred Stock that are not integral multiples of one
one-hundredth of a share of Preferred Stock, the Company shall pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-hundredth of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of one one-hundredth of a share of
Preferred Stock shall be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one share of Common Stock. For purposes
of this Section 14(c), the current market value of one share of Common Stock
shall be the closing price of one share of Common Stock (as determined pursuant
to Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives such holder's right to receive any
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fractional Rights or any fractional shares upon exercise of a Right, except as
permitted by this Section 14.
(e) The Rights Agent shall have no duty or obligation with
respect to this Section 14 and Section 24(e) unless and until it has received
specific instructions (and sufficient cash, if required) from the Company with
respect to its duties and obligations under such Sections.
Section 15. Rights of Action. All rights of action in respect
of this Agreement, other than rights of action vested in the Rights Agent
pursuant to the terms of this Agreement, are vested in the respective registered
holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Stock), without
the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, of the Common Stock), may, in such holder's
own behalf and for such holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, such holder's right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company and the Rights
Agent and with every holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and certificates
fully executed;
(c) subject to Section 6(a), Section 7(e) and Section 7(f)
hereof, the Company and the Rights Agent may deem and treat the person
in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificates made by anyone other than the
Company or the Rights Agent) for all purposes
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whatsoever, and neither the Company nor the Rights Agent shall be
required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree, judgment or ruling issued by a court of competent jurisdiction
or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation; provided,
however, the Company must use reasonable efforts to have any such
order, decree, judgment or ruling lifted or otherwise overturned as
soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose to be the holder of the
number of one one-hundredths of a share of Preferred Stock or any other
securities of the Company which may at any time be issuable upon the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the preparation, execution,
delivery and amendment of this Agreement and the exercise and performance of its
duties hereunder, provided, that the aggregate amount that the Company shall be
required to pay the Rights Agent in connection with the preparation, execution
and delivery of this Agreement shall not exceed $2,500. The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless against,
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any loss, liability, damage, judgment, fine, penalty, claim, demand, settlement,
cost or expense incurred without gross negligence, bad faith or willful
misconduct (each as finally determined by a court of competent jurisdiction) on
the part of the Rights Agent for any action taken, suffered 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. Anything to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect, punitive consequential
or incidental 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. Any liability of the Rights Agent under this Rights
Agreement will be limited to the amount of fees paid by the Company to the
Rights Agent.
(b) The Rights Agent shall be authorized and protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its acceptance and administration of this
Agreement in reliance upon any Rights Certificate or certificate for Common
Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 20.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any Person into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the stock
transfer business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at the time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates
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shall have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed, and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case, at that time, any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes only the duties and obligations expressly imposed by this Agreement
upon the following terms and conditions, by all of which the Company and the
holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect
of any action taken, suffered or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter (including, without limitation, the identity of any
Acquiring Person and the determination of "current market price") be
proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for or in respect
of any action taken, suffered or omitted by it in good faith by it
under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct (each as finally
determined by a court of competent jurisdiction).
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(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement
or in the Rights Certificates or be required to verify the same (except
as to its countersignature on such Rights Certificates), but all such
statements and recitals are and shall be deemed to have been made by
the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except
its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Section 11, Section 13
or Section 24 hereof or responsible for the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise
of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation
of any shares of Common Stock or Preferred Stock to be issued pursuant
to this Agreement or any Rights Certificate or as to whether any shares
of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments
and assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the provisions of
this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, any Vice
President, the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall
incur no liability for or in respect of any action taken, suffered or
omitted by it in good faith in accordance with instructions of any such
officer.
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(h) The Rights Agent and any stockholder, director, Affiliate,
officer or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as fully
and freely as though it were not Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or
misconduct; provided, however, that reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for
believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to
the form of assignment or form of election to purchase, as the case may
be, has either not been completed or indicates an affirmative response
to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer
without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and
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Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then any registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be (i) a Person organized and doing
business under the laws of the United States or of the State of Illinois or the
State of New York (or of any other state of the United States so long as such
Person is authorized to do business in the State of Illinois or the State of New
York), in good standing, having an office or agency in the State of Illinois or
the State of New York, which is authorized under such laws to exercise 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 $50,000,000 or (ii) an Affiliate of
such Person. 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 reasonable assurance, conveyance, act or deed necessary for the purpose.
Not later than the effective date of any such appointment, the Company shall
file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred Stock, and mail a notice
thereof in writing to the registered holders of the Rights Certificates. Failure
to give any notice provided for in this Section 21 or any defect therein shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of the
Rights, the
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Company (a) shall, with respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded prior to the Distribution Date, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing an
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Person to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired. The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the "current market price", as defined in Section 11(d)(i)
hereof, 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 may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole discretion
may establish.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to
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the Rights Agent and to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become null and void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding
the foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of any such Rights shall be to receive that number of shares of Common
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice (with prompt
notice thereof to the Rights Agent) of any exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
will be effected pro rata based on the number of Rights (other than
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Rights which have become null and void pursuant to the provisions of Section
7(e) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company,
at its option, may substitute shares of Preferred Stock (or equivalent preferred
stock, as such term is defined in paragraph (b) of Section 11 hereof) for shares
of Common Stock exchangeable for Rights, at the initial rate of one
one-hundredth of a share of Preferred Stock (or equivalent preferred stock) for
each share of Common Stock, as appropriately adjusted to reflect adjustments in
the voting rights of the Preferred Stock pursuant to the terms thereof, so that
the fraction of a share of Preferred Stock delivered in lieu of each share of
Common Stock shall have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient shares of
Common Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such actions as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, there
shall be paid to the registered holders of the Rights Certificates with regard
to which such fractional shares of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this subsection (e), the current
market value of a whole share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of Section
11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange
pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with
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Section 11(o) hereof), or to effect any sale or other transfer (or to permit one
or more of its Subsidiaries to effect any sale or other transfer), in one
transaction or a series of related transactions, of more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to the Rights Agent and to each
holder of a Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, distribution of rights or
warrants, or the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case a Section 11(a)(ii) Event shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof, and (ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if
appropriate, other securities.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
eLoyalty Corporation
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: President
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company
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or by the holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
ChaseMellon Shareholder Services, L.L.C.
000 Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxx Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Relationship Manager
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. The Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order to cure any ambiguity, to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions with respect to
the Rights which the Company may deem necessary or desirable (including, without
limitation, a supplement or amendment that changes the Purchase Price), any such
supplement or amendment to be evidenced by a writing signed by the Company and
the Rights Agent; provided, however, that from and after such time as any Person
becomes an Acquiring Person, this Agreement shall not be amended in any manner
which would adversely affect the interests of the holders of Rights and further
provided that the Rights Agent shall not be obligated to enter into any such
supplement or amendment that would change or increase the duties, liabilities or
obligations of the Rights Agent hereunder. Prior to the Distribution Date, the
interest of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock. Without limiting the foregoing, the Company may
at any time prior to such time as any Person becomes an Acquiring Person amend
this Agreement to lower the thresholds set forth in Sections 1(a) and 3(a) to a
percentage that (subject to exceptions for specified Persons or groups excepted
from the definition of "Acquiring Person") is not less than the greater of (i)
the sum of .001% and the largest percentage of the outstanding shares of Common
Stock then known by the Company to be beneficially owned by any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, any Person organized, appointed
or established by the Company for or pursuant to the terms of any such plan or,
to the extent excepted from the definition of "Acquiring Person", other
specified Persons or groups) and (ii) 10.0%.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company
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or the Rights Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 29. Determination and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding shares
of Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(l)(i) of the General Rules
and Regulations under the Exchange Act. The Board of Directors of the Company
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors of
the Company or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, but not limited to, a determination to redeem or not
redeem the Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
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. The Rights Agent is entitled to always
assume that the Board of Directors of the Company acted in good faith and shall
be fully protected and incur no liability in reliance thereon.
Section 30. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company
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determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board of Directors of the Company.
Section 32. Governing Law. This Agreement, each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
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.
Attest: eLoyalty Corporation
By: _________________________________ By: _______________________________
Name: Name:
Title: Title:
Attest: ChaseMellon Shareholder
Services, L.L.C.
By: _________________________________ By: _______________________________
Name: Name:
Title: Title:
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Exhibit A
Certificate of Designations
of
Series A Junior Participating Preferred Stock
of
eLoyalty Corporation
--------------------------------------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
--------------------------------------------------------------------------------
The undersigned do hereby certify that the following resolution
was duly adopted by the Board of Directors of eLoyalty Corporation, a Delaware
corporation (the "Corporation"), on [
]:
RESOLVED, that pursuant to the authority vested in the board of
directors of the Corporation by the Certificate of Incorporation, as amended
(the "Charter"), the Board of Directors does hereby create, authorize and
provide for the issue of a series of Preferred Stock, par value $.01 per share,
of the Corporation, to be designated "Series A Junior Participating Preferred
Stock" (hereinafter referred to as the "Series A Preferred Stock"), initially
consisting of 1,000,000 shares, and to the extent that the designations, powers,
preferences and relative and other special rights and the qualifications,
limitations or restrictions of the Series A Preferred Stock are not stated and
expressed in the Charter, does hereby fix and herein state and express such
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used
herein which are defined in the Charter shall be deemed to have the meanings
provided therein):
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior Participating Preferred Stock" and the
number of shares constituting such series shall be 1,000,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Preferred Stock with respect to dividends, the holders of
shares of Series A Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
47
purpose, quarterly dividends payable in cash on the first business day of
January, April, July and October 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) $.01 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 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,
par value $.01 per share, of the Corporation (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. In the event the Corporation
shall at any time after [ ] (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, 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, subject to the prior and superior
rights of the holders of any shares of any series of Preferred Stock ranking
prior to and superior to the shares of Series A Preferred Stock with respect to
dividends, a dividend of $.01 per share on the Series A Preferred Stock shall
nevertheless by 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
48
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 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 60 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) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote collectively as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall xxxx the beginning of
a period (herein called a "default period") which shall extend until
such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly dividend 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, all holders of Preferred Stock (including holders
49
of the Series A Preferred Stock) with dividends in arrears in an amount
equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2) 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(C) 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 ten percent (10%) in number of shares of 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 Preferred Stock of such voting rights. At any meeting at
which the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the right,
voting as a class, to elect Directors to fill such vacancies, if any, in
the Board of Directors as may then exist up to two (2) Directors or, if
such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting
does not amount to the required number, the holders of the Preferred
Stock shall have the right to make such increase in the number of
Directors as shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall have
exercised their right to elect Directors in any default period and
during the continuance of such period, the number of Directors shall not
be increased or decreased except by vote of the holders of Preferred
Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred
Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding, irrespective
of series, may request, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the Chairman
of the Board, the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this
paragraph (C)(iii) shall be given to each holder of record of Preferred
Stock by mailing a copy of such notice to him or her at his or her 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 50 days after such order or request, or in default of the
calling of such meeting within 50 days
50
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 ten percent (10%) of the total number of shares of Preferred
Stock outstanding. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period
within 50 days immediately preceding the date fixed for the next annual
meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and, if
applicable, other classes of capital stock of the Corporation, shall
continue to be entitled to elect the whole number of Directors until the
holders of Preferred Stock shall have exercised their right to elect two
(2) Directors voting as a class, after the exercise of which right (x)
the Directors so elected by the holders of 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 (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the
remaining Directors theretofore elected by the holders of the class of
capital stock which elected the Director whose office shall have become
vacant. References in this paragraph (C) to Directors elected by the
holders of a particular class of stock shall include Directors appointed
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 Preferred Stock as a class to elect Directors
shall cease, (y) the term of any Directors elected by the holders of
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 paragraph (C)(ii) 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.
(D) 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.
(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
51
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, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares
of capital 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 capital stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any capital 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 capital 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.
52
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.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of capital 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 $100 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment
(the "Series A Liquidation Preference"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, and the payment of liquidation preferences of all other shares of
capital stock which rank prior to or on a parity with Series A Preferred Stock,
holders of Series A Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on
53
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the 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.
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 shall at
the same time be similarly exchanged or changed into an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of capital stock, securities, cash and/or any other
property (payable in kind), as the case may be, for which or into which each
share of Common Stock is exchanged or changed. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption.
The shares of Series A Preferred Stock shall not be redeemable.
Section 9. Ranking.
The Series A Preferred Stock shall rank junior to all other
series of the Corporation's Preferred Stock as to the payment of dividends and
the distribution of assets, whether or not upon the dissolution, liquidation or
winding up of the Corporation, unless the terms of any such series shall provide
otherwise.
Section 10. Amendment.
The Charter 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
54
them adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting separately as a class.
Section 11. Fractional Shares.
Series A Preferred Stock may be issued in fractions of a share
which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Preferred Stock.
IN WITNESS WHEREOF, eLoyalty Corporation has caused its corporate
seal to be hereunto affixed and this certificate to be signed by , its , and the
same to be attested to by , its , this _______th day of ________, ____.
eLoyalty Corporation
By:_________________________________
Name:
Title:
(Corporate Seal)
Attest:
_________________
55
Exhibit B
[Form of Rights Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER [ ] OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION,
AT THE OPTION OF THE COMPANY, AT $.01 PER RIGHT, AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON
(AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF SUCH AGREEMENT.]*
--------
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
56
Rights Certificate
eLoyalty Corporation
This certifies that _______________, or registered assigns, is
the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of [ ], as the same may be amended from time to
time (the "Rights Agreement"), between eLoyalty Corporation, a Delaware
corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C., a New
Jersey limited liability company (the "Rights Agent"), to purchase from the
Company at any time prior to 5:00 P.M. (Chicago time) on [ ] at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, nonassessable share of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of the Company, at a purchase price of $[ ] per one one-hundredth of a
share (the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of [ ], based on the Preferred Stock as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering
Event (as such term is defined in the Rights Agreement) that, upon any exercise
of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person or an Affiliate or Associate of such Person, such Rights shall
become null and void and no holder hereof shall have any right with respect to
such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the
number and kind of shares of Preferred Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events.
57
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates,
which limitations of rights include the temporary suspension of the
exercisability of such Rights under the specific circumstances set forth in the
Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the principal office or offices of the Rights
Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of one one-hundredths
of a share of Preferred Stock as the Rights evidenced by the Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may, in each case at the option of the Company, be
(i) redeemed by the Company at its option at a redemption price of $.01 per
Right or (ii) exchanged in whole or in part for shares of Common Stock or other
securities of the Company. Immediately upon the action of the Board of Directors
of the Company authorizing redemption, the Rights will terminate and the only
right of the holders of Rights will be to receive the redemption price.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of
58
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned manually or by facsimile
signature by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Dated as of _______ __, ____
ATTEST: eLoyalty Corporation
_________________________ By:_________________________
Secretary Name:
Title:
Countersigned:
ChaseMellon Shareholder Services, L.L.C.
By:_________________________________
Authorized Signature
59
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ___________________________________________________________
hereby sells, assigns and transfers unto _____________________________________
______________________________________________________________________________
(Please print name and address of transferee) this Rights
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________ Attorney, to transfer the
within Rights Certificate on the books of the within-named Company, with full
power of substitution.
Dated: ___________________,______
_____________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an Acquiring Person.
Dated: ___________________,______ ____________________________
Signature
Signature Guaranteed:
60
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Rights
Certificate.)
TO: eLoyalty Corporation
The undersigned hereby irrevocably elects to exercise ______
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares (or other
securities) be issued in the name of and delivered to:
Please insert social security
or other identifying number: ______________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by
this Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number: ______________________
_________________________________________________________________
(Please print name and address)
_________________________________________________________________
Dated: ___________________,______
________________________________________
Signature
Signature Guaranteed:
61
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 pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _________,___ __________________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
62
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
On [ ], the Board of Directors of eLoyalty Corporation adopted a
Stockholders Rights Plan (the "Rights Plan") and declared a dividend
distribution of one Right for each outstanding share of eLoyalty's common stock,
to stockholders of record at the close of business on [ ]. Each Right will
entitle its holder, under the circumstances described below, to purchase from
eLoyalty one one-hundredth of a share of its Series A Junior Participating
Preferred Stock, $.01 par value, (the "Series A Preferred Stock"), at an
exercise price of $[ ] per Right, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between eLoyalty and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
Initially, the Rights will be associated with the common stock
and evidenced by the common stock certificates, which will contain a notation
incorporating the Rights Agreement by reference, and will be transferred with
and only with underlying shares of common stock. The Rights will become
exercisable and separately certificated only upon the "Distribution Date," which
will occur upon the earlier of:
- ten days following a public announcement that a person or group
(an "Acquiring Person") has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding
shares of common stock then outstanding (the date of the
announcement being the "Stock Acquisition Date"); or
- ten business days (or later if determined by eLoyalty's board of
directors prior to any person becoming an Acquiring Person)
following the commencement of a tender offer or exchange offer
that would result in a person or group becoming an Acquiring
Person.
Until the Distribution Date, the surrender for transfer of any
shares of common stock outstanding will also constitute the transfer of the
Rights associated with such shares.
As soon as practicable after the Distribution Date, separate
certificates or book-entry statements for the Rights will be mailed to holders
of record of common stock as of the close of business on the Distribution Date.
From and after the Distribution Date, the separate certificates or book-entry
statements alone will represent the Rights. Except as otherwise provided in the
Rights Agreement, only shares of common stock issued prior to the Distribution
Date will be issued with Rights.
63
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on [ ], unless earlier redeemed or
exchanged by eLoyalty as described below.
In the event (a "Flip-In Event") that a person or group becomes
an Acquiring Person, each holder of a Right (other than any Acquiring Person and
certain related parties, whose Rights will automatically become null and void)
will have the right to receive, upon exercise, common stock, or, in certain
circumstances, cash, property or other securities of eLoyalty, with a value
equal to two times the exercise price of the Right. The Rights may not be
exercised following a Flip-In Event while eLoyalty has the ability to cause the
Rights to be redeemed. eLoyalty's ability to redeem the Rights is described
below.
For example, at an exercise price of $100 per Right, each Right
not owned by an Acquiring Person (or by certain related parties) following a
Flip-In Event would entitle its holder to purchase $200 worth of common stock
(or other consideration, as noted above) for $100. Assuming that the common
stock had a per share value of $50 at that time, the holder of each valid Right
would be entitled to purchase 4 shares of common stock for $100.
In the event (a "Flip-Over Event") that, at any time following
the Stock Acquisition Date:
- eLoyalty is acquired in a merger or other business
combination in which it is not the surviving entity,
- eLoyalty is acquired in a merger or other business combination in
which it is the surviving entity and all or part of its common
stock is converted into or exchanged for securities of another
entity, cash or other property, or
- 50% or more of eLoyalty's assets or earning power is
sold or transferred,
then each holder of a Right (except Rights which previously have been voided as
set forth above) will have the right to receive, upon exercise, common stock of
the acquiring company having a value equal to two times the exercise price of
the Right. Flip-In Events and Flip-Over Events are collectively referred to as
"Triggering Events."
The exercise price payable, and the number of shares of Series A
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution:
64
- in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Series A
Preferred Stock,
- if holders of the Series A Preferred Stock are granted certain
rights, options or warrants to subscribe for Series A Preferred
Stock or convertible securities at less than the current market
price of the Series A Preferred Stock, or
- upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular periodic
cash dividends) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the exercise price will
be required until cumulative adjustments amount to at least 1% of the then
current exercise price. No fractional shares of Series A Preferred Stock will be
issued and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Series A Preferred Stock on the last trading day prior to
the date of exercise. eLoyalty may require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Series A Preferred Stock will be issued.
eLoyalty may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (subject to adjustment and payable in cash, common stock
or other consideration deemed appropriate by eLoyalty's board of directors) at
any time until ten days following the Stock Acquisition Date. Immediately upon
the action of eLoyalty's board of directors authorizing any redemption, the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.
At any time after any person or group becomes an Acquiring Person
and prior to the acquisition by that person or group of 50% or more of the
outstanding shares of common stock, eLoyalty may exchange the Rights (other than
Rights owned by that person or group which will have become void), in whole or
in part, at an exchange ratio of one share of common stock, or one one-hundredth
of a share of Series A Preferred Stock (or of a share of a class or series of
our preferred stock having equivalent rights, preferences and privileges), per
Right (subject to adjustment).
Until a Right is exercised, its holder, as such, will have no
rights as a stockholder of eLoyalty, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not
result in the recognition of taxable income by eLoyalty or its stockholders,
stockholders may, depending upon the circumstances, recognize taxable income
after a Triggering Event.
65
The terms of the Rights may be amended by eLoyalty's board of
directors without the consent of the holders of the Rights. The board of
directors could, among other things, lower the thresholds described above to the
greater of 10% or .001% more than the largest percentage of the outstanding
shares of common stock then known to eLoyalty to be beneficially owned by any
person or group of affiliated or associated persons. Once a person or group has
become an Acquiring Person no amendment can adversely affect the interests of
the holders of the Rights.
A copy of the Rights Agreement is available free of charge from
the Rights Agent. This 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.
