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RIGHTS AGREEMENT
QUEST RESOURCE CORPORATION
and
UMB BANK, n.a.,
Rights Agent
Dated as of May 31, 2006
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TABLE OF CONTENTS
Page
Section 1. Certain Definitions...........................................................1
Section 2. Appointment of Rights Agent...................................................3
Section 3. Issue of Rights Certificates..................................................3
Section 4. Form of Rights Certificates...................................................3
Section 5. Countersignature and Registration.............................................3
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates......................3
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.................3
Section 8. Cancellation and Destruction of Rights Certificates...........................3
Section 9. Reservation and Availability of Capital Stock.................................3
Section 10. Securities Record Date........................................................3
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
or Number of Rights...........................................................3
Section 12. Certificate of Adjusted Purchase Price or Number of Shares....................3
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........3
Section 14. Fractional Rights and Fractional Shares.......................................3
Section 15. Rights of Action..............................................................3
Section 16. Agreement of Rights Holders...................................................3
Section 17. Rights Certificate Holder Not Deemed a Stockholder............................3
Section 18. Concerning the Rights Agent...................................................3
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....................3
Section 20. Duties of Rights Agent........................................................3
Section 21. Change of Rights Agent........................................................3
Section 22. Issuance of New Rights Certificates...........................................3
Section 23. Redemption and Termination; Three-Year Independent Director Evaluation........3
Section 24. Exchange......................................................................3
Section 25. Notice of Certain Events......................................................3
Section 26. Notices.......................................................................3
Section 27. Supplements and Amendments....................................................3
Section 28. Successors....................................................................3
Section 29. Determinations and Actions by the Board of Directors, Etc.....................3
Section 30. Benefits of this Agreement....................................................3
Section 31. Severability..................................................................3
Section 32. Governing Law.................................................................3
Section 33. Counterparts..................................................................3
Section 34. Descriptive Headings..........................................................3
EXHIBIT A -- Form of Certificate of Designation, Preferences and Rights
EXHIBIT B -- Form of Rights Certificate
EXHIBIT C -- Form of Summary of Rights
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RIGHTS AGREEMENT
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RIGHTS AGREEMENT, dated as of May 31, 2006 (the "Agreement"), between
Quest Resource Corporation, a Nevada corporation (the "Company"), and UMB Bank,
n.a., a national banking organization, as Rights Agent (the "Rights Agent").
WHEREAS, on May 31, 2006 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized the issuance of, and declared a
dividend payable in, one right for each share of Common Stock of the Company
outstanding at the close of business on June 15, 2006 (the "Record Date"), each
such right initially representing the right to purchase one one-thousandth of a
share of Preferred Stock of the Company having the rights, powers and
preferences set forth in the form of Certificate of Designation, Preferences and
Rights attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (individually, a "Right" and collectively, the
"Rights");
WHEREAS, the Board of Directors of the Company further authorized the
issuance of one (as such number may hereinafter be adjusted pursuant to the
provisions of Section 11(q) hereof) Right for each share of Common Stock issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date, and, in certain circumstances
provided in Section 22 of this Agreement, after the Distribution Date; and
WHEREAS, on May 31, 2006, the Board of Directors adopted and approved a
Rights Agreement, dated as of May 31, 2006 (the "Rights Agreement"), in the form
hereof;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean collectively any Person who or
which, together with all Affiliates and Associates of such Person, shall be
the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding (other than as a result of a Permitted Offer) or was such a
Beneficial Owner at any time after the date hereof, whether or not such
Person together with all Affiliates or Associates of such Person continues
to be the Beneficial Owner of 15% or more of the then outstanding Common
Stock. Notwithstanding the foregoing, (A) the term "Acquiring Person" shall
not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any
employee benefit plan of the Company or of any Subsidiary of the Company,
(iv) any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan (including, without
limitation, any trust or other entity organized, appointed, established or
holding common stock for or pursuant to the terms of any such plan), or (v)
any Person together with all Affiliates and Associates of such Person who
or which becomes the Beneficial Owner of 15% or more of the then
outstanding shares of Common Stock as a result of the acquisition of Common
Stock directly from the Company (each of (i) through (v), an "Exempted
Person"); (B) no Person shall become an "Acquiring Person" as a result of
an acquisition of Common Stock by the Company which, by
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reducing the number of such shares then outstanding, increases the
proportionate number of shares beneficially owned by such Person together
with all Affiliates and Associates of such Person to 15% or more of the
outstanding Common Stock, except that if such Person, after such share
purchases by the Company, becomes the Beneficial Owner of additional shares
of Common Stock constituting 1% or more of the then outstanding shares of
Common Stock other than pursuant to a Permitted Offer, such Person shall be
deemed to be an "Acquiring Person"; and (C) if the Board of Directors of
the Company determines in good faith that a Person, together with all
Affiliates and Associates of such Person, who would otherwise be an
"Acquiring Person" has become such inadvertently, and such Person, together
with all Affiliates and Associates of such Person, divests as promptly as
practicable a sufficient number of shares of Common Stock so that such
Person, together with all Affiliates and Associates of such Person, would
no longer be an Acquiring Person, then such Person shall not be deemed to
be an "Acquiring Person." The term "outstanding," when used with reference
to a Person's Beneficial Ownership of securities of the Company, shall mean
the number of such securities then issued and outstanding together with the
number of such securities not then actually issued and outstanding which
such Person would be deemed to beneficially own hereunder.
(b) "Act" shall mean the Securities Act of 1933, as amended and in
effect on the date hereof.
(c) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) of this Agreement.
(d) "Affiliate" shall have the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act as amended and in
effect on the date hereof.
(e) "Associate" of a Person shall mean (i) with respect to a
corporation (other than the Company or a majority-owned Subsidiary of the
Company), any officer or director thereof or of any Subsidiary (as such
term is hereinafter defined) thereof, or any Beneficial Owner (as such term
is hereinafter defined) of 10% or more of any class of equity security
thereof, (ii) with respect to an association, joint venture or other
unincorporated organization, any officer or director thereof or of a
Subsidiary thereof or any Beneficial Owner of 10% or more ownership
interest therein, (iii) with respect to a partnership, any general partner
thereof or any limited partner thereof who is, directly or indirectly, the
Beneficial Owner of a 10% or greater ownership interest therein, (iv) with
respect to a limited liability company, any officer, director or manager
thereof or of a Subsidiary thereof or any member thereof who is, directly
or indirectly, the Beneficial Owner of a 10% or greater ownership interest
therein, (v) with respect to a business trust, any officer or trustee
thereof or of any Subsidiary thereof, (vi) with respect to any other trust
or an estate, any trustee, executor or similar fiduciary or any Person who
has a 10% or greater interest as a beneficiary in the income from or
principal of such trust or estate, (vii) with respect to a natural person,
any relative or spouse of such person, or any relative of such spouse, who
has the same home as such person or who is a director or officer of the
registrant or any of its parents or subsidiaries, and (viii) any Affiliate
of such Person.
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(f) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable immediately
or only after the passage of time or the fulfillment of a condition or
any or all of the foregoing) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, other rights (other than the
Rights), warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are
accepted for purchase or exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the occurrence of a Triggering
Event, or (C) securities issuable upon exercise of Rights from and
after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior
to the Distribution Date or pursuant to Section 3(a) or Section 22
hereof ("Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original
Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose
of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act as
amended and in effect on the date hereof), 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 or consent
given in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable provisions of the
rules and regulations under the Exchange Act as amended and as in
effect on the date hereof, and (B) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report, other than by reference to a proxy or consent
solicitation being conducted by such Person); 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 (f)) or disposing of any voting securities of the
Company;
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provided, however, that nothing in this paragraph (f) shall cause a
person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities
acquired through such person's participation in good faith in a bona
fide firm commitment underwriting until the expiration of forty days
after the date of such acquisition. Notwithstanding anything in this
definition of Beneficial Owner to the contrary, a Person who, prior to
the Distribution Date, is a member of the Board of Directors or an
officer of the Company or who is an Affiliate or Associate of a member
of the Board of Directors or officer of the Company (each, an
"Excluded Person") shall not be deemed to "beneficially own" shares of
Common Stock held by another Excluded Person solely by reason of any
agreement, arrangement or understanding, written or otherwise, entered
into in opposition to any transaction or in support of a Permitted
Offer.
(g) "Board of Directors" shall mean the Board of Directors of the
Company as constituted from time to time.
(h) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the States of
Oklahoma, New York or location of Right Agent are authorized or
obligated by law or executive order to close.
(i) "Close of business" on any given date shall mean 5:00 p.m.,
New York City time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 p.m., New York City time, on
the next succeeding Business Day.
(j) "Common Stock" shall mean the common stock, par value $0.001
per share, of the Company (or in the event of a subdivision,
combination or reclassification with respect to such shares of Common
Stock, the shares of Common Stock resulting from such subdivision,
combination or reclassification), except, subject to the proviso in
Section 13(b) of this Agreement, that "Common Stock" when used with
reference to any Person other than the Company (A) which shall be
organized in corporate form, shall mean the capital stock or other
equity security or equity interest with the greatest voting power to
control the management of such Person or, if such other Person is a
Subsidiary of another Person, the Person or Persons which ultimately
control such first-mentioned Person, or (B) which shall not be
organized in corporate form, shall mean units of beneficial interest
which shall represent the right to participate in profits, losses,
deductions and credits of such Person and which shall be entitled to
exercise the greatest voting power to direct the management of such
Person, or if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned
Person.
(k) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) of this Agreement.
(l) "Company" shall have the meaning set forth in the
introductory paragraph of this Agreement.
(m) "Current Market Price" shall have the meaning set forth in
Section 11(d).
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(n) "Current Value" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(o) "Distribution Date" shall have the meaning set forth in
Section 3(a) of this Agreement.
(p) "Equivalent preferred stock" shall have the meaning set forth
in Section 11(b) of this Agreement.
(q) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect on the date hereof.
(r) "Exchange Ratio" shall have the meaning set forth in Section
24(a) hereof.
(s) "Excluded Person" shall have the meaning set forth in Section
1(f) of this Agreement.
(t) "Exempted Person" shall have the meaning set forth in Section
1(a) of this Agreement.
(u) "Expiration Date" shall have the meaning set forth in Section
7(a) of this Agreement.
(v) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) of this Agreement.
(w) "Interested Stockholder" shall mean any Acquiring Person or
any Affiliate or Associate of an Acquiring Person or any other Person
in which such Acquiring Person, Affiliate or Associate has an
interest, or any other Person acting directly or indirectly on behalf
of or in concert with any such Acquiring Person, Affiliate or
Associate.
(x) "NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotation System.
(y) "Original Rights" shall have the meaning set forth in Section
1(f)(i) of this Agreement.
(z) "Permitted Offer" shall mean an acquisition of shares of
Common Stock pursuant to a tender offer or an exchange offer for all
outstanding shares of Common Stock that meets all of the following
requirements:
(i) the consideration of the offer is cash or publicly
traded securities and, in the case of a cash offer, is
fully-financed;
(ii) such offer remains open for at least 60 calendar days
from the date it commenced (within the meaning of Rule 14d-2(a),
as in effect on the date hereof, under the Exchange Act);
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(iii) on or prior to the date such offer is commenced
(within the meaning of Rule 14d-2(a), as in effect on the date
hereof, under the Exchange Act), the Person on whose behalf such
offer is being made has, and has provided to the Company, firm
written commitments from responsible financial institutions,
which have been accepted by such Person (or one of its
Affiliates), to provide, subject only to customary terms and
conditions, funds for such offer which, when added to the amount
of cash and cash equivalents which such Person then has available
and has irrevocably committed in writing to the Company to
utilize for purposes of such offer, will be sufficient to pay for
all shares of Common Stock then outstanding and all related
expenses;
(iv) shares representing at least a majority of the Common
Stock then outstanding as of the day immediately prior to the
date of commencement of such offer (within the meaning of Rule
14d-2(a), as in effect on the date hereof, under the Exchange
Act), but excluding therefrom any shares of Common Stock
beneficially owned immediately prior to such offer by the Person
on whose behalf such offer is being made and such Person's
Affiliates and Associates, are tendered and purchased pursuant to
such offer;
(v) prior to or on the date that such offer is commenced
(within the meaning of Rule 14d-2(a), as currently in effect,
under the Exchange Act), the Person on whose behalf such offer is
being made makes an irrevocable written commitment to the Company
(A) to consummate a transaction or transactions promptly upon the
completion of such offer in which the consideration in such
transaction or transactions is fully-financed cash or
publicly-traded securities and whereby all shares of Common Stock
not purchased in such offer will be acquired at the same price
per share of Common Stock paid in such offer, provided that the
Board of Directors shall have granted any approvals required to
enable such Person to consummate such transaction or transactions
following consummation of such offer without obtaining the vote
of any other stockholder, (B) that such Person will not make any
amendment to the original offer which reduces the per share price
offered (other than a reduction to reflect any dividend declared
by the Company after the commencement of such offer or any
material change in the capital structure of the Company initiated
by the Company after the commencement of such offer, whether by
way of recapitalization, reorganization, repurchase or
otherwise), changes the form of consideration offered, reduces
the number of shares being sought or which is in any other
respect materially adverse to the holders of Common Stock (other
than the Person on whose behalf such Offer is being made and such
Person's Affiliates and Associates); and
(vi) such offer is at a price and on other terms determined
by at least a majority of the members of the Board of Directors,
after receiving an opinion from one or more nationally recognized
investment banking firms selected by the Board of Directors that
the price offered is fair, from a financial point of view, to be
(A) fair (taking into account all factors which the Board of
Directors may deem relevant, including, without limitation, the
Company's long-term prospects and prices which could reasonably
be achieved if the Company or its assets were sold
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on an orderly basis designed to realize maximum value) to
stockholders (other than the Person or any Affiliate or Associate
hereof on whose behalf the offer is being made) and (B) otherwise
in the best interests of the Company and its stockholders (other
than the Person or any Affiliate or Associate thereof on whose
behalf the offer is being made) taking into account all factors
that the Board of Directors may deem relevant; provided, however,
that (1) such determination is made by the Board of Directors
prior to the purchase of shares under such tender offer or
exchange offer, and (2) a majority of the members of the Board of
Directors are independent (within the meaning of Rule 4200 of the
NASDAQ Stock Market rules (or any successor rule) and under
applicable Nevada case law) and disinterested (each such member
is neither an Acquiring Person or a Person on whose behalf the
tender offer for Common Stock is being made, nor an Affiliate,
Associate, nominee or representative of an Acquiring Person or a
Person on whose behalf the tender offer for Common Stock is being
made).
(aa) "Person" shall mean any individual, firm, corporation,
partnership, limited liability company, trust or other entity, and
shall include any successor (by merger or otherwise) thereof or
thereto.
(bb) "Preferred Stock" shall mean shares of Series B Junior
Participating Preferred Stock, par value $0.001 per share, of the
Company (or in the event of a subdivision, combination or
reclassification with respect to such shares of Preferred Stock, the
shares of Preferred Stock resulting from such subdivision, combination
or reclassification), and, to the extent that there is not a
sufficient number of shares of Series B Junior Participating Preferred
Stock authorized to permit the full exercise of the Rights, any other
series of preferred stock of the Company designated for such purpose
containing terms substantially similar to the terms of the Series B
Junior Participating Preferred Stock.
(cc) "Principal Party" shall have the meaning set forth in
Section 13(b) of this Agreement.
(dd) "Purchase Price" shall have the meaning set forth in Section
4(a) of this Agreement.
(ee) "Record Date" shall have the meaning set forth in the first
"WHEREAS" clause at the beginning of this Agreement.
(ff) "Redemption Date" shall have the meaning set forth in
Section 7(a) of this Agreement.
(gg) "Redemption Price" shall have the meaning set forth in
Section 23 of this Agreement.
(hh) "Rights" shall have the meaning set forth in the first
"WHEREAS" clause at the beginning of this Agreement.
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(ii) "Rights Agent" shall have the meaning set forth in the
introductory paragraph of this Agreement.
(jj) "Rights Certificates" shall have the meaning set forth in
Section 3(a) of this Agreement.
(kk) "Rights Dividend Declaration Date" shall have the meaning
set forth in the first "WHEREAS" clause at the beginning of this
Agreement.
(ll) "Section 11(a)(ii) Event" shall have the meaning set forth
in Section 11(a)(ii) of this Agreement.
(mm) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) of this Agreement.
(nn) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a) of this Agreement.
(oo) "Spread" shall have the meaning set forth in Section
11(a)(iii) of this Agreement.
(pp) "Stock Acquisition Date" shall mean the earlier of the date
of (i) the public announcement (which, for purposes of this
definition, shall include, without limitation, a report filed under
the Exchange Act) by the Company or an Acquiring Person that an
Acquiring Person has become such or (ii) the public disclosure of
facts by the Company or an Acquiring Person indicating that an
Acquiring Person has become an Acquiring Person, which date may occur
prior to the Record Date; provided, however, that if such Person is
determined not to have become an Acquiring Person pursuant to Section
1(a)(C) hereof, then no Stock Acquisition Date shall be deemed to have
occurred.
(qq) "Subsidiary" shall mean, with reference to any Person, any
corporation or other Person of which an amount of voting securities
sufficient to elect at least a majority of the directors or others
having similar authority over such corporation or other Person is
beneficially owned, directly or indirectly, by such first-named
Person, or otherwise controlled by such first-named Person.
(rr) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) of this Agreement.
(ss) "Summary of Rights" shall have the meaning set forth in
Section 3(b) of this Agreement.
(tt) "Trading Day" shall have the meaning set forth in Section
11(d)(i) of this Agreement.
(uu) "Transaction" shall mean any merger, consolidation or sale
of assets or earning power described in Section 13(a) hereof or any
acquisition of Common Stock
8
which, without regard to any required approval of the Company, would
result in a Person becoming an Acquiring Person.
(vv) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
(ww) "Vote" shall mean, with respect to any entity, the ability
to cast a vote at a stockholders', members' or comparable meeting of
such entity with respect to the election of directors, managers or
other members of such entity's governing body, or the ability to cast
a general partnership or comparable vote.
(xx) "Voting Power" shall mean, with respect to any entity as at
any date, the aggregate number of Votes outstanding as at such date in
respect of such entity.
(yy) "Voting Securities" shall mean the Common Stock and any
other securities of the Company the holders of which are ordinarily,
in the absence of contingencies, entitled to Vote, even though the
right to such Vote has been suspended by the happening of such a
contingency.
(zz) "Voting Stock" shall mean (i) the Common Stock of the
Company and (ii) any other shares of capital stock of the Company
entitled to vote generally in the election of directors. For purposes
of this Agreement, Voting Stock shall include securities of the type
referred to in clauses (i) and (ii) above that trade on a "when
issued" basis on a national securities exchange or an inter-dealer
quotation system. For purposes of this Agreement, a stated percentage
of the Voting Stock shall mean a number of shares of the Voting Stock
as shall equal in voting power that stated percentage of the total
voting power of the then outstanding shares of Voting Stock in the
election of a majority of the Board of Directors or in respect of any
merger, consolidation, sale of all or substantially all of the
Company's assets, liquidation, dissolution or winding up.
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
Business Day after the Stock Acquisition Date (or, if the tenth Business
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 the Board of Directors shall
determine) after the date of the earlier of commencement by any Person
(other than an Exempted Person) of, or the first public announcement of the
intention of any Person (other than an Exempted Person) to commence, a
tender or exchange offer (other than a Permitted Offer) the consummation of
which would result in any Person becoming an Acquiring Person (including
any such date which is on or after the date of this Agreement
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and prior to the issuance of the Rights) (the earlier of (i) and (ii) being
herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of Section 3(b) of this Agreement) by
the certificates for the Common Stock registered in the names of the record
holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection
with the transfer of the underlying shares of Common Stock (including a
transfer to the Company); provided, however, that if a tender or exchange
offer is terminated prior to the occurrence of a Distribution Date, then no
Distribution Date shall occur as a result of such tender or exchange offer.
The Board of Directors may defer the date set forth in clause (ii) of the
preceding sentence (with prompt written notice thereof to the Rights Agent)
to a specified later date or to an unspecified later date, each to be
determined by action of the Board of Directors. As soon as practicable
after the Distribution Date, the Company shall prepare and execute, the
Rights Agent will countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested and provided with all
necessary information, send) by first-class, insured, postage prepaid mail,
to each record holder of the Common Stock as of the close of business on
the Distribution Date, at the address of such holder shown on the registry
books for the Common Stock of the Company, one or more rights certificates,
in substantially the form of Exhibit B hereto (the "Rights Certificates"),
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to
Section 11(q) 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 and may be transferred by the transfer of the Rights
Certificate as permitted hereby, separately and apart from any transfer of
one or more shares of Common Stock.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit C (the "Summary of Rights"), by first-class, postage
prepaid mail, to each record holder of the Common Stock as of the close of
business on the Record Date, at the address of such holder shown on the
records of the transfer agent. With respect to certificates for the Common
Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates for the Common Stock and the
record holders of the Common Stock shall also be the record holders of the
associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any certificates representing shares of
Common Stock in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with such shares of Common
Stock.
(c) The Company shall promptly notify the Rights Agent in writing upon
the occurrence of the Distribution Date and, if such notification is given
orally, the Company shall confirm same in writing on or prior to the
Business Day next following. Until such notice is received by the Rights
Agent, the Rights Agent may presume conclusively for all purposes that the
Distribution Date has not occurred.
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(d) 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, and, in certain circumstances provided in Section 22
of this Agreement, after the Distribution Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for
Rights and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Quest
Resource Corporation (the "Company") and UMB Bank, n.a., a national
banking organization (the "Rights Agent"), dated as of May 31, 2006,
as it 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 Beneficially Owned 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 Beneficially Owned or held by or on
behalf of such Person or by any subsequent holder, may become null and
void.
With respect to such certificates containing the foregoing legend, until
the earlier of the Distribution Date or the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and record holders of Common Stock
shall also be the record holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the
Rights associated with the Common Stock represented by such certificates.
In the event the Company purchases or acquires any Common Stock after the
Record Date but prior to the Distribution Date, any Rights associated with
such Common Stock shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with the Common
Stock which are no longer outstanding. Notwithstanding this paragraph (d),
the omission of a legend shall not affect the enforceability of any part of
this Rights Agreement or the rights of any holder of the Rights.
(e) In addition, in connection with the issuance or sale of shares of
Common Stock following the Distribution Date and prior to the Expiration
Date, the Company (i) shall, with respect to shares of Common Stock so
issued or sold (x) pursuant to the exercise of stock options or under any
employee plan or arrangement or (y) upon the exercise, conversion or
exchange of other securities issued by the Company prior to the
Distribution Date and (ii) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided that no
11
such Rights Certificate shall be issued if, and to the extent that, (i) 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 or (ii) appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
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 rights, duties or immunities 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
or inter-dealer quotation system or transactor reporting system on which or
with whom the Rights may from time to time be listed or quoted, or to
conform to usage or otherwise. Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever distributed, shall
entitle the record holders thereof to purchase such number of one
one-thousandths of a share of Preferred Stock as shall be set forth therein
at the price set forth therein (such exercise price per one one-thousandth
of a share, the "Purchase Price"), but the amount and the type of
securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii)
a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect avoidance of Section
7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall contain (to
the extent the Rights Agent has notice thereof and to the extent feasible)
the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become, or may have already
12
become, null and void in the circumstances specified in Section 7(e)
of such Agreement.
The provisions of Section 7(e) of this Agreement shall be operative
whether or not the foregoing legend is contained in any such Rights
Certificate.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its Chief Executive Officer, its President,
its Chief Financial Officer or any Executive Vice President, either
manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be countersigned by an
authorized signatory of the Rights Agent, either manually or by facsimile
signature, and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certificates, nevertheless, may be countersigned by an
authorized signatory of the Rights Agent and issued and delivered by the
Company with the same force and effect as though the person who signed such
Rights Certificates had not ceased to be such officer of the Company. Any
Rights Certificates may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Rights Certificate, shall
be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such
person was not such an officer.
(b) Following the Distribution Date and receipt by the Rights Agent of
notice to that effect and all other relevant information referred to in
Section 3(a), the Rights Agent will keep or cause to be kept, at its office
designated for such purpose, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective record holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights Certificates
and the date of each of the Rights Certificates. The Company and Rights
Agent may deem and treat the person in whose name any Rights Certificate
(or prior to the Distribution Date, the associated Common Stock
Certificate) is recorded on the books for the registration and transfer of
Rights (or, the Common Stock) as the absolute owner thereof, for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen
--------------------------------------------------
Rights Certificates.
-------------------
(a) Subject to the provisions of Section 4(b), Section 7(e), Section
7(f), Section 11, Section 14, Section 23 and Section 24 hereof, at any time
after the Close of business on the Distribution Date, and at or prior to
the Close of business on the Expiration Date, any Rights Certificate or
Certificates (other than Rights Certificates
13
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 record holder to purchase a like number of
one one-thousandths of a share of Preferred Stock (or, following a
Triggering Event, Common Stock, other securities, cash or other assets, as
the case may be) as the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a transfer) to
purchase. Any record holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Certificates shall make such request in
writing in a form acceptable and delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be split up, combined
or exchanged at the office 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 or Rights Certificates until the record holder shall
have (i) properly completed and signed the certificate contained in the
form of assignment on the reverse side of such Rights Certificate or Rights
Certificates, (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof, or of the Rights evidenced thereby, as the Company or the Rights
Agent shall reasonably request, and (iii) paid a sum sufficient to cover
any tax or charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates as required by
Section 9(e) hereof. Thereupon, the Rights Agent shall, subject to Section
4(b), Section 7(e), Section 7(f), Section 11, Section 14, Section 23 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 or the Rights Agent may require payment by the
record holder of a Rights Certificate of a sum sufficient to cover any
applicable tax or governmental charge that may be imposed in connection
with any transfer, split up, combination or exchange of Rights
Certificates, and the Company and the Rights Agent shall have no duty or
obligation under this Section unless and until it is satisfied that all
such taxes and/or governmental charges have been paid.
(b) Subject to the provisions of Section 4(b), Section 7(e), Section
7(f), Section 11, Section 14, Section 23 and Section 24 hereof, 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 to the Rights Agent and the Company satisfactory to
the Rights Agent and the Company and reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate,
if mutilated, the Company will execute and deliver a new Rights Certificate
of like tenor to the Rights Agent for countersignature and delivery to the
record holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
-------------------------------------------------------------
(a) Subject to Section 7(e), Section 7(f) and Section 14 hereof, the
record holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein including, without limitation,
the restrictions on exercisability
14
set forth in Section 9(c), Section 11(a)(ii), Section 11(a)(iii), Section
23(a) and Section 24(b) hereof) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form
of election to purchase and the certificate on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, along with a signature guarantee and such
other and further documentation as the Rights Agent may reasonably request,
together with payment of the aggregate Purchase Price with respect to the
total number of one one-thousandths of a share of Preferred Stock (or,
following the occurrence of a Triggering Event, Common Stock or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earlier of (i)
the Close of business on May 31, 2016 (the "Final Expiration Date"), (ii)
the time at which the Rights are redeemed as provided in Section 23 hereof
(the "Redemption Date"), (iii) the time at which such Rights are exchanged
as provided in Section 24 hereof, or (iv) the consummation of a transaction
contemplated by Section 13(d) hereof (the earliest of (i), (ii), (iii) and
(iv) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be
$75.00, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with
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 and properly completed, accompanied by payment, with respect to
each Right so exercised, of the Purchase Price per one one-thousandth of a
share of Preferred Stock (or other shares, securities, cash or other
assets, as the case may be) to be purchased as set forth below and an
amount equal to any tax or charge required to be paid by the holder of such
Rights Certificate in accordance with Section 9 hereof, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-thousandths of a share of
Preferred Stock to be purchased, and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests, or (B) if
the Company 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-thousandths of a share of Preferred
Stock as are to be purchased (in which case certificates for the shares of
Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) when appropriate,
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 record holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such
cash, if any, to or upon the order of the record holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) shall be made in cash or by
certified bank check or bank draft payable
15
to the order of the Company, in each case in lawful money of the United
States of America. 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 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 record holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining exercisable and
unexercised shall be issued by the Rights Agent and delivered to, or upon
the order of, the record holder of such Rights Certificate, registered in
such name or names as may be designated by such holder, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate
of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such, or (iii) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such
Rights pursuant to either (A) a transfer (whether or not for consideration)
from the Acquiring Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or
(B) a transfer which the Board of Directors has determined is part of a
plan, arrangement or understanding which has the purpose or effect the
avoidance of this Section 7(e), shall become null and void without any
further action, and any record holder of such Rights shall have no rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but neither the Rights Agent nor the Company shall have any
liability to any record holder of Rights Certificates or any other Person
as a result of the Company's failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder. The Company or the Rights Agent may require (or cause any
transfer agent of the Company to require) any Person who submits a Rights
Certificate (or a certificate representing shares of Common Stock that
evidences, or but for the provisions of this Section 7(e) would evidence,
Rights) for transfer on the registry books or to exercise the Rights
represented thereby to establish to the satisfaction of the Company in its
sole discretion that such Rights have not become null and void pursuant to
the provisions of this Section 7(e).
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake
any action with respect to a record holder upon the occurrence of any
purported exercise as set forth in this Section
16
7 unless such holder shall have (i) properly completed and duly executed
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, or any transferee referred to in clause (ii) or (iii) of Section
7(e) hereof, or of the Rights evidenced thereby, in any such case, 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 canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates to the Company, or shall, at the written request
of the Company, destroy such canceled Rights Certificates in accordance with
applicable law and regulations, and in such case shall deliver a certificate of
destruction 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 in accordance with
this Agreement.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange or national automated quotation system,
the Company shall use its best efforts to cause, from and after such time
as the Rights become exercisable (but only to the extent that it is
reasonably likely that the Rights will be exercised), all shares reserved
for such issuance to be listed on such exchange or authorized to be quoted
on such quotation system upon official notice of issuance upon such
exercise.
(c) If then required by applicable law, 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
17
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,
(B) the Expiration Date or (C) the date the Company receives an opinion of
counsel to the effect that the maintenance of such registration statement
in effect is no longer necessary. If then required by applicable law, 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 one hundred twenty
(120) 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 or to
comply with such blue sky laws. Upon any such suspension, the Company shall
make a public announcement, and shall give simultaneous written notice to
the Rights Agent, stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement, and simultaneous
written notice to the Rights Agent, at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such
time as a registration statement has been declared effective, and shall
provide the Rights Agent with written notice of such suspension.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification
in such jurisdiction shall not have been obtained, the exercise thereof
shall not be permitted under applicable law or a registration statement
shall not have been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities, as the case may be) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for
such shares, Common Stock, or other securities, as the case may be (subject
to payment of the Purchase Price), be duly and validly authorized and
issued, and fully paid and nonassessable including, without limitation,
effecting such changes to the accounts of the Company as may be necessary
to accomplish the foregoing purposes.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all 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-thousandths of a share of
Preferred Stock (or Common Stock or other securities, as the case may be)
upon the exercise of the Rights. The Company shall not, however, be
required to pay any tax or charge which may be payable in respect of any
transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in respect of a name other than that
of, the record holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a
number of one one-thousandths of a share of Preferred Stock (or, following
the occurrence of a Triggering Event, Common Stock or other securities, as
the case may be) in a name other
18
than that of the record holder upon the exercise of any Rights until such
tax or charge shall have been paid (any such tax or charge being payable by
the holder of such Rights Certificate at the time of surrender) or until it
has been established to the Company's or the Rights Agent's satisfaction
that no such tax or charge is due.
Section 10. Securities Record Date. Each person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable taxes or charges) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the record
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or capital stock, as the case may be, issuable
on such date, shall be proportionately adjusted so that the record holder
of any Right exercised after such time shall be entitled to receive, upon
payment of the Purchase Price then in effect, the aggregate number and
kind of shares of Preferred Stock or capital stock, as the case may be,
which, if such Right had been exercised immediately prior to such date and
at a time when the Preferred Stock transfer books of the Company were
open, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided for
in this Section 11(a)(i)
19
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, alone or
together with its Affiliates and Associates, shall, at any time after the
Rights Dividend Declaration Date, become an Acquiring Person (such an event
being referred to herein as a "Section 11(a)(ii) Event"), then, promptly
following the occurrence of such Section 11(a)(ii) Event, proper provision
shall be made by the Company so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall, for a period of sixty
(60) days after the later of any such Section 11(a)(ii) Event and the
effective date of an appropriate registration statement pursuant to Section
9 hereof, have the right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, in
lieu of fractional interests in shares of Preferred Stock, such number of
shares of Common Stock of the Company as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event at issue, and (y) dividing that product (which, following
such first occurrence, shall thereafter be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by 50% of the
Current Market Price (determined pursuant to Section 11(d) hereof) per
share of Common Stock on the date of such first occurrence (such number of
shares being referred to as the "Adjustment Shares"); provided, however,
that if the transaction that would otherwise give rise to the foregoing
adjustment is also subject to the provisions of Section 13 hereof, then
only the provisions of Section 13 hereof shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii); and provided, further,
that such sixty (60) day period shall not be deemed to run (A) during any
period in which the exercise of the Rights or the fulfillment by the
Company or the Rights Agent of its or their obligations under this
Agreement shall be enjoined or otherwise prohibited in full or in part by
any court or other governmental agency or body, or (B) as to any other
period during which exercise of the Rights is permitted to be suspended
under this Agreement, including, without limitation, Section 11(a)(iii),
during the time period with respect to which such authority has been
exercised. The Company shall give the Rights Agent written notice of the
identity of any such Acquiring Person, Associate or Affiliate, or the
nominee of any of the foregoing, and the Rights Agent may rely on such
notice in carrying out its duties under this Agreement and shall be deemed
not to have any knowledge of the identity of any such Acquiring Person,
Associate or Affiliate, or the nominee of any of the foregoing unless and
until it shall have received such notice.
(iii)Subject to such limitations existing as of the date hereof as are
necessary to prevent a default under any agreement to which the Company is
a party, in the event that the number of shares of Common Stock which are
authorized by the Company's articles of incorporation but not outstanding
or reserved for issuance for purposes other than upon exercise of the
Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a), the
Company, acting by resolution of its Board of Directors shall (A) determine
the excess of (x) the value of the Adjustment Shares issuable upon the
exercise of a Right determined as set forth below (the "Current Value"),
over (y) the Purchase Price (such
20
excess, the "Spread"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the
Adjustment Shares, upon the exercise of a Right and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
(3) Common Stock or other equity securities of the Company (including,
without limitation, shares or units of shares of preferred stock, such as
the Preferred Stock, which the Board of Directors has deemed to have
essentially the same value or economic rights as shares of Common Stock
(such shares of preferred stock or other equity securities being referred
to as "Common Stock Equivalents")), (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value (less the amount of any reduction in the
Purchase Price), where such aggregate value has been determined by the
Board of Directors based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors; provided,
however, that if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days
following the date on which the Company's right of redemption pursuant to
Section 23(a) expires (such date being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of
the Purchase Price (other than an amount equal to the par value of the
shares of Common Stock to be issued), shares of Common Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors determines
in good faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended to the extent
necessary, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder approval for
the authorization of such additional shares (such thirty (30) day period,
as it may be extended, is herein called the "Substitution Period"). To the
extent that action is to be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (1) shall provide,
subject to Section 7(e) hereof, that such action shall apply uniformly to
all outstanding Rights, and (2) may suspend the exercisability of the
Rights until the expiration of the Substitution Period in order to seek
such stockholder approval for such authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall make a public announcement and shall
give simultaneous written notice to the Rights Agent stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement, and simultaneous written notice to the Rights Agent,
at such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the Current Value of each Adjustment Share shall be the
Current Market Price per share of the Common Stock on the Section 11(a)(ii)
Trigger Date, and the per share or per unit value of any Common Stock
Equivalent shall be deemed to equal the Current Market Price per share of
the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all record holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Stock (or
shares having the same rights, privileges and preferences as the
21
shares of Preferred Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred stock at a price
per share of Preferred Stock or per share of equivalent preferred stock (or
having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price
to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the number of shares of Preferred
Stock and equivalent preferred stock outstanding on such record date, plus
the number of shares of Preferred Stock and equivalent preferred stock
which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such Current Market Price, and the
denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred stock outstanding on such record date, plus the number
of additional shares of Preferred Stock and/or equivalent preferred stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent
and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock and equivalent preferred stock owned by or held
for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights or
warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall fix a record date for a distribution to
all record holders of Preferred Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend out of the earnings or
retained earnings of the Company), assets (other than a dividend payable in
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and
the holders of the Rights) of the portion of the cash, assets or evidences
of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of
which shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is
fixed, and in the event that such
22
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for
the thirty (30) consecutive Trading Days immediately prior to 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 or ex-distribution date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, as set
forth above, then, and in each such case, the Current Market Price shall be
properly adjusted to reflect the current market per share equivalent. 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 NASDAQ or, if the shares of
Common Stock are not listed or admitted to trading on the NASDAQ, as
reported in the principal consolidated transaction reporting system with
respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, the last sale price, regular way, or, if such
last sale price is not reported, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use, or, if on any such date the shares of Common Stock are
not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
the Common Stock selected by the Board of Directors. If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board of Directors
shall be used. The term "Trading Day" shall mean a day on which the
principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business
or, if the shares of Common Stock are not listed or admitted to trading on
any national securities exchange, a Business Day. If the Common Stock is
not publicly held or not so listed or traded, Current Market Price per
share shall mean the fair value per share as determined in good faith by
the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes.
23
(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 1000 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock occurring after the
date of this Agreement) multiplied by the Current Market Price per share
of the Common Stock. If neither the Common Stock nor the Preferred Stock
is publicly held or so listed or traded, Current Market Price per share of
the Preferred Stock shall mean the fair value per share as determined in
good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be
conclusive for all purposes. For all purposes of this Agreement, the
Current Market Price of one one-thousandth of a share of Preferred Stock
shall be equal to the Current Market Price of one share of Preferred Stock
divided by 1000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to the nearest
hundred-thousandth of a share of Common Stock or other share or
one-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which mandates such
adjustment, or (ii) the Expiration Date.
(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-thousandths of a share of Preferred Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
24
(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 one-thousandths of a share of Preferred Stock (calculated to
the nearest one- millionth) obtained by (i) multiplying (x) the number of
one one-thousandths of a share covered by a Right immediately prior to
this adjustment, by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price, and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment
of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-thousandths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be
exercisable for the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the
nearest one-millionth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase
Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement and shall give simultaneous
written notice to the Rights Agent of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at
the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten
(10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of Rights Certificates on
such record date Rights Certificates evidencing, subject to Section 14
hereof, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause
to be distributed to such holders in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for
herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public
announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number by one one-thousandths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the Purchase Price per one
one-thousandths of a share and the number of one one-thousandths of a
share which were expressed in the initial Rights Certificates issued
hereunder.
25
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the number of one
one-thousandths of a share of Preferred Stock, or the par value, if any,
of any shares of any other capital stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly
and legally issue such number of fully paid and non-assessable one
one-thousandths of a share of Preferred Stock (or such other shares) at
such adjusted Purchase Price. If upon any exercise of the Rights, a holder
is to receive a combination of Common Stock and Common Stock Equivalents,
a portion of the consideration paid upon such exercise, equal to at least
the then par value of a share of Common Stock, shall be allocated as the
payment for each share of Common Stock so received.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer (with prompt written
notice thereof to the Rights Agent), until the occurrence of such event,
the issuance to the record holder of any Right exercised after such record
date the number of one one-thousandths of a share of Preferred Stock and
other capital stock or securities of the Company, if any, issuable upon
such exercise over and above the number of one one-thousandths of a share
of Preferred Stock, and other capital stock or securities of the Company,
if any, issuable upon such exercise on the basis of the Purchase Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to such holder a due xxxx or other appropriate instrument
evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price,
in addition to those adjustments expressly required by this Section 11, as
and to the extent that in its good faith judgment the Board of Directors
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any
shares of Preferred Stock at less than the Current Market Price thereof,
(iii) issuance wholly for cash of shares of Preferred Stock or securities
which by their terms are convertible into or exchangeable for shares of
Preferred Stock, (iv) stock dividends, or (v) issuance of rights, options
or warrants referred to in this Section 11, hereafter made by the Company
to holders of its Preferred Stock shall not be taxable to such holders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been
redeemed pursuant to Section 23 hereof or exchanged pursuant to Section 24
hereof, (i) consolidate with any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(p) hereof),
(ii) merge with or into any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(p) 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(p) hereof), if
(x) at the time of or
26
immediately after such consolidation, merger or sale there are any articles
of incorporation or bylaw provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other
actions taken which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or
sale, the stockholders of the Person who constitutes, or would constitute,
the Principal Party for purposes of Section 13(a) hereof shall have
received a distribution of Rights previously owned by such Person or any of
its Affiliates and Associates, and (z) the form or nature of organization
of the Principal Party would preclude or limit the exercise of Rights or
otherwise diminish or substantially limit the benefits intended to be
afforded by the Rights.
(o) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto the Company and such other person
shall have executed and delivered to the Rights Agent a supplemental
agreement evidencing compliance with this Section 11(n).
(p) 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.
(q) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare or pay any
dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide or split the outstanding shares of Common
Stock into a greater number of shares, or (iii) combine or consolidate the
outstanding shares of Common Stock into a smaller number of shares or
effect a reverse split of the outstanding shares of Common Stock, then, and
in each such event, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior
to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be the total
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. Right to adjust preferred stock in lieu of
adjusting number of Rights is not a big deal.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made or any event affecting the Rights or their
exercisability (including without limitation an event which causes the Rights to
become null and void) occurs as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment or describing such event, and a brief, reasonably detailed statement
of the facts, computations and methodology accounting for such adjustment, (b)
27
promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each record holder of a Rights Certificate (or, if
prior to the Distribution Date, to each record holder of a certificate
representing shares of Common Stock) in accordance with Section 26 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment or statement therein contained and shall have no duty or
liability with respect to, and shall not be deemed to have knowledge of, any
adjustment or any such event unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
--------------------------------------------
Assets or Earning Power.
-----------------------
(a) In the event that, following the Stock Acquisition Date (which for
purposes of this Section 13(a) only shall also include the date of the
first public announcement (including, without limitation, a report filed
pursuant to Section 13(d) under the Exchange Act) that any Person (other
than the Company, any Subsidiary of the Company, any employee benefit plan
of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the
terms of any such plan), together with any of such Person's Affiliates and
Associates, has become the Beneficial Owner of 15% or more of the shares of
Common Stock then outstanding pursuant to a Permitted Offer), directly or
indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(p) 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(p) 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(p) hereof), then, upon the first occurrence of such event
(except as may be contemplated by Section 13(d) hereof), proper provision
shall be made so that: (i) each holder of a Right, except as provided in
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, in accordance with the
terms of this Agreement, such number of validly authorized and issued,
fully paid, non-assessable and freely tradeable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), not subject to
any liens, encumbrances, rights of first refusal or other adverse claims,
as shall be equal to the result obtained by (1) multiplying the then
current Purchase Price by the number of one one-thousandths of a share of
Preferred Stock for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event,
multiplying the
28
number of such one one-thousandths of a share for which a Right was
exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such
first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase
Price" for each Right and for all purposes of this Agreement) by (2) 50% of
the Current Market Price (determined pursuant to Section 11(d)(i) hereof)
per share of the Common Stock of such Principal Party on the date of
consummation, provided that the Purchase Price and the number of shares of
Common Stock of such Principal Party issuable upon exercise of each Right
shall be further adjusted as provided in Section 11(f) of this Agreement to
reflect any events occurring in respect of such Principal Party after the
date of such Section 13 Event; (ii) such Principal Party shall thereafter
be liable for, and shall assume, by virtue of such Section 13 Event, all
the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be ------- deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party shall
take such steps (including, but not limited to, the reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its shares of Common Stock thereafter deliverable
upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of
any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a): (A) the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, or if there is
more than one such issuer, the issuer of the shares of Common Stock
which has the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (1) the Person that is the
other party to the merger, if such Person survives said merger, or, if
there is more than one such Person, the Person the shares of Common
Stock of which has the greatest aggregate market value of shares
outstanding or (2) if the Person that is the other party to the merger
does not survive the merger, the Person that does survive the merger
(including the Company if it survives) or (3) the Person resulting
from the consolidation; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions or, if each
Person that is a party to such transaction or transactions receives
the same portion of the assets or earning power so transferred or if
the Person receiving the greatest portion of the assets or earning
power cannot be determined, whichever of such Persons as is the issuer
of the shares of Common Stock having the greatest aggregate market
value of shares outstanding;
29
provided, however, that in any such case, (1) if the Common Stock of such
Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of
another Person the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer
of the Common Stock having the greatest aggregate market value of shares
outstanding; and (3) in case such Person is owned, directly or indirectly,
by a joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth in (1) and
(2) above shall apply to each of the chains of ownership having an
interest in such joint venture as if such party were a "Subsidiary" of
both or all of such joint venturers and the Principal Parties in each such
chain shall bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party covenants and agrees that it
will cause to be reserved and kept available out of its authorized and
unissued shares of Common Stock or out of its authorized and issued shares
held in its treasury, the number of shares of its Common Stock that will be
sufficient to permit the exercise in full of all outstanding Rights under
this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement confirming that the requirements set forth in paragraphs (a) and
(b) of this Section 13 shall be promptly performed in accordance with their
terms and further providing that, as soon as practicable after executing
such agreement pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date and similarly comply with applicable state securities
laws;
(ii) use its best efforts, if the shares of Common Stock of the
Principal Party shall be listed or admitted to trading on a national
securities exchange or NASDAQ to list or admit to trading (or continue
the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange or NASDAQ and, if
the shares of Common Stock of the Principal Party shall not be listed
or admitted to trading on a national securities exchange or NASDAQ, to
cause the Rights and the securities purchasable upon exercise of the
Rights to be eligible for trading in the over-the-counter market and
reported by such other system then in use;
(iii) deliver to record holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which comply in all
30
respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the shares of Common Stock of the Principal Party
subject to purchase upon exercise of outstanding Rights.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a). If,
for any reason, the Rights cannot be exercised for Common Stock of the
Company or such Principal Party, then a holder of Rights will have the
right to exchange such Rights for cash from the Company or such Principal
Party in an amount equal to the number of shares of such Common Stock such
holder would otherwise be entitled to purchase times 50% of the then
Current Market Price, as determined pursuant to Section 11(d)(i) hereof, of
such stock of such Principal Party or the Company. If, for any reason,
including, without limitation, such Principal Party is an individual,
private partnership or private company, the foregoing formulation cannot be
applied to determine the cash amount into which the Rights are
exchangeable, then the Board of Directors, based upon advice from one or
more nationally recognized investment banking firms, shall determine such
amount reasonably and with utmost good faith to the holders of Rights. Any
such determination shall be binding and final.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in
subparagraphs (x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a Permitted Offer (or a wholly owned Subsidiary of any such
Person or Persons), (ii) the price per share of Common Stock offered in
such transaction is not less than the price per share of Common Stock paid
to all record holders of shares of Common Stock whose shares were purchased
pursuant to such Permitted Offer, and (iii) the form of consideration being
offered to the remaining record holders of shares of Common Stock pursuant
to such transaction is the same as the form of consideration paid pursuant
to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
(e) The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are
any rights, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
transaction, would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights. Without limiting the
generality of the preceding sentence, in case the Principal Party which is
to be a party to a transaction of the kind referred to in this Section 13
has a provision in any of its authorized securities or in its certificate
or articles of incorporation or bylaws or other instrument governing its
corporate affairs (or organizational affairs if organized other than in
corporate form), which provision would have the effect of (i) causing such
Principal Party to issue, in connection with, or as a consequence of, the
consummation of
31
a transaction of the kind referred to in this Section 13, Common Stock of
such Principal Party at less than the then Current Market Price per share
(determined pursuant to Section 11(d)(i)) or securities exercisable for or
convertible into Common Stock of such Principal Party at less than such
then Current Market Price per share (other than to holders of Rights
pursuant to this Section 13) or (ii) providing for any special payment, tax
or similar provisions in connection with the issuance of Common Stock of
such Principal Party pursuant to the provisions of Section 13; then, in
such event, the Company shall not consummate any such transaction unless
prior thereto the provision in question of such Principal Party shall have
been canceled, waived or amended so as to avoid any of the effects referred
to in clauses (i) and (ii) of this paragraph, or the authorized securities
shall have been redeemed, so that the applicable provision will have no
effect in connection with, or as a consequence of, the consummation of the
proposed transaction.
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(q) hereof,
or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the record holders
of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction
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 NASDAQ or, if the Rights
are not listed or admitted to trading on the NASDAQ, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the Rights are listed or admitted to trading, or if the Rights are not
listed or admitted to trading on any national securities exchange, the last
sale price or, if such last sale price is not reported, the average of the
high bid and low asked prices in the over-the-counter market, as reported
by NASDAQ or such other system then in use or, if on any such date the
Rights are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a
market in the Rights selected by the Board of Directors. If on any such
date no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by the Board of
Directors shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than, except as provided in Section 7(c), fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock) upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred
Stock). Fractions of shares of Preferred Stock in integral multiples of one
one-
32
thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such
depositary receipts shall have the rights, privileges and preferences to
which they are entitled as beneficial owners of the shares of Preferred
Stock represented by such depositary receipts. In lieu of fractional shares
of Preferred Stock that are not integral multiples of one one-thousandth of
a share of Preferred Stock, the Company may pay to the record holders of
Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one one-thousandth of a share of Preferred Stock. For purposes of
this Section 14(b), the current market value of one one-thousandth of a
share of Preferred Stock shall be one one-thousandth of the closing price
of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock or distribute
certificates which evidence fractional shares of Common Stock. In lieu of
fractional shares of Common Stock the Company may pay to the record holders
of Rights Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of one share of Common Stock. For purposes of this Section 14(c), the
current market value of one share of Common Stock shall be determined in a
manner set forth in Section 11(d)(i) hereof for the Trading Day immediately
prior to the date of such exercise.
(d) The record holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any
fractional shares (other than, except as provided in Section 7(c),
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock) upon exercise of a Right or to receive any certificates
which evidence such Rights or shares, except as permitted by this Section
14.
(e) Whenever a payment for fractional Rights or fractional shares is
to be made by the Rights Agent, the Company shall (i) promptly prepare and
deliver to the Rights Agent a certificate setting forth in reasonable
detail the facts related to such payments and the prices and/or formulas
utilized in calculating such payments, and (ii) provide sufficient monies
to the Rights Agent in the form of fully collected funds to make such
payments. The Rights Agent shall be fully protected in relying upon such a
certificate and shall have no duty with respect to, and shall not be deemed
to have knowledge of any payment for fractional Rights or fractional shares
under any Section of this Agreement relating to the payment of fractional
Rights or fractional shares unless and until the Rights Agent shall have
received such a certificate and sufficient monies.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent, are vested
in the respective record holders of the Rights Certificates (and, prior to the
Distribution Date, the record holders of the Common Stock); and any record
holder of any Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), without the consent of the Rights Agent or of the record holder
of
33
any other Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the record holders of Rights, it is specifically
acknowledged that such holders of Rights would not have an adequate remedy at
law for any breach by the Company of this Agreement and shall be entitled to
specific performance of the obligations hereunder and injunctive relief against
actual or threatened violations by the Company of the obligations hereunder of
any Person subject to this Agreement. After a Triggering Event, holders of
Rights shall be entitled to reissue the reasonable costs and expenses, including
attorneys' fees, incurred by them to enforce the provisions of this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights 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 transfer books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered on the transfer books of the Rights Agent
as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent shall be required to be
affected by any notice to the contrary;
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, judgment, decree or ruling (whether
interlocutory or final) issued by a court or by a governmental, regulatory,
self-regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of
such obligations; provided, however, the -------- ------- Company must use
its reasonable efforts to have any such injunction, order, judgment, decree
or ruling lifted or otherwise overturned as soon as possible; and
(e) Rights that become Beneficially Owned by the Persons specified in
Section 7(e) hereof are automatically null and void pursuant to that
Section.
34
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Rights Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of one one-thousandths of
a share of Preferred Stock or any other securities of the Company which may at
any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
or to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation as shall be agreed upon in writing between the Company and the
Rights Agreement for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the preparation, negotiation,
execution, delivery, amendment and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent including its members, directors, officers,
employees, shareholders and agents, for, and to hold it harmless against,
any loss, liability, damage, judgment, fine, penalty, claim, demand,
settlement, cost or expense (including, without limitation, the reasonable
fees and expenses of legal counsel) incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent (each as
determined by a final, non-appealable order, judgment, decree or ruling of
a court of competent jurisdiction), for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance,
administration, exercise and performance of its duties under this
Agreement, including, without limitation, the costs and expenses of
defending against and appealing any claim of liability arising therefrom,
directly or indirectly. The provisions of this Section 18 and Section 20
below shall survive the exercise or expiration of the Rights, the
termination of this Agreement, or the resignation or removal of the Rights
Agent. The costs and expenses incurred in enforcing this right of
indemnification shall be paid by the Company.
(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
and the exercise and performance of its duties hereunder, in reliance upon
any Rights Certificate or certificate for Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, verified,
guaranteed or acknowledged, by the proper Person or Persons, or otherwise
upon the advice of counsel as set forth in Section 20 hereof.
35
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
corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided, that such --------
Person would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of
the Rights Certificates shall have been countersigned but not delivered;
any such successor Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates
shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
(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. Rights and Duties of Rights Agent. The Rights Agent undertakes
to perform the duties and obligations expressly imposed by this Agreement, and
no implied duties or obligations, 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 or an employee of the Rights Agent), and the advice
or 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
and in accordance with such advice or 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, suffering or omitting to take 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,
36
any Vice Chairman, 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 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 under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful
misconduct (each as determined by a final, non-appealable order, judgment,
decree or ruling of a court of competent jurisdiction). Anything to the
contrary notwithstanding, in no event shall the Rights Agent be liable for
special, punitive, indirect, 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.
(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 have any liability or be under any
responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the
Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be
responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any adjustment required under the provisions of Section 11
or Section 13 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such
adjustment, upon which the Rights Agent may rely); 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, Preferred Stock or other
securities, will when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
37
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, any Vice Chairman, 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 such instructions
shall be full authorization and protection to the Rights Agent and the
Rights Agent shall not be liable for or in respect of any action taken,
suffered or omitted by it in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.
The Rights Agent shall be fully authorized and protected in relying upon
the most recent instructions received by any such officer.
(h) The Rights Agent and any stockholder, affiliate, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights
or other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though
the Rights Agent were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent or any such stockholder, affiliate,
director, officer or employee 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
(through its directors, officers or employees) or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, omission, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company or any other Person
resulting from any such act, omission, default, neglect or misconduct,
absent gross negligence or bad faith (each as determined by a final,
non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction) 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 it believes that repayment of such funds or adequate
indemnification against such risk or liability is not reasonably assured to
it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting
with the Company.
(l) The Rights Agent shall have no responsibility to the Company, any
holders of Rights or any holders of shares of Common Stock for interest or
earnings on any moneys held by the Rights Agent pursuant to this Agreement.
38
(m) The Rights Agent shall not be required to take notice or be deemed
to have notice of any event or condition hereunder, including, but not
limited to, a Distribution Date, a Redemption Date, any adjustment of the
Purchase Price of the Common Stock, and adjustment to the Purchase Price of
the Preferred Stock, the existence of an Acquiring Person or any other
event or condition that may require action by the Rights Agent, unless the
Rights Agent shall be specifically notified in writing of such event or
condition by the Company, and all notices or other instruments required by
this Agreement to be delivered to the Rights Agent must, in order to be
effective, be received by the Rights Agent as specified in Section 26
hereof, and in the absence of such notice so delivered, the Rights Agent
may conclusively assume no such event or condition exists.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing, mailed to the Company and shall
provide notice thereof to each transfer agent of the Common Stock or Preferred
Stock known to the Rights Agent by registered or certified mail and to the
holders of the Rights Certificates in accordance with Section 26 hereof, or if
prior to the Distribution Date, to the holders of Rights through any filing made
by the Company pursuant to the Exchange Act. The Company may remove the Rights
Agent or any successor Rights Agent upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
shall provide notice thereof to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates in accordance with Section 26 hereof, or, if prior to the
Distribution Date, to the holders of Rights through any filing made by the
Company pursuant to the Exchange Act. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the record
holder of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then the Company shall become the
Rights Agent until a successor Rights Agent has been appointed, and any record
holder of any Rights Certificate or the Rights Agent may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a Person organized and doing business under the laws of the United States or of
the State of Oklahoma or the State of New York (or of any other state of the
United States so long as such corporation is authorized to do business as a
banking institution in the State of Oklahoma or the State of New York), in good
standing, 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 $100,000,000 or (b) an Affiliate of a
Person described in clause (a). After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the
39
Rights Certificates in accordance with Section 26 hereof, or, if prior to the
Distribution Date, give notice to the holders of Rights through any filing made
by the Company pursuant to the Exchange Act. Failure to give any notice provided
for in this Section 21, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
issued by the Company on or prior to the Distribution Date, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificates shall be issued and this sentence shall be null and void ab initio
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued, and
(ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof
Section 23. Redemption and Termination; Three-Year Independent
--------------------------------------------------
Director Evaluation.
-------------------
(a) The Board of Directors, at its option, at any time prior to the
earlier of (i) the close of business on the tenth Business Day following
the Stock Acquisition Date (or, if the Stock Acquisition Date shall have
occurred prior to the Record Date, the close of business on the tenth
Business Day following the Record Date), or (ii) the time at which the
Rights expire pursuant to this Agreement, redeem all but not less than all
the then outstanding Rights at a redemption price of $0.001 per Right (such
redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption
hereunder has expired. The Company may, at its option, pay the Redemption
Price in cash, shares of Common Stock (based on the Current Market Price of
the Common Stock at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors. The redemption
of the Rights may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may
establish.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to Section 23(a) (or at such later time
as the Board of
40
Directors may establish for the effectiveness of such redemption), notice
of which shall have been provided to the Rights Agent, and without any
further action and without any notice, the right to exercise the Rights
will terminate and the only right thereafter of the holders of Rights shall
be to receive the Redemption Price for each Right so held. Promptly after
the action by the Board of Directors ordering the redemption of the Rights
becoming effective, the Company shall provide notice of such redemption to
the holders of the then outstanding Rights, with prompt written notice
thereof to the Rights Agent, each in accordance with Section 26 hereof
(provided that the failure to provide, or any defect in, such notice shall
not affect the legality or validity of such redemption). Any notice which
is provided in the manner herein provided shall be deemed given, whether or
not the record holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be
made.
(c) The Stockholder Rights Plan Committee of the Company's Board of
Directors shall review this Agreement in order to consider whether the
maintenance of this Rights Agreement continues to be in the best interests
of the Company and its stockholders. Such committee shall conduct such
review periodically when, as and in such manner as the committee deems
appropriate, after giving due regard to all relevant circumstances;
provided, however, that the committee shall take such action at least every
three years. Following each such review, such committee will report its
conclusions to the full Board of Directors of the Company, including any
recommendation in light thereof as to whether this Agreement should be
modified or the Rights should be redeemed. Such committee shall be
comprised only of directors of the Company who shall have been determined
by the Company's Board of Directors to be independent and disinterested
(who are neither an Acquiring Person or a Person on whose behalf a tender
offer or exchange offer for Common Stock is being made nor an Affiliate,
Associate, nominee or representative of an Acquiring Person or a Person non
whose behalf a tender offer or exchange for Common Stock is being made).
Such committee shall be appointed by the Board of Directors of the Company
and is authorized to retain such legal counsel, financial advisors and
other advisors as the committee deems appropriate in order to assist the
committee in carrying out its foregoing responsibilities under this
Agreement.
Section 24. Exchange.
--------
(a) The Board of Directors may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
exchange ratio being hereinafter referred to as the "Exchange Ratio"),
provided that the shares of Common Stock so exchanged shall be of the same
class or series which the holders of such Rights would have been entitled
to receive upon the exercise thereof. Notwithstanding the foregoing, the
Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than an Exempted Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of
41
Voting Securities of the Company then outstanding representing 50% or more
of the Voting Power of the Company.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to Section 24(a) and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of the holders of such Rights shall
be to receive that number of shares of Common Stock equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio, provided
that the shares of Common Stock so exchanged shall be of the same class or
series which the holder of such Rights would have been entitled to receive
upon the exercise thereof. The Company shall promptly make a public
announcement of any such exchange (with prompt written notice thereof to
the Rights Agent); provided, however, that the failure to make, or any
defect in, such public announcement shall not affect the legality or
validity of such exchange. Promptly after the action of the Board of
Directors ordering the exchange of the Rights becoming effective, the
Company shall provide notice of such exchange to the holders of the then
outstanding Rights in accordance with Section 26 hereof (provided that the
failure to give, or any defect in, such notice shall not affect the
validity of such exchange). Any notice which is mailed in the manner
provided in Section 26 hereof shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the shares of Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected based on
the number of Rights (other than Rights which have become null and void
pursuant to the provisions of Section 7(e) hereof) held by each holder of
Rights.
(c) In the event that there shall not be authorized and unissued
shares of the applicable class or series of Common Stock and/or authorized
and issued shares of the applicable class or series of Common Stock held in
its treasury sufficient to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take all such action as
may be necessary to authorize additional shares of the applicable class or
series of Common Stock for issuance upon exchange of the Rights. In the
event the Company shall, after good faith effort, be unable to take all
such action as may be necessary to authorize such additional shares of the
applicable class or series of Common Stock, the Company shall substitute,
for each share of such class or series of Common Stock that would otherwise
be issuable upon exchange of a Right, a number of shares of the applicable
series of Preferred Stock or fraction thereof (subject to Section 14(b)
hereof) such that the Current Market Price per share of the applicable
series of Preferred Stock multiplied by such number or fraction is equal to
the Current Market Price per share of such class or series of Common Stock
as of the date of issuance of such shares of such series of Preferred Stock
or fraction thereof.
(d) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay to the registered holders of the 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
42
of the Current Market Price per share of the applicable class or series of
Common Stock as of the Trading Day immediately prior to the record date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
------------------------
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to
the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend
out of earnings or retained earnings of the Company), or (ii) to offer to
the holders of Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding shares of Preferred Stock),
or (iv) to effect any consolidation or merger into or with any other Person
(other than a Subsidiary of the Company in a transaction which complies
with Section 11(p) 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(p) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the
Company shall give to each holder of a Rights Certificate and to the Rights
Agent, 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 ten (10) 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
ten (10) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the shares of Preferred
Stock whichever shall be the earlier.
(b) In the event that a Section 11(a)(ii) Event shall occur, then in
any such case (i) the Company shall as soon as practicable thereafter give
to the Rights Agent and to each holder of a Rights Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such
event, which shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references
in the preceding paragraph to Preferred Stock shall be deemed thereafter to
refer to Common Stock and/or, if appropriate, other securities of the
Company.
Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) or by facsimile transmission as follows:
43
Quest Resource Corporation
Corporate Xxxxxx
0000 Xxxxx Xxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No: (000) 000-0000
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made upon
receipt by the Rights Agent, if sent by registered or certified mail, postage
prepaid, addressed (until another address is filed in writing with the Company)
or by facsimile transmission as follows:
UMB Bank, n.a., as Rights Agent
0000 Xxxxx Xxxx.
Xxxxxx Xxxx, XX 00000
Attention: Corporate Trust Dept.
Facsimile No: (000) 000-0000
With a copy to:
UMB Bank, n.a., as Transfer Agent
000 Xxxxx Xxxx., 0xx Xxxxx
Xxxxxx Xxxx, XX 00000
Attention: Securities Transfer Dept.
Facsimile No: (000) 000-0000
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 as held and maintained
by the Rights Agent (or, if prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock of the Company).
Section 27. Supplements and Amendments. Subject to the provisions of this
Section 27, for so long as the Rights are then redeemable, the Company may in
its sole and absolute discretion, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of the Rights. At any time when the Rights are no longer
redeemable, but subject to the provisions of this Section 27, the Company may,
and the Rights Agent shall if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order to
(i) cure any ambiguity, (ii) correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) shorten or lengthen any time period hereunder, or (iv) change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable; provided that no such supplement or amendment adversely
affects the interests of the holders of Rights as such (other than an Acquiring
Person or an Affiliate or
44
Associate of an Acquiring Person) and no such amendment may cause the Rights
again to become redeemable or cause the Agreement again to become amendable
other than in accordance with this sentence. Upon the delivery of a certificate
from an appropriate officer of the Company and, if requested by the Right Agent,
an opinion of counsel, which states that the proposed supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment; provided, however, that the Rights Agent may, but
shall not be obligated to, enter into any such supplement or amendment which
adversely affects the Rights Agent's own rights, duties, obligations or
immunities under this Agreement and the Rights Agent shall not be bound by
supplements or amendments not executed by it. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price. Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, Etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations
under the Exchange Act as amended and in effect on the date hereof. The Board of
Directors, except as otherwise specifically provided for herein, shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board of Directors or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights Certificates (and, prior to the Distribution Date, record holders of the
Common Stock) and all other parties, and (y) not subject the Board of Directors
to any liability to the holders of the Rights. The Rights Agent is entitled
always to assume the Company's Board of Directors 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
record holders of the Rights Certificates (and, prior to the Distribution Date,
record holders of the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the record holders of the
Rights Certificates (and, prior to the Distribution Date, record holders of the
Common Stock).
45
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth Business Day (or such longer period of time as permitted pursuant to
Section 27 of this Agreement) following the date of such determination by the
Board of Directors. Without limiting the foregoing, if any provision requiring
that a determination be made by less than the entire Board of Directors (or at a
time or with the concurrence of a group of directors consisting of less than the
entire Board of Directors) is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then be
made by the Board of Directors in accordance with applicable law and the
Company's Certificate of Incorporation and Bylaws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Nevada 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; provided, however, that all
provisions regarding the rights, duties, obligations and immunities of the
Rights Agent shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed entirely
within such State.
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.
46
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.
QUEST RESOURCE CORPORATION
By: /s/ Xxxxx Xxxx
------------------------------------
Name: Xxxxx Xxxx
Title: Chairman of the Board and
Chief Executive Officer
UMB BANK, n.a.,
as Rights Agent
By: /s/ K. Xxxxx Xxxxxxx
------------------------------------
Name: K. Xxxxx Xxxxxxx
Title: Vice President and Trust Officer
47
EXHIBIT A
---------
CERTIFICATE OF DESIGNATIONS
OF SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
QUEST RESOURCE CORPORATION
Pursuant to Sections 78.195 and 78.1955 of the Nevada Revised Statutes
Quest Resource Corporation, a Nevada corporation (the "Corporation"), in
accordance with the provisions of Sections 78.195 and 78.1955 the Nevada Revised
Statutes, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Articles of Incorporation, as amended, of the Corporation, the Board of
Directors on May 31, 2006, adopted the following resolution creating a series of
One Hundred Thousand (100,000) shares of Preferred Stock, par value $.001 per
share, designated as the Series B Junior Participating Preferred Stock
(hereinafter referred to as "Series B Preferred Stock"):
Designation of Preferred Stock
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation by the provisions of the Articles of Incorporation of the
Corporation, as amended, (the "Articles of Incorporation"), there is hereby
created a series of Preferred Stock 1 par value designated as Series B Preferred
Stock, consisting of One Hundred Thousand (100,000) shares of Series B Junior
Participating Preferred Stock, $0.001 par value per share, of the Corporation;
and
FURTHER RESOLVED, that the Series B Preferred Stock shall have the powers,
preferences, rights, qualifications, limitations and restrictions set forth in
the Certificate of Designation of Series B Junior Participating Preferred Stock
("Certificate of Designation") which Certificate of Designation as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as the Series B Junior Participating Preferred Stock (hereinafter
referred to as "Series B Preferred Stock") and the number of shares constituting
such series shall be One Hundred Thousand (100,000). Such number of shares may
be increased or decreased by resolution of the Board of Directors, provided that
no decrease shall reduce the number of shares of Series B Preferred Stock to a
number less than the number of shares outstanding plus the number of shares
reserved for issuance upon the exercise of outstanding rights to purchase or
convert into shares of Series B Preferred Stock.
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 B Preferred Stock with respect
A-1
to dividends, the holders of shares of Series B Preferred Stock, in
preference to the holders of Common Stock, par value $0.001 per share (the
"Common Stock"), of the Corporation and of any other class of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the shares of Series B Preferred Stock, together with Common Stock
("Junior Stock"), shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
dividends payable in cash in an amount per share (rounded to the nearest
cent), equal to the product of the Series B Multiple (as defined below)
times the aggregate per share amount of all other cash dividends, plus the
product of the Series B Multiple times the aggregate per share amount
(payable in cash, based upon the fair market value at the time the non-cash
dividend or other distribution is declared as determined in good faith by
the Board of Directors) of all non-cash dividends or other distributions
other than a dividend payable in shares of Common Stock, or a subdivision
of the outstanding shares of Common Stock (by reclassification or
otherwise), declared (but not withdrawn) on the Common Stock.
(B) As used herein, the "Series B Multiple" shall initially be 1,000.
In the event the Corporation shall (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 Series B Multiple 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.
(C) The Board of Directors of the Corporation shall not declare a
dividend or distribution on the Common Stock (other than a dividend payable
in shares of Common Stock) unless it shall concurrently therewith declare a
dividend or distribution on the Series B Preferred Stock. Payment of a
dividend or distribution determined on the Series B Preferred Stock shall
be in preference to payment of any dividend or distribution on the Common
Stock or any Junior Stock.
(D) The Board of Directors may fix a record date for the determination
of holders of shares of Series B Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date
shall be no more than thirty (30) days prior to the date fixed for the
payment thereof.
A-2
Section 3. Voting Rights. Except as otherwise provided herein or by law,
the holders of shares of Series B Preferred Stock shall have the following
voting rights:
(A) Each share of Series B Preferred Stock shall entitle the holder
thereof to a number of votes equal to the product of the Series B Multiple
then in effect times the number of votes that each share of Common Stock
entitles its holder to vote at such meeting of the stockholders of the
Corporation.
(B) The holders of shares of Series B Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) The holders of Series B 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 dividends or distributions payable on the Series B
Preferred Stock as provided in Section 2 are in arrears, thereafter and
until all accrued and unpaid dividends and distributions on shares of
Series B Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends (other than a dividend payable in
shares of Common Stock) on, make any other distributions on, or redeem
or purchase or otherwise acquire for consideration any shares of
Junior 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 B
Preferred Stock ("Parity Stock"), except dividends paid ratably on the
Series B 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 Parity Stock, provided that the Corporation may at any
time
A-3
redeem, purchase or otherwise acquire shares of any such Parity Stock
in exchange for shares of any Junior Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series B Preferred Stock, or any shares of Parity Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and
preferences of the respective series and classes, shall determine in
good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could, under paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, in any other Certificate of Designation establishing a series of
Preferred Stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the shares of
the Series B Preferred Stock shall be entitled to receive, in preference to
the holders of Junior Stock, the greater of (a) $1000 per share, plus
accrued dividends to the date of distribution, whether or not earned or
declared, or (b) an amount per share equal to the product of the Series B
Multiple then in effect times the aggregate amount to be distributed per
share to holders of Common Stock.
(B) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Parity Stock
shall not receive any distributions except
A-4
for distributions made ratably on the Series B Preferred Stock and all
other such Parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution
or winding up.
Section 7. Consolidation, Merger, Etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
the Series B Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share equal to the product of the Series B Multiple
then in effect times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged.
Section 8. No Redemption. The shares of Series B Preferred Stock shall not
be redeemable.
Section 9. Ranking. The Series B Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock, or any similar stock that
specifically provides that it shall rank prior to the shares of Series B
Preferred Stock, as to the payment of dividends and the distribution of assets,
unless the terms of any such series shall provide otherwise. Nothing herein
shall preclude the Board of Directors from creating any series of Preferred
Stock or any similar stock ranking on a parity with or prior to the shares of
Series B Preferred Stock as to the payment of dividends or the distribution of
assets.
Section 10. Fractional Shares. Series B 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 B Preferred Stock.
Section 11. Amendment. The Articles of Incorporation, as amended, including
this Certificate of Designation establishing the shares of the Series B
Preferred Stock, shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series B Preferred
Stock so as to affect them adversely without the affirmative vote of the holders
of two-thirds or more of the outstanding shares of Series B Preferred Stock
voting separately as a class.
A-5
IN WITNESS WHEREOF, this Certificate is executed on behalf of the
Corporation as of this 10th day of June, 2006.
-----------------------------------------
Xxxxx X. Xxxx, Chairman of the Board
and Chief Executive Officer
A-6
EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER MAY 31, 2016 OR EARLIER IF REDEEMED BY THE COMPANY OR THE
OCCURRENCE OF A SECTION 11(a)(ii) EVENT (AS DEFINED IN THE RIGHTS AGREEMENT).
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE
OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS SHALL 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) OR A
SUBSEQUENT HOLDER OF SUCH RIGHTS. ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY SHALL BECOME, OR MAY ALREADY HAVE BECOME, NULL AND
VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT AND MAY
NOT BE TRANSFERRED TO ANY PERSON.*
RIGHTS CERTIFICATE
QUEST RESOURCE 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 May 31, 2006, as it may from
time to time be supplemented or amended (the "Rights Agreement"), between Quest
Resource Corporation, a Nevada corporation (the "Company"), and UMB Bank, n.a.,
the Rights Agent (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 P.M. (New York City time) on May 31, 2016 (the "Final Expiration
Date") at the office of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, nonassessable
share of Series B Junior Participating Preferred Stock (the "Preferred Stock")
of the Company, at a purchase price of $75.00 per one one-thousandth 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 and properly completed. The number of Rights evidenced by this Rights
Certificate (and the number of one one-thousandth of a share 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 May 31, 2006,
based on the Preferred Stock as constituted at such date. As provided in the
Rights Agreement, the Purchase Price, the number and kind of shares of Preferred
Stock or other securities of the Company or any other Person (as such term is
defined in the Rights Agreement) or other property, which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate, and the timing
B-1
of permitted exercise, are subject to modification and adjustment upon the
happening of certain events including a Triggering Event (as such term is
defined in the Rights Agreement).
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of an Acquiring Person or of any such 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 an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office 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-thousandths of a share of Preferred Stock or other
securities of the Company or another Person or other property as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $0.001 per Right at any time prior to the earlier of the
close of business on (i) the tenth business day following the Stock Acquisition
Date, and (ii) the Final Expiration Date. In addition, subject to the provisions
of the Rights Agreement, each Right evidenced by this Certificate may be
exchanged by the Company at its option for one share of Common Stock of the
Company (subject to adjustment for any stock split, stock dividend or similar
transaction) following the Stock Acquisition Date and prior to the time an
Acquiring Person owns 50% or more of the shares of Common Stock then
outstanding.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be
B-2
evidenced by depositary receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of ____________ [20__]. QUEST RESOURCE CORPORATION
By:
------------------------------------
Name:
Title:
ATTEST:
--------------------------------
Name:
Title:
Countersigned:
-------------------------,
as Rights Agent
By:
----------------------------
Name:
Title:
B-3
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
________________________________________________________________________________
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _____________, ____
------------------------------------------
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:
B-4
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.
B-5
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise Rights represented by the Rights Certificate.)
To: QUEST RESOURCE 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 be issued in the name of
and delivered to:
Please insert social security
or taxpayer identification 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 taxpayer identification number
--------------------------------------------
-------------------------------------------------------------------------------
(Please print name and address)
-------------------------------------------------------------------------------
Dated: ______________, ____
---------------------------------------------
Signature
Signature Guaranteed:
B-6
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of 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.
B-7
EXHIBIT C
---------
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
Declaration of Rights Dividend
------------------------------
On May 31, 2006, the Board of Directors of Quest Resource Corporation
(the "Company") declared a dividend distribution of one Right for each
outstanding share of Common Stock, $0.001 par value per share, of the Company
("Common Stock"). The dividend is payable on June 15, 2006 to shareholders of
record at the close of business on that date (the "Record Date"). Each Right
entitles the registered holder thereof to purchase from the Company at any time
following the Distribution Date (as defined below) a unit consisting of one
one-hundredth of a share (a "Unit") of Series B Junior Participating Preferred
Stock, $0.001 par value per share (the "Preferred Stock"), at a purchase price
of $75.00 per Unit (the "Purchase Price"), subject to adjustment as described
below. The Rights are not exercisable until the Distribution Date. The
description and terms of the Rights are set forth in a Rights Agreement dated
May 31, 2006 (the "Rights Agreement") between the Company and UMB Bank, n.a., as
Rights Agent.
Rights will also be issued with respect to shares of Common Stock issued
by the Company or transferred from the Company's treasury after May 31, 2006 and
prior to the Distribution Date, and, under certain circumstances, Rights will be
issued with respect to shares of Common Stock issued or transferred by the
Company after the Distribution Date.
Rights Initially Attached to and Trade with Common Stock
--------------------------------------------------------
Until the earlier of the Distribution Date or the date the Rights are
redeemed or expire:
(1) the Rights will be evidenced by Common Stock certificates and no
separate Rights Certificates will be distributed,
(2) the Rights will be transferable only in connection with the transfer
of the underlying shares of Common Stock,
(3) the surrender for transfer of any Common Stock certificate (with or
without a copy of this Summary of Rights attached thereto) will also constitute
the transfer of the Rights associated with the shares of Common Stock
represented by such certificate, and
(4) new Common Stock certificates issued after June 15, 2006 will
contain a notation incorporating the Rights Agreement by reference. Shareholders
will not be required to take any action in connection with the payment of the
Rights dividend on June 15, 2006.
When Rights Separate from Common Stock and Become Exercisable
-------------------------------------------------------------
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate certificates evidencing
the Rights will be distributed. The Rights will separate from the Common Stock
and become exercisable on the Distribution Date. As soon as practicable after
the Distribution Date, Rights Certificates will be mailed to holders of record
of the Common Stock as of the close of business on the Distribution Date, and
thereafter the separate Rights Certificates will represent the Rights.
C-1
The "Distribution Date" will occur upon the earlier of (1) twenty
business days after the Stock Acquisition Date (as defined below) or (2) twenty
business days (or such later date as the Board shall determine prior to such
time as there is an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender or exchange offer, the
consummation of which would result in a Person becoming an Acquiring Person (as
defined below).
The "Stock Acquisition Date" means the earlier of (i) the date of the
first public announcement by the Company or an Acquiring Person that an
Acquiring Person has become such or (ii) the date on which the Company has
actual notice, direct or indirect, or otherwise determines that a Person has
become an Acquiring Person.
Under the Rights Agreement, an "Acquiring Person" is a Person who,
together with all affiliates and associates of such Person, and without the
prior written approval of the Company, is the Beneficial Owner (as defined in
the Rights Agreement) of 15% or more of the outstanding shares of Common Stock
of the Company, subject to a number of exceptions set forth in the Rights
Agreement. The Rights Agreement exempts certain persons from the definition of
"Acquiring Person," including (1) person who acquire shares in a Permitted
Offer, (2) the Company or any subsidiary of the Company, and (3) any employee
benefit plan of the Company or any subsidiary and certain persons appointed
pursuant to the terms of any such plan. Under the Rights Agreement, a Person
shall not be an Acquiring Person if such Person acquires beneficial ownership of
15% or more of the outstanding shares of Common Stock pursuant to a Permitted
Offer, which is a cash tender offer for all of the outstanding shares of Common
Stock which meets certain conditions specified in the Rights Agreement. The
Rights Agreement also contains exceptions for Persons who inadvertently become
Acquiring Persons or who exceed the ownership limits as a result of repurchases
of stock by the Company, if certain conditions are satisfied.
Exercising Rights; Mailing Rights Certificates
----------------------------------------------
In the event that, at any time following the Distribution Date, a person
becomes an Acquiring Person, except pursuant to a "Permitted Offer", each holder
of a Right will, for a sixty (60) day period (subject to extension under certain
circumstances) thereafter, have the right to receive, upon exercise of the
Right, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a value equal to two times the Purchase Price
of the Right. A "Permitted Offer" is a tender offer or exchange offer for (i)
all outstanding shares of Common Stock which remains open for at least sixty
(60) calendar days, the consideration offered is cash that is fully financed or
a publicly traded security, (ii) that is accepted by the holders of at least a
majority of the then outstanding shares but excluding therefrom any shares
beneficially owned by the Person for whose benefit the tender offer or exchange
offer is being made and its Affiliates and Associates, (iii) that follows an
irrevocable written commitment to the Company by the Person for whose benefit
the offer is made to consummate a transaction promptly upon the completion of
such offer in which the consideration offered is cash that is fully financed or
a publicly traded security and whereby all shares of Common Stock not purchased
in the offer shall be acquired at the same price per share as paid in such offer
and that such Person will not make any amendment to the original offer which
reduces the per share price offered or which is in any other respect materially
adverse to the holders of Common Stock (other than the Person on whose behalf
such offer is being made and such Person's Affiliates and Associates), (iv) that
is determined, prior to the purchase of shares pursuant to the tender offer or
C-2
exchange offer, by the Company's Board of Directors that the price and other
terms of that tender offer or exchange offer are fair (taking into account all
factors which the Board of Directors may deem relevant, including the Company's
long-term prospects and prices which could reasonably be achieved if the Company
or its assets were sold on an orderly basis designed to realize maximum value)
to stockholders (other than the Person on whose behalf the tender offer is being
made and its Affiliates and Associates) and is otherwise in the best interests
of the Company and its stockholders (other than the person on whose behalf the
tender offer or exchange offer is being made and its Affiliates and Associates)
taking into account all factors the Board of Directors may deem relevant, (v)
the Company's Board of Directors has received an opinion from one or more
nationally recognized investment banking firm selected by the Company's Board of
Directors that the price offered is fair from a financial point of view, and
(vi) the Company's Board of Directors has taken the action contemplated by
clause (iv) by at least a majority of directors who are independent (within the
meaning of Rule 4200 of the NASDAQ Stock Market rules and under applicable
Nevada case law) and disinterested (i.e., the directors are neither the
Acquiring Person or a Person on whose behalf the tender offer is being made, nor
an Affiliate, Associate, nominee or representative of the Acquiring Person or a
Person on whose behalf the tender offer is being made). However, at the option
of the Board of Directors of the Company, during such time as an Acquiring
Person Beneficially Owns an amount of stock less than 50% of the outstanding
Common Stock, the Company may exchange, in whole or in part, each right of each
holder (other than the Acquiring Person or the Acquiring Person's Affiliate or
Associates or their subsequent holders) for one share of Common Stock.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, Beneficially Owned by any Acquiring
Person (or any Affiliate or Associate of an Acquiring Person) will be null and
void and nontransferable and any holder of any such Right (including any
purported transferee or subsequent holder) will be unable to exercise or
transfer any such right.
An "Affiliate" of a Person (as such term is defined in the Rights
Agreement) is a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the Person specified. An "Associate" of a Person shall mean (i) with respect to
a corporation (other than the Company or a majority-owned Subsidiary of the
Company), any officer or director thereof or of any Subsidiary (generally a
Person as to whom another Person has the right to elect a majority of the
directors or others with similar authority) thereof, or any Beneficial Owner of
10% or more of any class of equity security thereof, (ii) with respect to an
association, joint venture or other unincorporated organization, any officer or
director thereof or of a Subsidiary thereof or any Beneficial Owner of 10% or
more ownership interest therein, (iii) with respect to a partnership, any
general partner thereof or any limited partner thereof who is, directly or
indirectly, the Beneficial Owner of a 10% or greater ownership interest therein,
(iv) with respect to a limited liability company, any officer, director or
manager thereof or of a Subsidiary thereof or any member thereof who is,
directly or indirectly, the Beneficial Owner of a 10% or greater ownership
interest therein, (v) with respect to a business trust, any officer or trustee
thereof or of any Subsidiary thereof, (vi) with respect to any other trust or an
estate, any trustee, a beneficiary in the income from or principal of such trust
or estate, (vii) with respect to a natural person, any relative or spouse of
such person, or any a relative of such spouse, who has the same home as such
person, and (viii) any Affiliate of such Person.
C-3
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except in certain circumstances
specified in the Rights Agreement or as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
Adjustment of Rights upon Occurrence of a Triggering Event
----------------------------------------------------------
In the event that a Person becomes an Acquiring Person, each holder of a
Right (except the Acquiring Person and certain other persons as described below)
will no longer have the right to purchase Units of Preferred Stock, but instead
will thereafter have the right to receive, upon exercise of the Right, shares of
Common Stock (or, in certain circumstances, cash, property or other securities
of the Company) having a Current Market Price (as defined in the Rights
Agreement) equal to two times the then current exercise price of the Right. For
example, at a Purchase Price of $75.00 per Right, each Right not owned by an
Acquiring Person would entitle its holder to purchase $150.00 worth of Common
Stock (or other consideration, as noted above) for $75.00. Assuming that the
Common Stock has a per share value of $15.00 at such time, the holder of each
valid Right would be entitled to purchase ten shares of Common Stock for $75.00.
Once a Person becomes an Acquiring Person, all Rights that are, or under certain
circumstances were, beneficially owned by such Acquiring Person (or certain
related parties) will be null and void.
In the event that, at any time after the Stock Acquisition Date, (1) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation (other than a merger which
follows a Permitted Offer and satisfies certain other requirements), or (2) 50%
or more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, Common Stock
of the acquiring company having a Current Market Price equal to two times the
then current Purchase Price of the Right. The events set forth in this paragraph
and in the preceding paragraph which allow Rights to be exercised are referred
to individually as a "Triggering Event" and collectively as "Triggering Events."
Exchange of Rights
------------------
At any time after any Person becomes an Acquiring Person, the Board of
Directors of the Company may, at its option, exchange the Rights (except Rights
which previously have been voided as set forth above), in whole or in part, at
an exchange ratio of one-hundredth of a share of Preferred Stock or one share of
Common Stock for each Right, subject to adjustment for any stock split, stock
dividend or similar transaction occurring after May 31, 2006. The Board of
Directors may not cause the exchange of Rights at any time after any Person,
together with such person's affiliates and associates, becomes the beneficial
owner of 50% or more of the shares of Common Stock then outstanding, with
certain exceptions.
C-4
Redemption of Rights
--------------------
At any time prior to the close of business on the twentieth business day
after the Stock Acquisition Date, the Company may order that all Rights be
redeemed at a price of $.001 per Right (payable in cash, Common Stock or other
consideration deemed appropriate by the Board of Directors), subject to
adjustment for any stock split, stock dividend or similar transaction occurring
after May 31, 2006 (the "Redemption Price"). Immediately upon the effectiveness
of the action of the Board of Directors ordering redemption of the Rights, the
right to exercise the Rights will terminate and the holders of the Rights will
only be entitled to receive the Redemption Price for each Right so held.
Amendment of Rights
-------------------
At any time and from time to time prior to the close of business on the
twentieth business day after the Stock Acquisition Date, the Company may amend
the Rights in any manner without the approval of any holders of Rights. At any
time and from time to time after the close of business on the twentieth business
day after the Stock Acquisition Date, the Company may supplement or amend the
Rights without the approval of any holders of the Rights, provided that no such
supplement or amendment adversely affects the interests of the holders of Rights
as such (other than an Acquiring Person or an affiliate or associate of an
Acquiring Person).
Terms of Preferred Stock
------------------------
Each Unit of Preferred Stock (consisting of one one-hundredth of a share
of Preferred Stock) that is issuable upon exercise of the Rights after the
Distribution Date and prior to the occurrence of a Triggering Event is intended
to have approximately the same economic rights and voting power as a share of
Common Stock, and the value of a Unit of Preferred Stock should approximate the
value of one share of Common Stock. Each share of Preferred Stock will be
entitled to dividend payments equal to 1000 times the other cash dividends plus
1000 times the aggregate per share amount of all non-cash dividends (other than
a dividend payable in Common Stock) declared per share of Common Stock. In the
event of liquidation, the holders of shares of Preferred Stock will be entitled
to the greater of (a) a minimum preferential liquidation payment of $1000 per
share, or (b) 1000 times the aggregate amount to be distributed per share of
Common Stock. Each share of Preferred Stock will have 1000 votes, voting
together with, and on the same matters as, the Common Stock. In the event of any
merger, consolidation or other transaction in which shares of Common Stock are
exchanged for or changed into other stock, securities, cash and/or other
property, each share of Preferred Stock will be entitled to receive 1000 times
the amount received per share of Common Stock. These rights are protected by
customary anti-dilution provisions. Shares of Preferred Stock are not
redeemable. Pursuant to the Rights Agreement, the Company reserves the right to
require, prior to the occurrence of a Triggering Event, that upon any exercise
of Rights a number of Rights be exercised so that only whole shares of Preferred
Stock will be issued.
Adjustment of Rights and Securities Upon Certain Events
-------------------------------------------------------
The Purchase Price payable, and the number of Units of Preferred Stock
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to
C-5
prevent dilution (1) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Stock, or (2) upon the
distribution to holders of the Preferred Stock of certain rights, options,
warrants, evidences of indebtedness or assets (excluding regular quarterly cash
dividends). No adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of the Purchase Price.
The number of outstanding Rights attached to each share of Common Stock
and the number of Units of Preferred Stock purchasable upon exercise of a Right
are also subject to adjustment in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in shares of Common Stock or a
subdivision or combination of the shares of Common Stock, occurring prior to the
Distribution Date.
The Company is not required to issue fractional Units; in lieu thereof,
the Company may pay cash for such fractional Units based on the market price of
the Preferred Stock on the last trading date prior to the date of issuance.
Rights Holder Not a Shareholder
-------------------------------
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. The holders of Rights will be able to vote and
receive dividends on the Common Stock that they hold.
Tax Consequences
----------------
While the current distribution of the Rights will not be taxable to
shareholders or to the Company, shareholders might, depending upon the
circumstances, realize taxable income in the event that the Rights become
severable from the Common Stock and will likely realize taxable income in the
event such Rights become exercisable for Common Stock of the acquiring company
as set forth above or are exchanged as provided above.
Expiration of Rights
--------------------
The Rights will expire at the close of business on May 31, 2016, unless
the Company redeems or exchanges the Rights prior to such date, in each case as
described above.
Three-Year Independent Director Evaluation
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The Rights Agreement includes a "TIDE" (Three-year Independent Director
Evaluation) provision. Under the TIDE provision, the Board of Directors'
Stockholder Rights Plan Committee composed of independent (as defined above) and
disinterested (as defined above) directors will review the Rights Plan
periodically (at least every three years) in order to consider whether the
maintenance of the Rights Agreement continues to be in the best interests of the
Company and its stockholders. This committee will communicate its conclusions to
the full Board of Directors after each review, including any recommendation as
to whether the Rights Plan should be modified or the Rights should be redeemed.
C-6
Number of Rights to be Outstanding
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As of May 31, 2006, there were 200,000,000 shares of Common Stock
authorized and approximately 22,072,383 shares issued and outstanding.
Approximately, 2.3 million shares have been reserved for issuance pursuant to
employee benefit plans and pursuant to warrants issued by the Company. Each
share of Common Stock outstanding at the close of business June 15, 2006 will
receive one Right. Rights will also be issued with respect to shares of Common
Stock issued or transferred by the Company after May 31, 2006 and prior to the
Distribution Date, and, under certain circumstances, Rights will be issued with
respect to shares of Common Stock issued or transferred by the Company after the
Distribution Date.
Rights Agreement
This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement and the
exhibits thereto, filed herewith as Exhibit 1, which is incorporated herein by
reference.
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