Exhibit 10.20
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RIGHTS AGREEMENT
DATED AS OF JANUARY 4, 2002
BY AND BETWEEN
COMMONWEALTH ENERGY CORPORATION
AND
COMPUTERSHARE TRUST COMPANY,
RIGHTS AGENT
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TABLE OF CONTENTS
PAGE
Section 1. Certain Definitions..........................................................1
Section 2. Appointment of Rights Agent..................................................5
Section 3. Issuance of Rights Certificates..............................................5
Section 4. Form of Rights Certificates..................................................7
Section 5. Countersignature and Registration............................................7
Section 6. Transfer, Split Up, Combination and Exchange of Rights,
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.................................................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights................8
Section 8. Cancellation and Destruction of Rights Certificates.........................11
Section 9. Reservation and Availability of Preferred Stock.............................11
Section 10. Preferred Stock Record Date.................................................12
Section 11. The Flip-In.................................................................12
Section 12. The Flip-Over...............................................................15
Section 13. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights............................................................17
Section 14. Rights of Action............................................................22
Section 15. Agreement of Rights Holders.................................................22
Section 16. Rights Holder Not Deemed a Stockholder......................................23
Section 17. Concerning the Rights Agent.................................................24
Section 18. Merger or Consolidation or Change of Name of Rights Agent...................24
Section 19. Duties of Rights Agent......................................................24
Section 20. Change of Rights Agent......................................................26
Section 21. Issuance of New Rights Certificates.........................................27
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 22. Redemption and Termination..................................................27
Section 23. Exchange....................................................................28
Section 24. Notice of Certain Events....................................................29
Section 25. Notices.....................................................................30
Section 26. Supplements and Amendments..................................................30
Section 27. Successors..................................................................31
Section 28. Benefits of this Agreement..................................................31
Section 29. Severability................................................................31
Section 30. Governing Law...............................................................31
Section 31. Counterparts................................................................31
Section 32. Descriptive Headings........................................................31
EXHIBIT A -- FORM OF CERTIFICATE OF DESIGNATIONS OF
PREFERRED STOCK
EXHIBIT B -- FORM OF RIGHTS CERTIFICATE
EXHIBIT C -- FORM OF SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
-ii-
RIGHTS AGREEMENT
Rights Agreement, dated as of January 4, 2002 (this "AGREEMENT"),
between COMMONWEALTH ENERGY CORPORATION, a California corporation (the
"COMPANY"), and Computershare Trust Company (the "RIGHTS AGENT").
W I T N E S S E T H:
WHEREAS, on January 4, 2002, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as such term is
hereinafter defined) for each outstanding share of common stock, par value
$0.001 per share (the "COMMON STOCK"), of the Company outstanding on January 4,
2002 (the "RECORD DATE"), and the issuance of one Right for each share of Common
Stock of the Company issued between the Record Date and the Distribution Date
(as such term is hereinafter defined), each Right entitles the holder thereof to
purchase 1/1000th of a share of Preferred Stock of the Company having the
rights, powers and preferences set forth in the form of Certificate of
Designations attached hereto as Exhibit A, upon the terms and subject to the
conditions hereinafter set forth (the "RIGHTS");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement,
the following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of the
Person, shall be the Beneficial Owner (as such term is hereinafter defined) of
15% or more of the shares of Common Stock then outstanding and shall include all
Affiliates and Associates of the Person, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company or any entity
holding shares of Common Stock organized, appointed or established by the
Company for or pursuant to the terms of any such plan.
(b) "ADVERSE PERSON" shall mean a Person who or which, pursuant
to a determination of the Board of Directors of the Company, has become the
Beneficial Owner of more than 10% of the outstanding shares of Common Stock and
that (i) such Beneficial Ownership is intended to cause the Company to
repurchase the Common Stock Beneficially Owned by such Person or to cause
pressure on the Company to take action or enter into transactions intended to
provide such Person with short-term financial gain under circumstances where the
Board of Directors of the Company determines that the best long-term interests
of the Company would not be served by taking such action or entering into such
transactions or (ii) such Beneficial Ownership is causing or reasonably likely
to cause a material adverse impact on the business or prospects of the Company;
provided, however, that the Board of Directors of the Company shall not declare
any Person to be an Adverse Person if such Person has
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reported or is required to report its ownership of Common Stock on Schedule 13G
under the Exchange Act, or on Schedule 13D under the Exchange Act (as such term
is hereinafter defined) which Schedule 13D does not state any intention to, or
reserve the right to, control or influence the Company or engage in certain
other actions, so long as such Person neither reports nor is required to report
such ownership other than as so described.
(c) "AFFILIATE" shall mean, with respect to a specified Person, 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.
(d) "ASSOCIATE" shall mean, with respect to a specified Person,
(i) any corporation or organization (other than the Company or a Subsidiary of
the Company) of which the Person is an officer, director or partner or is,
directly or indirectly, the beneficial owner of 10% or more of any class of
equity security as defined in Rule 3a-11 of the General Rules and Regulations
under the Exchange Act, (ii) any trust or other estate in which the Person has a
substantial beneficial interest or as to which the Person serves as trustee or
in a similar fiduciary capacity, and (iii) any relative or spouse of the Person,
or any relative of the spouse, who has the same home as the Person, or is an
officer or director of any corporation controlling or controlled by the Person.
(e) "BENEFICIAL OWNERSHIP" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities Exchange Act of
1934 (or any successor rule or statutory provision) or, if Rule 13d-3 shall be
rescinded and there shall be no successor rule or statutory provision thereto,
pursuant to Rule 13d-3 as in effect on the date hereof; provided, however, that
a Person shall, in any event, also be deemed to be the "Beneficial Owner" of any
securities:
(i) which the Person or any Affiliate or Associate thereof
beneficially owns, directly or indirectly
(ii) which the Person or any Affiliate or Associate
thereof, directly or indirectly, has the right to acquire (whether the
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by or on behalf of the Person or any Affiliate or
Associate thereof until the tendered securities are accepted for
purchase or exchange, or (B) securities issuable upon exercise of the
Rights;
(iii) which the Person or any Affiliate or Associate
thereof, directly or indirectly, has sole or shared voting or investment
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power with respect thereto 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 (iii) as a
result of an agreement, arrangement or understanding to vote the
security if such agreement, arrangement or understanding (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act and (B) is not also then reportable by the Person on
Schedule 13D under the Exchange Act; or
(iv) which are beneficially owned, directly or indirectly,
by any other Person or any Affiliate or Associate thereof with which the
Person or any Affiliate or Associate thereof 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 subparagraph (iii) of this paragraph (e)) or
disposing of any voting securities of the Company.
Nothing in this Section 1(e) shall cause a Person engaged in business as
an underwriter to be the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through the Person's participation in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of
acquisition.
(f) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or other day on which banking institutions in the State of California are
authorized or obligated by law or executive order to close.
(g) "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,
California time, on that date; provided, however, that if the date is not a
Business Day it shall mean 5:00 p.m., California time, on the next succeeding
Business Day.
(h) "CLOSING PRICE" of any security on any given day shall be the
last sale price, regular way, of the security or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
on the principal trading market on which the security is then traded.
(i) "COMMON STOCK" shall mean the common stock, par value $0.001
per share, of the Company, and "common stock" when used with reference to any
Person other than the Company shall mean the capital stock with the greatest
voting power, or the equity securities or other equity interest having power to
control or direct the management of the Person.
(j) "CURRENT MARKET PRICE" of any security on any given date
shall be deemed to be the average of the daily Closing Prices per share or other
trading unit of the security for 10 consecutive Trading Days (as such term is
hereinafter defined)
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immediately preceding the date; provided, however, that with respect to shares
of capital stock, in the event that the current market price per share of the
capital stock is determined during a period following the announcement of (i) a
dividend or distribution on the capital stock payable in shares of the capital
stock or securities convertible into shares of the capital stock (other than the
Rights), or (ii) any subdivision, combination or reclassification of the capital
stock, and prior to the expiration of the requisite 10 Trading Day period, as
set forth above, after the ex-dividend date for the dividend or distribution, or
the record date for the subdivision, combination or reclassification, then and
in each case, the "Current Market Price, shall be properly adjusted to take into
account ex-dividend trading; and provided further, that if the security is not
publicly held or not so listed or traded, Current Market Price per share or
other trading unit shall mean the fair value per share or other trading unit as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(k) "DISTRIBUTION DATE" shall mean the earliest of (i) the 10th
day after the Stock Acquisition Date (as such term is hereinafter defined), (ii)
the 10th business day after the date of the commencement of, or first public
announcement of the intent to commence, a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any Subsidiary of the Company or any entity holding
shares of Common Stock organized, appointed or established by the Company for or
pursuant to the terms of any such plan), if upon consummation thereof, the
Person would be the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding (including any date that is after the date of this
Agreement and prior to issue of the Rights) and (iii) the 10th business day
following a determination by the Board of Directors of the Company that a Person
has become an Adverse Person.
(l) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended and in effect on the date of this Agreement, and all references
to any rule or regulation of the General Rules and Regulations under the
Exchange Act shall be, except as otherwise specifically provided herein, to the
rule or regulation as was in effect on the date of this Agreement.
(m) "EXCHANGE DATE" shall mean the date at which the rights are
exchanges as provided in Section 23 of this Agreement.
(n) "EXPIRATION DATE" shall mean the Close of Business on January
4, 2012, subject to extension as provided in Section 12(c) of this Agreement.
(o) "FLIP-IN EVENT" shall mean any of the events described in
Section 11(a) of this Agreement.
(p) "FLIP-OVER EVENT" shall mean any of the events described in
Section 12(a) of this Agreement.
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(q) "PERSON" shall mean any individual, firm, corporation,
partnership, limited liability company, sole proprietorship or other entity and
shall include any "group" as that term is used in Rule 13d-5(b) under the
Exchange Act.
(r) "PURCHASE PRICE" shall mean the price to be paid by the
holders of Rights, upon the exercise thereof, in exchange for shares of
Preferred Stock. The initial Purchase Price shall be U.S.$50 per 1/1000th share
of Preferred Stock, subject to adjustment in accordance with Section 13 of this
Agreement.
(s) "PREFERRED STOCK" shall mean shares of Preferred Stock, par
value $0.001 per share, of the Company.
(t) "RECORD DATE" shall mean January 4, 2002.
(u) "REDEMPTION DATE" shall mean the time at which the Rights are
ordered to be redeemed pursuant to Section 22 of this Agreement.
(v) "STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company, an Acquiring Person or otherwise, that an Acquiring
Person has become an Acquiring Person.
(w) "SUBSIDIARY" shall mean, with reference to any Person, any
Person of which a majority of any class of equity security is Beneficially
Owned, directly or indirectly, by another Person.
(x) "TRADING DAY", with respect to any security, shall mean a day
on which the principal national securities exchange on which such security is
listed or admitted to trading is open for the transaction of business or, if
such security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(y) "TRIGGERING EVENT" shall mean a Flip-In Event or a Flip-Over
Event.
Any determination required by the definitions contained in this Section 1 shall
be made by the Board of Directors of the Company in its good faith judgment,
which determination shall be final and binding on the Rights Agent.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3 of this Agreement, shall prior to the
Distribution Date also be the holders of the Common Stock) in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts the
appointment. The Company may from time to time appoint whichever co-Rights
Agents it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the Distribution Date, (i) the Rights will be evidenced
by the certificates for the Common Stock registered in the names of the holders
of the Common Stock (which certificates for Common Stock shall be deemed also to
be
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certificates for Rights) and not by separate certificates, and (ii) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company).
(b) As soon as practicable after the Company has notified the
Rights Agent of the occurrence of the Distribution Date, the Rights Agent will
send by first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the Distribution Date, at the
address of the holder shown on the records of the Company, a Rights certificate
(the "RIGHTS CERTIFICATE"), evidencing one Right (as adjusted from time to time
prior to the Distribution Date pursuant to this Agreement) for each share of
Common Stock so held. As of and after the Distribution Date, the Rights will be
evidenced solely by Rights Certificates.
(c) As soon as practicable after 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 the holder shown on the records of the
Company.
(d) Certificates evidencing the Common Stock issued after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date (as such term is hereinafter defined), shall be deemed also to be
certificates evidencing 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
COMMONWEALTH ENERGY CORPORATION (THE "COMPANY") AND COMPUTERSHARE
TRUST COMPANY, DATED AS OF JANUARY 4, 2002 (THE "RIGHTS
AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES
OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS AGREEMENT, THE RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS CERTIFICATE.
THE COMPANY WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF
THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN
REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS SUCH TERM IS DEFINED
IN THE RIGHTS AGREEMENT) BECOME NULL AND VOID AND THE HOLDER OF
THOSE RIGHTS (INCLUDING ANY SUBSEQUENT HOLDER) SHALL NOT HAVE ANY
RIGHT TO EXERCISE THE RIGHTS.
(e) After the Distribution Date but prior to the Expiration Date,
Rights shall only be issued in connection with the issue of Common Stock upon
the exercise of stock options granted prior to the Distribution Date or pursuant
to other benefits under
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any employee plan or arrangement established prior to the Distribution Date;
provided, however, that if, pursuant to the terms of any option or other benefit
plan, the number of shares issuable thereunder is adjusted after the
Distribution Date, the number of Rights issuable upon issuance of the shares
shall be equal only to the number of shares which would have been issuable prior
to the adjustment.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the form of election to purchase
shares and form of assignment) shall be in substantially the form of Exhibit B
and may contain whatever marks of identification or designation and/or legends,
summaries or endorsements printed thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed or to conform to usage. Subject to
the provisions of this Agreement, the Rights Certificates, whenever issued,
shall be dated as of the Record Date and on their face shall entitle the holders
thereof to purchase the number of shares of Preferred Stock which shall be set
forth therein at the Purchase Price set forth therein, subject to adjustment as
provided in this Agreement.
(b) Any Rights Certificate issued pursuant to Section 3(a) of
this Agreement that represents Rights beneficially owned by an Acquiring Person
or that represents any Rights owned on or after the Distribution Date by any
Person who subsequently becomes an Acquiring Person and any Rights Certificate
issued at any time upon the transfer of any Rights to an Acquiring Person
thereof or to any nominee of the Acquiring Person and any Rights Certificate
issued pursuant to Section 6 or Section 13 of this Agreement upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, may contain the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE WERE ISSUED TO
A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON. THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN
THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS
AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by the Chairman of its Board of Directors, its President or any Vice
President, either manually or by facsimile signature and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. Each Rights Certificate shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed
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any of the Rights Certificates shall cease to be an officer of the Company
before countersignature by the Rights Agent and issue and delivery by the
Company, the Rights Certificates, nevertheless, may be countersigned by the
Rights Agent, and issued and delivered by the Company with the same force and
effect as though the person who signed the Rights Certificates had not ceased to
be an officer of the Company; and any Rights Certificate may be signed on behalf
of the Company by any person who, at the actual date of the execution of the
Rights Certificate, is an officer of the Company, even if on the date of
execution of this Rights Agreement that person was not an officer.
(b) Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at one of its offices, books for registration and transfer
of the Rights Certificates issued hereunder. The books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced by each of the Rights Certificates, and the certificate number
and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) At any time after the Close of Business on the Distribution
Date, and at or prior to the Close of Business on the Expiration Date, any
Rights Certificate or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of shares of Preferred Stock (or
other securities, cash or other property, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled the holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Certificates
shall make the request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be transferred, split up,
combined or exchanged at the principal office of the Rights Agent designated for
that purpose. Thereupon, the Rights Agent shall countersign and deliver to the
Person entitled thereto a Rights Certificate or Rights Certificates, as the case
may be, as so requested. The Company may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
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(a) Each Right shall entitle (except as otherwise provided in
this Agreement) the registered holder thereof, upon the exercise thereof as
provided in this Agreement, to purchase, for the Purchase Price, at any time
after the Distribution Date and prior to the earlier of the Expiration Date and
the Redemption Date, 1/1000th share of Preferred Stock, subject to adjustment
from time to time as provided in Section 13 of this Agreement, payable in lawful
money of the United States of America in accordance with Paragraph (c) below.
(b) Subject to Section 7(e), Section 22(a) and Section 23 of this
Agreement, the registered holder of any Rights Certificate may exercise the
Rights evidenced thereby 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 on the reverse side thereof including the certificate contained therein
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each 1/1000th share of Preferred
Stock as to which the Rights are exercised prior to the earliest of the
Expiration Date, the Exchange Date and the Redemption Date. The Purchase Price
and the number of shares of Preferred Stock to be acquired upon exercise of a
Right shall be subject to adjustment from time to time as provided in Section 13
of this Agreement.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase including the certificate
contained therein duly executed, accompanied by payment of the Purchase Price
for the shares (or cash or other assets as the case may be) to be purchased and
an amount equal to any applicable transfer tax in cash, or by certified check or
bank draft payable to the order of the Company, the Rights Agent shall thereupon
promptly:
(i)(A) requisition from any transfer agent for the Preferred
Stock certificates for the number of 1/1000th 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) requisition from the depositary agent depositary
receipts representing the number of 1/1000th of a share of
Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by the
receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary
agent to comply with the request;
(ii) after receipt of the certificates or depositary receipts,
cause the same to be delivered to or upon the order of the
registered holder of the Rights Certificate, registered in
whatever name or names may be designated by the holder; and
(iii) after receipt, deliver the cash, if any, to or upon the
order of the registered holder of the Rights Certificate.
If the Company becomes obligated to issue other securities of the
Company, pay cash and/or distribute other property pursuant to this Agreement,
the Company shall
9
make all arrangements necessary so that the other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
(d) If the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of the Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 6 of this Agreement.
(e) Notwithstanding anything in this Agreement to the contrary,
upon the occurrence of the earliest of: (x) the date on which the Board of
Directors of the Company decides to exchange the Rights pursuant to Section 23
of this Agreement, (y) a Triggering Event and (z) the date any Person becomes an
Acquiring Person, any unexercised Rights that are or were (at any time on or
after the earlier to occur of: (1) the Distribution Date and (2) the Stock
Acquisition Date) beneficially owned by (i) an Acquiring Person, an Adverse
Person or an Associate or Affiliate of an Acquiring Person or Adverse Person,
(ii) a transferee of an Acquiring Person or an Adverse Person (or of any
Associate or Affiliate thereof) that becomes a transferee after such Acquiring
Person becomes an Acquiring Person or such Adverse Person becomes an Adverse
Person, as the case may be, (iii) a transferee of an Acquiring Person or an
Adverse Person (or of any Associate or Affiliate thereof) that becomes a
transferee prior to or concurrently with such Acquiring Person or such Adverse
Person becoming an Acquiring Person or Adverse Person, as the case may be, and
receives the Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person or such Adverse Person to holders of
equity interests in such Acquiring Person or such Adverse Person or to any
Person with whom such Acquiring Person or such Adverse 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,
the avoidance of this Section 7(e), shall immediately become permanently null
and void without any further action, and no holder of the Rights shall have any
right whatsoever with respect to the Rights under 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) of this Agreement are complied with, but
shall have no liability to any holder of Rights Certificates or to any other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person [or Adverse Person] or its Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Rights Certificate upon the
occurrence of any purported exercise thereof unless the registered holder shall
have (i) completed and signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights Certificate surrendered
for the exercise and (ii) provided the additional evidence of the identity of
the Beneficial Owner (or former or proposed Beneficial Owner) or Affiliates
thereof as the Company shall reasonably request.
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Section 8. Cancellation and Destruction of Rights Certificates.
All Rights Certificates surrendered for the purpose of exercise, transfer,
split-up, combination or exchange shall, if surrendered to the Company or any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Rights Certificates purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy the cancelled Rights Certificates, and in that
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available at all times out of its authorized and unissued
shares of Preferred Stock or its authorized and issued shares of Preferred Stock
held in its treasury, free from preemptive rights or any right of first refusal,
the number of shares of Preferred Stock that will be sufficient to permit the
exercise in full of all Rights from time to time outstanding.
(b) So long as the shares of Preferred Stock issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause, from and after the time the Rights
become exercisable, all shares reserved for issue to be listed on the exchange
upon official notice of issue when exercised.
(c) The Company shall use its best efforts to:
(i) file, as soon as practicable following the earlier of
the Distribution Date or as soon as is required by law, a registration
statement under the Securities Act of 1933, as amended (the "Act"), with
respect to the Preferred Stock purchasable upon exercise of the Rights
on an appropriate form;
(ii) cause the registration statement to become effective
as soon as practicable after the filing; and
(iii) cause the registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Act)
until the earliest of (A) the date as of which Rights are no longer
exercisable for the securities, (B) the Expiration Date and (C) the
Redemption Date.
The Company will also take all action necessary 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
11
ninety (90) days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and file
the registration statements and permit them to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in that jurisdiction shall have been obtained and, if applicable, until a
registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all action
as may be necessary to ensure that all shares of Preferred Stock delivered upon
exercise of Rights shall, at the time of delivery of the certificates for the
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued, fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any shares of Preferred Stock upon the exercise of Rights.
The Company shall not, however, be required to pay any transfer tax that may be
payable in connection with the transfer or delivery of any Rights Certificates
or share of Preferred Stock to any Person other than the registered holder
thereof, and the Company shall not be required to transfer or issue any Rights
Certificate or share of Preferred Stock to such Person until the tax has been
paid by the registered holder thereof, or it has been determined to the
Company's satisfaction that no tax is due.
Section 10. Preferred Stock Record Date. Each Person in whose
name any certificate for shares of Preferred Stock is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the shares of Preferred Stock represented thereby on, and the certificate
shall be dated, the date upon which the Rights Certificate evidencing the Rights
was duly surrendered and payment of the Purchase Price (and all applicable
transfer taxes) was made; provided, however, that if the date of surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, the Person shall be deemed to have become the record holder of the
shares on, and the certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock transfer books of the Company are open.
Section 11. The Flip-In. (a) If:
(i) any Acquiring Person, directly or indirectly, shall merge
into the Company or otherwise combine with the Company and the Company
shall be the continuing or surviving corporation of the merger or
combination and the Common Stock of the Company shall remain outstanding
and unchanged; or
12
(ii) 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 entity organized, appointed or
established pursuant to the terms of such plan) shall become the
Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding;
then, and in each case, subject to the provisions of Section 23 of this
Agreement, each holder of a Right, except as provided below and in Section 7(e)
of this Agreement, shall thereafter have a right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of shares of Preferred Stock, the 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 1/1000th of a share of
Preferred Stock for which a Right is then exercisable and dividing that product
by (y) 50% of the Current Market Price per share of the Common Stock on the date
on which the first of the events listed above in this subparagraph (a) occurs
(such number of shares hereinafter the "ADJUSTMENT SHARES").
(b) In the event that there shall not be sufficient issued but
not outstanding, and authorized but unissued, shares of Common Stock to permit
the exercise in full of the Rights in accordance with the foregoing subparagraph
(a), the Company shall take all action as may be necessary to authorize
additional shares of Common Stock for issue upon exercise of the Rights;
provided, however, that if the Company is unable to cause the authorization of a
sufficient number of additional shares of Common Stock, then, in the event the
Rights become so exercisable, the Company, with respect to each Right and to the
extent necessary and permitted by applicable law and any agreements or
instruments in effect on the date hereof to which the Company is a party, shall,
upon the exercise of the Rights,
(i) pay an amount in cash equal to the excess of (A) the
product of (1) the number of Adjustment Shares, multiplied by (2) the
Current Market Price of the Common Stock (hereinafter the "CURRENT
VALUE"), over (B) the Purchase Price, in lieu of issuing shares of
Common Stock and requiring payment therefor, or
(ii) issue debt or equity securities, or a combination
thereof, having a value equal to the Current Value, where the value of
the securities shall be determined by a nationally recognized investment
banking firm selected by the Board of Directors of the Company, and
require the payment of the Purchase Price, or
(iii) deliver any combination of cash, property, Common
Stock and/or other securities having the requisite value, and require
payment of all or any requisite portion of the Purchase Price.
If the Company determines that some action need be taken pursuant to clauses
(i), (ii), or (iii) of the proviso of this Section 11(b), a majority of the
Board of Directors may
13
suspend the exercisability of the Rights for a period of up to 45 days following
the date on which the first of the events listed in Section 11(a)(i) or (ii) of
this Agreement shall have occurred, in order to decide the appropriate form of
distribution to be made pursuant to the above proviso and to determine the value
thereof. In the event of any suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at the time the suspension is no
longer in effect.
Section 12. The Flip-Over.
(a) If, following the Distribution Date, directly or indirectly,
(w) the Company shall consolidate with, or merge with and
into, any other Person; or
(x) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the
continuing or surviving corporation of the merger and, in
connection with the merger, all or part of the 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
(y) the Company shall effect a share exchange in which all
or part of the Common Stock of the Company shall be exchanged
into (including, without limitation, any conversion into or
exchange for) securities of any other Person, cash or any other
property; or
(z) the Company shall sell, lease, exchange or otherwise
transfer or dispose of (or one or more of its Subsidiaries shall
sell, lease, exchange or otherwise transfer or dispose of), 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,
then, and in each case, subject to the provisions of Section 23 of this
Agreement,
(i) each holder of a Right, except as provided in Section 7(e) of
this Agreement, 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, the number of shares of freely tradable
common stock of the Principal Party, free and clear of any lien,
encumbrance or other adverse claim, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the
number of 1/1000th of a share of Preferred Stock for which a Right is
then exercisable (or the number of 1/1000th of a share of Preferred
Stock for which a Right was exercisable immediately prior to the
14
occurrence of the Flip-In Event if a Flip-In Event has previously
occurred) and dividing that product by (2) 50% of the Current Market
Price per share of the common stock of the Principal Party on the date
of consummation of the Flip-over Event;
(ii) all common stock of any Person for which any Right
may be exercised after consummation of a business combination as
provided in this Section 12(a) shall, when issued upon exercise thereof
in accordance with this Agreement, be duly and validly authorized and
issued and fully paid and nonassessable;
(iii) the Principal Party shall thereafter be liable for,
and shall assume, by virtue of the Flip-Over Event, all the obligations
and duties of the Company pursuant to this Agreement;
(iv) the term "Company" shall thereafter be deemed to
refer to the Principal Party, it being specifically intended that the
provisions of Section 13 hereof shall apply to the Principal Party;
(v) the Principal Party shall take whatever steps
(including, but not limited to, the reservation of a sufficient number
of shares of its common stock) in connection with the consummation 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
(vi) the provisions of Section 11 of this Agreement shall
be of no effect following the first occurrence of any Flip-Over Event.
(b) "PRINCIPAL PARTY" shall mean:
(i) in the case of any transaction described in (w), (x)
or (y) of the first sentence of Section 12(a), the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in the merger or consolidation, and if no
securities are so issued, the Person that is the other party to the
merger or consolidation; and
(ii) in the case of any transaction described in (z) of
the first sentence in Section 12(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to the transaction or transactions; provided,
however, that in any case, (1) if the common stock of the Person is not
at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Securities Exchange Act of
1934, as then in effect, and the Person is a direct or indirect
15
Subsidiary of another Person the common stock of which is and has been
so registered, "Principal Party" shall refer to the other Person; and
(2) in case the 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 the
Persons is the issuer of the common stock having the greatest aggregate
market value.
(c) The Company shall not consummate any Flip-over Event unless
prior thereto the Company and each Principal Party and each other Person who may
become a Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 12 and further providing that, as soon as practicable after
the date of any Flip-Over Event, the Principal Party will:
(i) prepare and file at its own expense a registration
statement under the Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, will use
its best efforts to cause the registration statement to become effective
as soon as practicable after the filing and will use its best efforts to
cause the registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earliest of
the Expiration Date, the Exchange Date and the Redemption Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
that comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The Principal Party shall temporarily suspend, for a period of time not
to exceed 90 days following the occurrence of a Flip-Over Event, the
exercisability of the Rights in order to prepare an file the registration
statement referred to in clause (i) above, and the Expiration Date shall be
extended by the number of days of the suspension. The provisions of this Section
12 shall similarly apply to successive Flip-Over Events. In the event that a
Flip-Over Event shall occur at any time after the occurrence of a Flip-In Event,
the Rights that have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 12(a).
Section 13. 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 13.
(a) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend or make a distribution on the Preferred
Stock payable in shares of Preferred Stock into a larger number of shares, (B)
subdivide the
16
outstanding Preferred Stock into a larger number of shares, (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), then in
each event, except as otherwise provided in this Section 13(a), the Purchase
Price in effect at the time of the record date for the dividend or distribution,
or of the effective date of the subdivision, combination or reclassification,
and the number and kind of shares of Preferred Stock or capital stock issuable
on that date, shall be proportionately adjusted so that the holder of any Rights
(except as provided in Section 7(e) of this Agreement) exercised on or after
that time shall be entitled to receive upon payment of the Purchase Price in
effect immediately prior to that date, the aggregate number and kind of shares
of Preferred Stock or capital stock which, if the Rights had been exercised
immediately prior to that 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 the dividend, distribution, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both Section 11(a) of this Agreement and this Section 13(a),
the adjustment provided for in this Section 13(a) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a).
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Stock entitling them
to subscribe for or purchase (for a period expiring within 45 calendar days
after the record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("EQUIVALENT
PREFERRED STOCK") or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
Equivalent Preferred Stock (or having a conversion price per share, if a
security convertible into Preferred Stock or Equivalent Preferred Stock) of less
than the Current Market Price per share of Preferred Stock on the record date,
the Purchase Price to be in effect after the record date shall be determined by
multiplying the Purchase Price in effect immediately prior to the record date by
a fraction, the numerator of which shall be the number of 1/1000th of shares of
Preferred Stock outstanding on the record date, plus the number of 1/1000th of
shares of Preferred Stock which the aggregate offering price of the total number
of shares of 1/1000th 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 the current market price and the
denominator of which shall be the number of 1/1000th of shares of Preferred
Stock outstanding on the record date, plus the number of additional 1/1000th of
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 the subscription price is paid in a
form of consideration all or part of which is in a form other than cash, the
value of the consideration shall be determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. The adjustment shall
be made successively whenever a record date is fixed; and in the
17
event that rights or warrants are not issued following an adjustment, the
Purchase Price shall be adjusted to be the Purchase Price that would have been
in effect if the record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any distribution made
in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend), 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
13(b)), the Purchase Price to be in effect after the record date shall be
determined by multiplying the Purchase Price in effect immediately prior to the
record date by a fraction, the numerator of which shall be the Current Market
Price per 1/1000th of a share of the Preferred Stock on the record date, less
the fair market value (as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness to be so distributed or of the subscription rights or warrants
applicable to 1/1000th of a share of Preferred Stock and the denominator of
which shall be the Current Market Price per 1/1000th of a share of the Preferred
Stock. The adjustments shall be made successively whenever a record date is
fixed; and in the event that a distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price that would be in effect if the
record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless the adjustment would
require an increase or decrease of at least 1% in the Purchase Price; provided,
however, that any adjustments which by reason of this Section 13(d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 13 shall be made to
the nearest cent or to the nearest ten-thousandth of a share of Common Stock or
other share of one-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 13(d), any adjustment
required by this Section 13 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment or (ii)
the earliest of the Expiration Date, the Exchange Date and the Redemption Date.
(e) If as a result of an adjustment made pursuant to Section
11(a), the holder of any Rights thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Stock,
thereafter the number of the other shares so receivable upon exercise of any
Rights shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the shares
contained in Section 13(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10 and 12 hereof with respect to the Preferred Stock shall apply
on like terms to any other shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase,
18
at the adjusted Purchase Price, the number of shares of Preferred Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 13(h), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 13(b) and (c), each Rights
outstanding immediately prior to the making of the adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
1/1000th of a share of Preferred Stock (calculated to the nearest one-millionth)
obtained by (i) multiplying (x) the number of 1/1000th of a share covered by a
Right immediately prior to this adjustment by (y) the Purchase Price in effect
immediately prior to the adjustment of the Purchase Price and (ii) dividing the
product so obtained by the Purchase Price in effect immediately after adjustment
of the Purchase Price.
(h) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of 1/1000th of a share of
Preferred Stock for which a Right was exercisable immediately prior to the
adjustment. Each Right held of record prior to the adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one-millionth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 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 13(h), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on the record date Rights Certificates evidencing the additional
Rights to which the holders shall be-entitled as a result of the adjustment, or,
at the option of the Company, shall cause to be distributed to the holders of
record in substitution and replacement for the Rights Certificates held by the
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 the
holders shall be entitled after the 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.
(i) Irrespective of any adjustment or change in the Purchase
Price or the number of 1/1000th of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to
19
express the Purchase Price per share and the number of shares which were
expressed in the initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Purchase Price below the par value of the shares of Preferred Stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Preferred Stock at the adjusted Purchase Price.
(k) In any case in which this Section 13 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Rights exercised after the record date,
the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon the exercise over and above the shares of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon the exercise on the basis of the Purchase Price in effect prior to
the adjustment; provided, however, that the Company shall deliver to the holder
a due xxxx or other appropriate instrument evidencing the holder's right to
receive the additional shares upon the occurrence of the event requiring the
adjustment.
(l) Anything in this Section 13 to the contrary notwithstanding,
the Company shall be entitled to make reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 13, as and to
the extent that in its sole discretion the Company shall determine to be
advisable in order that any (i) consolidation or subdivision of the Preferred
Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less
than the Current Market Price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are convertible into or
exchangeable for shares of Preferred Stock, (iv) stock dividends, or (v)
issuance of rights, options or warrants referred to in this Section 13,
hereafter made by the Company to holders of its Preferred Stock shall, if
practicable, not be taxable to the stockholders.
(m) The Company covenants and agrees that it shall not (i)
consolidate with, (ii) merge with or into, or (iii) sell or transfer to, in one
or more 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,
any other Person if at the time of or immediately after the consolidation,
merger or sale there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(n) The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by Section 22 or Section 26
hereof, take any action the purpose or effect of which is to diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
20
(o) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time prior to the Distribution Date
(i) declare a dividend or distribution on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding shares of
Common Stock, or (iii) combine the outstanding shares of Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter but prior to
the Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to the event by a
fraction, (1) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence of the event and
(2) the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of the event.
(p) Whenever an adjustment is made as provided in Sections 11, 12
and 13 hereof, the Company shall (a) promptly prepare a certificate setting
forth the adjustment and a brief statement of the facts accounting for the
adjustment, (b) promptly file with the Rights Agent and with each transfer agent
for the Preferred Stock and the Common Stock a copy of the Certificate and (c)
mail a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 25 hereof. The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.
Section 14. Rights of Action. All rights of action in respect of
this Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock) without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in 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 nights
pursuant to this Agreement. Without limiting the foregoing or any remedies
available to the holders of Rights, it is specifically acknowledged that the
holders of Rights would not have an adequate remedy at law for any breach of
this Agreement and shall be entitled to specific performance of the obligations
hereunder and injunctive relief against actual or threatened violations of the
obligations hereunder of any Person subject to this Agreement.
Section 15. 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;
21
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal corporate trust office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court or by a
governmental, regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority prohibiting or otherwise restraining performance of the obligation;
provided, however, the Company must use its best efforts to have any order,
decree or ruling lifted or otherwise overturned.
Section 16. Rights Holder Not Deemed a Stockholder. Except as
otherwise expressly provided in this Agreement, no holder, as such, of any
Rights Certificate shall be entitled to vote, receive dividends or be deemed for
any purpose the holder of the shares of Preferred Stock 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, or to
receive dividends or subscription rights, or otherwise, until and only to the
extent that the Right or Rights evidenced by the Rights Certificate shall have
been exercised in accordance with the provisions of this Agreement.
Section 17. Concerning the Rights Agent. The Company agrees to
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and disbursements and other disbursements incurred in
the administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
22
premises. The indemnification provided for hereunder shall survive the
expiration of the Rights and the termination of this Agreement.
The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 18. Merger or Consolidation or Change of Name of Rights
Agent. Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the corporate
trust 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 the corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 20 of this Agreement. In case at
the time the 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 successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver the 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 the Rights
Certificates either in the name of the predecessor or in the name of the
successor Rights Agent; and in all cases the Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
that 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 the Rights Certificates either in its prior name or in its
changed name; and in all cases the Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.
Section 19. Duties of Rights Agent. The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of the counsel shall be full and
complete
23
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with the 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) be
proved or established by the Company prior to taking or suffering any action
hereunder, the fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and the
certificate shall be full authorization to the Rights Agent, for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon the certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of facts or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on the Rights Certificates), but all statements and recitals
are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Sections 11 or 13 of this Agreement 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 adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
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.
24
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to the officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any attorneys or
agents or for any loss to the Company resulting from any act, default, neglect
or misconduct provided reasonable care was exercised in the selection and
continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact event or determination under the Rights
Agreement unless and until the Rights Agent shall be specifically notified in
writing by the Company of such fact, event or determination.
Section 20. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 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
25
Agent or by the holder of a Rights Certificate (who shall, with such notice,
submit his Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
of the State of California (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 California), in good standing, having a principal office in the State
of California, which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; 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 Rights Certificates.
Failure to give any notice provided for in this Section 20, 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 21. Issuance of New Rights Certificates. Notwithstanding
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price per share and the number or kind or class of
shares or other securities or property purchasable under the Rights Certificates
made in accordance with the provision of this Agreement.
Section 22. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at
any time prior to 5:00 p.m., California time, on the earlier of (i) the tenth
day following the Stock Acquisition Date, subject to extension by the Board of
Directors for a period of time up to, but not exceeding, ten additional days,
and (ii) the Expiration Date, redeem all but not less than all the then
outstanding Rights at a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "REDEMPTION PRICE"). The Company may, at its option, pay such
redemption price in cash, shares of Common Stock (based on the market price of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors of the Company. Notwithstanding
anything in this Agreement to the
26
contrary, no Rights may be exercised at any time that the Rights are subject to
redemption in accordance with the terms of this Agreement.
(b) Immediately upon the action of the Board of Directors of the
Company extending the redemption period pursuant to Section 22(a)(i), evidence
of which shall have been filed with the Rights Agent, the Company shall issue a
press release indicating the date to which the Board of Directors has extended
its right to redeem the Rights.
(c) Notwithstanding anything in this Agreement to the contrary,
no redemption of the Rights shall be permitted after 5:00 p.m. California time,
on the earlier of (i) the tenth day following the Stock Acquisition Date,
subject to extension by the Board of Directors for a period of time up to, but
not exceeding, ten additional days, or (ii) the Expiration Date.
(d) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
Within ten days after the action of the Board of Directors ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. In any case, failure to
give such notice to any particular holder of Rights shall not affect the
sufficiency of the notice to other holders of Rights. Neither the Company nor
any of its Affiliates or Associates may redeem, acquire or purchase for value
any Rights at any time, in any manner, other than that specifically set forth in
this Section 22, and neither the Company nor any of its Affiliates or Associates
may acquire or purchase for value any Rights at any time, in any manner, other
than in connection with the purchase of shares of associated Common Stock prior
to the Distribution Date.
Section 23. Exchange.
(a) The Company may, at its option but subject to receipt of any
required regulatory approvals, by action of the Board of Directors, 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 owned by the
Acquiring Person or that otherwise have become void pursuant to 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 herein referred to as the "EXCHANGE RATIO").
27
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 23 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The Company shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Company promptly shall mail a
notice of any exchange to all holders of such Rights at their last addresses as
they appear upon the registry books of Rights Agent. Any notice that is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the Common Stock for Rights will be effected and, in the event
of any partial exchange, the number of Rights which will be exchanged. Any
partial exchange shall be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions of Section 7(e)
hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 23, the Company, at
its option, may substitute Preferred (or Equivalent Preferred Stock, for shares
of Common Stock exchangeable for Rights, at the initial rate of 1/1000th of a
share of Preferred Stock (or Equivalent Preferred Stock) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred Stock delivered in lieu of each share of Common
Stock shall have at least the same voting rights as one share of Common Stock.
Section 24. Notice of Certain Events.
(a) In case the Company shall propose (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) 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 Flip-Over Event 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, in accordance
with Section 25, 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, Flip-Over Event,
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 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 days prior
to the date of the taking of such proposed
28
action or the date of participation therein by the holders of the shares of
Preferred Stock whichever shall be the earlier.
(b) Upon the occurrence of a Flip-In Event or a Flip-Over Event,
the Company or Principal Party, as the case may be, shall as soon as practicable
thereafter give to each holder of a Rights Certificate, to the extent feasible
and in accordance with Section 25, a notice of the occurrence of such event and
the consequences thereof.
Section 25. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Commonwealth Energy Corporation
00000 Xxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxx Xxxxxx
With copy to: XxXxxxxxx, Will & Xxxxx
0000 Xxxxxxx Xxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000-0000
Attention: Xxxx Xxxxxxxxx, Esq.
Subject to the provisions of Section 20, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sufficiently given or made
if delivered by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
--------------------------
--------------------------
--------------------------
Attention:
---------------
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company. The Company shall deliver a copy of any notice or demand
it delivers to the holder of any Rights Certificate to the Rights Agent and the
Rights Agent shall deliver a copy of any notice or demand it deliver to the
holder of any Rights Certificate to the Company.
Section 26. Supplements and Amendments. The Company and the
Rights Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Rights Certificates in order to cure any
ambiguity, to correct or supplement any provision contained herein which may be
defective or inconsistent
29
with any other provisions herein or to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates other than an Acquiring Person; provided, however, that no
amendment or supplement may be made if the effect would be to extend or shorten
the redemption period after the Stock Acquisition Date or change the Purchase
Price or the Redemption Price. Notwithstanding any other provisions of this
Section 26, the Board of Directors shall retain the right to amend the Purchase
Price for a period of six months from the date of this Agreement.
Section 27. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common Stock).
Section 29. 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.
Section 30. 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 California and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
made and to be performed entirely within such State.
Section 31. 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 32. Descriptive Headings. Descriptive headings of the
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
30
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.
COMMONWEALTH ENERGY CORPORATION
By: /s/ Xxx X. Xxxxxx
--------------------------------
Name: Xxx X. Xxxxxx
Title: Chairman and Chief
Executive Officer
31
Exhibit A
to
Rights Agreement
[FORM OF]
CERTIFICATE OF DESIGNATIONS
OF PREFERRED STOCK
of
COMMONWEALTH ENERGY CORPORATION
We, ______________, Chairman of the Board of Directors and
______________, Secretary, of Commonwealth Energy Corporation, a corporation
organized and existing under the General Corporation Law of the State of
California (the "Corporation"), in accordance with the provisions of Section
_____ thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Corporation, the Board of Directors, on
January 4, 2002, adopted, ratified and approved this Certificate of Designations
and the series of preferred stock designated herein.
Section 1. Designation and Amount. A series of the Corporation's
preferred stock, $0.001 par value per share, shall be designated as "Preferred
Stock" (the "Preferred Stock") and the number of shares constituting such series
shall be ________.
Section 2. Voting Rights. The holders of shares of Preferred Stock shall
have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Preferred Stock shall entitle the holder thereof to
1000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time on or after
January 4, 2002 declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the number of votes per share to which holders of
shares of Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event, and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to
such event.
A-1
(B) Except as otherwise provided herein or by law, the holders of
shares of Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, holders of 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 3. Reacquired Shares. Any shares of Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of preferred stock and
may be reissued as part of a new series of preferred stock to be created by
resolution or resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein.
Section 4. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Preferred Stock unless, prior
thereto, the holders of shares of Preferred Stock shall have received an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 1000 times the aggregate amount to be distributed per share
to holders of Common Stock, or (2) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Preferred Stock, except distributions made ratably on the 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. In the event the Corporation shall at any time on or after January
4, 2002 declare or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the aggregate amount to which
holders of shares of Preferred Stock were entitled immediately prior to such
event under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 5. Consolidation, Merger, etc. In the event that 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 or other property, then in any such case
the shares of Preferred Stock then outstanding shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 1000 times
A-2
the aggregate amount of stock, securities, cash or other property (payable in
kind), as the case may be, into which or for which each share of Common Stock is
changed or exchanged. In the event the Corporation shall at any time on or after
January 4, 2002 declare or pay any dividend on Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Preferred Stock shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 6. No Redemption. The shares of Preferred Stock shall not be
redeemable.
Section 7. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the 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 Preferred Stock, voting together as a
single class.
A-3
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury as of this _____
day of January, 2002.
-----------------------------------
Xxx Xxxxxx
Chief Executive Officer
ATTEST:
-----------------------------------
Name: [_________________]
Title: [_________________]
A-4
Exhibit B
to
Rights Agreement
[FORM OF]
RIGHTS CERTIFICATE
Certificate No. R-____________ Rights
NOT EXERCISABLE AFTER [____________] OR EARLIER IF NOTICE OF REDEMPTION
OR EXCHANGE IS GIVEN.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
[THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT. ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF THE RIGHTS AGREEMENT.]
RIGHTS CERTIFICATE
COMMONWEALTH ENERGY CORPORATION
This certifies that ___________________ or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of January 4, 2002 (the "RIGHTS AGREEMENT"), between
Commonwealth Energy Corporation, a California corporation (the "COMPANY"), and
Computershare Trust Company (the "RIGHTS AGENT"), unless notice of redemption
shall have been previously given by the Company, to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 p.m. (California time) on [______________] at the
principal corporate trust office of the Rights Agent, or at the office of its
successor as Rights Agent, [_______________] of a fully paid nonassessable share
of the Preferred Stock (the "PREFERRED STOCK"), par value $0.001 per share, of
the Company, at a purchase price of $50 per share upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase duly
executed. The Purchase Price may be paid in cash or by certified bank check or
money order payable to the order of the Company.
The number of Rights evidenced by this Rights Certificate (and the
number of shares of Preferred Stock which may be purchased upon exercise
thereof) and the Purchase Price set forth above have been determined as of
____________, based on
B-1
the Common Stock of the Company as constituted at such date. As provided in the
Rights Agreement, the Purchase Price and the number of shares of Preferred Stock
or other securities, cash or other property which may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Rights Certificate are or were formerly
beneficially owned, on or after the earlier of the Distribution Date and the
Stock Acquisition Date, by an Acquiring Person or an Affiliate, Associate or
direct or indirect transferee of an Acquiring Person, such Rights may become
null and void and the holder of any such Right (including any subsequent holder)
shall not have any right with respect to such Right.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates.
Capitalized terms used in this Rights Certificate have the same meanings as such
terms are defined in the Rights Agreement. Copies of the Rights Agreement are on
file at the principal executive offices of the Company and the above-mentioned
office of the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal corporate trust office of the Rights Agent, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Preferred Stock or other property as the Rights evidenced by
the Rights Certificate or Rights Certificates surrendered entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive, upon surrender hereof, another Rights Certificate
or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate 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 (i) the close of
business on the 10th day following the time it becomes public that an Acquiring
Person has become such (with the possibility of an extension for an additional
10 days) and (ii) the Expiration Date.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be exchanged by the Company, at its option, at any time
after any person becomes an Acquiring Person, for a number of shares of common
stock of the Company determined in accordance with the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or to receive dividends or shall be deemed, for any purpose, the holder of
Preferred Stock or of any
B-2
other securities, cash or property which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or this
Certificate be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company, including, without limitation, any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or to institute, as a holder of Preferred
Stock or other securities issuable on the exercise of the Rights represented by
this Certificate, any derivative action, or otherwise, until and only to the
extent the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until the Rights Agent shall have countersigned it.
B-3
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _____ ___, 20__.
COMMONWEALTH ENERGY CORPORATION
By:
--------------------------------
Name:
Title:
ATTEST:
-----------------------------------
Secretary
Countersigned:
-----------------------------------
By:
Authorized Signature
B-4
[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 Certificates.)
FOR VALUE RECEIVED, _________________________________ hereby sells,
assigns and transfers unto ____________________________ (Please print name and
address of transferee) this Rights Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_____________________ Attorney to transfer the within Rights Certificate on the
books of the within-named Company, with full power of substitution.
Dated: , 20
----------- --- --
-----------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
B-5
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 any such 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 or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
Dated: , 20 -----------------------------------
----------- --- -- Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment
is not completed, the Company will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and, in the case of an
Assignment, will affix a legend to that effect on any Rights Certificate issued
in exchange for this Rights Certificate.
B-6
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
the Rights represented by this Rights Certificate)
To: Commonwealth Energy Corporation
The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock ______________ or other securities, cash or other property
issuable upon the exercise of such Rights and requests that certificates for
such shares or other securities be issued in the name of, and such cash or other
property be paid to:
Please insert social security or other identifying number:
--------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the remaining balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number:
--------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------
Dated: , 20 Signature
----------- --- -- -----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of this
Rights Certificate)
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
B-7
CERTIFICATE
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being exercised by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement);
(2) 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 or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
Dated: , 20 Signature
----------- --- -- -----------------------------------
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
NOTICE
The signature on the foregoing Form of 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.
In the event the certification set forth above in the Form of Election
is not completed, the Company will deem the beneficial owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Rights Agreement) and, in the case of an
Assignment, will affix a legend to that effect on any Rights Certificate issued
in exchange for this Rights Certificate.
B-8
Exhibit C
to
Rights Agreement
[SEE ATTACHED]
C-1
COMMONWEALTH ENERGY CORPORATION
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On January 4, 2002, the Board of Directors of Commonwealth Energy
Corporation, a California corporation (the "COMPANY"), declared a dividend
distribution of one preferred stock purchase right (a "RIGHT") for each share of
common stock, par value $0.001 per share (the "COMMON STOCK"), of the Company.
The dividend is payable on January 4, 2002 to stockholders of record at the
close of business on January 4, 2002 (the "RECORD DATE") and in respect of all
shares of Common Stock that become outstanding after the Record Date and prior
to the earliest of (a) the Distribution Date (as such term is hereinafter
defined), (b) the redemption of the Rights, (c) the exchange of the Rights and
(d) the expiration of the Rights. Except as described herein and subject to
adjustment as provided in the Rights Agreement (as such term is hereinafter
defined), each Right entitles the registered holder to purchase from the Company
1/1000th of a share of the Company's Preferred Stock, par value $0.001 per share
(the "PREFERRED STOCK"), at a purchase price of $50 per share (the "PURCHASE
PRICE"). The description and terms of the Rights are set forth in a Rights
Agreement, dated as of January 4, 2002 (the "RIGHTS AGREEMENT"), between the
Company and Computershare Trust Company, as Rights Agent (the "RIGHTS AGENT").
The Rights will be evidenced by Common Stock certificates and not
separate certificates until the earliest of (i) ten days following the date of
public disclosure that a person or group, together with persons affiliated or
associated with it (an "ACQUIRING PERSON"), has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the "STOCK ACQUISITION Date"), (ii) ten business days following
commencement or disclosure of an intention to commence a tender offer or
exchange offer by a person or group other than the Company and certain related
entities if, upon consummation of such offer, such person or group, together
with persons affiliated or associated therewith, would beneficially own 15% or
more of the outstanding shares of Common Stock , and (iii) ten business days
following a determination by the Board of Directors of the Company that a
person, as such term is defined below (referred to herein as an "ADVERSE
PERSON"), alone or together with persons affiliated or associated therewith, has
become the beneficial owner of more than 10% of the outstanding shares of Common
Stock and that (A) such beneficial ownership is intended to cause the Company to
repurchase the Common Stock beneficially owned by such person or to cause
pressure on the Company to take action or enter into transactions intended to
provide such person with short-term financial gain under circumstances where the
Board of Directors of the Company determines that the best long-term interests
of the Company would not be served by taking such action or entering into such
transactions or (B) such beneficial ownership is causing or reasonably likely to
cause a material adverse impact on the business or prospects of the Company;
provided, however, that the Board of Directors of the Company shall not declare
any person to be an Adverse Person if such person has reported or is required to
report its ownership of Common Stock on Schedule 13G under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or on Schedule 13D under
C-2
the Exchange Act which Schedule 13D does not state any intention to, or reserve
the right to, control or influence the Company or engage in certain other
actions, so long as such person neither reports nor is required to report such
ownership other than as so described (the earlier of such dates being the
"DISTRIBUTION DATE"). Until the Distribution Date (or earlier redemption or
expiration of the Rights), the transfer of Common Stock will also constitute
transfer of the associated Rights. Following the Distribution Date, separate
certificates will evidence the Rights.
The Rights will first become exercisable on the Distribution Date
(unless sooner redeemed); provided, however, that no Rights will be exercisable
at any time that the Rights are subject to redemption by the Company in
accordance with the terms of the Rights Agreement. The Rights will expire at the
close of business on January 4, 2012 (the "EXPIRATION DATE"), unless earlier
redeemed by the Company as hereinafter described.
The Purchase Price and the number of shares of Preferred Stock or other
securities, cash or other property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend or distribution on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of the
Preferred Stock of certain rights, options or warrants to subscribe for
Preferred Stock or securities convertible into Preferred Stock at less than the
current market price of the Preferred Stock or (iii) upon the distribution to
holders of the Preferred Stock of other securities, cash (excluding regular
periodic cash dividends, property, evidences of indebtedness or assets).
The number of outstanding Rights and the number of 1/1000th of a share
of Preferred Stock issuable upon exercise of each Right and the Purchase Price
are also subject to adjustment in the event of a stock dividend on the Common
Stock or a stock split of the Common Stock or subdivision, consolidation or
combination of the Common Stock occurring, in any case, prior to the
Distribution Date.
If (i) a person acquires beneficial ownership of 15% or more of the
Common Stock, or (ii) the Company is the surviving corporation in a merger with
an Acquiring Person and the Common Stock remains outstanding and unchanged, the
Rights will "FLIP IN" and entitle each holder of a Right, except as provided
below, to purchase, upon exercise at the then-current Purchase Price, that
number of shares of Common Stock having a market value of two times the Purchase
Price.
In the event that, following the Distribution Date, the Company is
acquired in a merger or other business combination in which the Common Stock
does not remain outstanding or is changed or 15% or more of the Company's
consolidated assets or earning power is sold, leased, exchanged or otherwise
transferred or disposed of (in one transaction or a series of related
transactions) the Rights will "FLIP OVER" and entitle each holder of a Right to
purchase, upon the exercise of the Right at the then-current Purchase Price,
that number of shares of common stock of the acquiring company (or, in certain
circumstances, one of its affiliates) which at the time of the transaction would
have a market value of two times the Purchase Price.
C-3
Any "flip-in" event or "flip-over" event is a "TRIGGERING EVENT."
Any Rights beneficially owned at any time on or after the Distribution
Date by an Acquiring Person or an Adverse Person or any affiliate or associate
of an Acquiring Person or Adverse Person (whether or not ownership is
subsequently transferred) will become null and void upon the occurrence of a
Triggering Event, and any such holder of Rights will have no right to exercise
such Rights.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price.
At any time prior to the earlier of (i) the close of business on the
tenth day following the Stock Acquisition Date (with the possibility for the
Board of Directors to extend this time for an additional ten days) and (ii) the
Expiration Date, the Company may redeem the Rights in whole, but not in part, at
a price of $0.001 per Right. The Company may, at its option, pay such redemption
price in cash, shares of Common Stock (based on the market price of the Common
Stock at the time of redemption) or any other form of consideration deemed
appropriate by the Board of Directors of the Company. Immediately upon the
action of the Company's Board of Directors electing to redeem the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
Rights thereafter will be to receive the applicable redemption price.
The Company may, at any time after the occurrence of a Triggering Event,
provided that all necessary regulatory approvals have been obtained, exchange
the Rights (other than Rights owned by the Acquiring Person [or an Adverse
Person]), in whole or in part, at a ratio of one share of Common Stock per
Right, subject to adjustment.
Until a Right is exercised, the holder has no rights as a Stockholder of
the Company, including, without limitation, the right to vote or to receive
dividends or distributions.
At any time prior to the Distribution Date, the Company may, without the
approval of any holder of the Rights, supplement or amend any provision of the
Rights Agreement (including the date on which the Distribution Date will occur),
except the Purchase Price, the number of shares of Preferred Stock, other
securities, cash or other property obtainable upon exercise of a Right, the
redemption price or the Expiration Date. Thereafter, the Rights Agreement may be
amended only to cure ambiguities, to correct inconsistent provisions or in ways
that do not adversely affect the holders of the Rights.
In the event of any merger or other business combination in which Common
Stock is exchanged, each share of Preferred Stock will be entitled to receive
two times the amount received per share of Common Stock. Customary antidilution
provisions protect these rights.
C-4
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the 1/1000th of a share of Preferred Stock
purchasable upon exercise of each Right is intended to approximate the value of
one share of Common Stock.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors of the Company because, at any time until ten days following the Stock
Acquisition Date, subject to extension by the Board of Directors for a period of
time up to ten additional days, the Rights may be redeemed by the Company at
$0.001 per Right.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission and is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by this reference.
C-5
