1
EXHIBIT 4
--------------------------------------------
RAINBOW TECHNOLOGIES, INC.
AND
U.S. STOCK TRANSFER CORPORATION
AS RIGHTS AGENT
--------------------------------------------
RIGHTS AGREEMENT
DATED AS OF JULY 29, 1997
2
TABLE OF CONTENT
Page
----
Section 1. Certain Definitions.......................................................3
Section 2. Appointment of Rights Agent...............................................7
Section 3. Issuance of Rights Certificates...........................................8
Section 4. Form of Rights Certificates...............................................9
Section 5. Countersignature and Registration.........................................9
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates..................9
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............10
Section 8. Cancellation and Destruction of Rights Certificates......................12
Section 9. Reservation and Availability of Common Shares............................12
Section 10. Common Shares Record Date................................................14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.........................................................15
Section 12. Certificate of Adjusted Purchase Price or Number of Shares...............21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.....21
Section 14. Fractional Rights and Fractional Shares..................................23
Section 15. Rights of Action.........................................................24
Section 16. Agreement of Right Holders...............................................24
Section 17. Rights Certificate Holder Not Deemed a Shareholder.......................25
Section 18. Concerning the Rights Agent..............................................25
Section 19. Merger or Consolidation or Change of Name of Rights Agent................26
Section 20. Duties of Rights Agent...................................................26
Section 21. Change of Rights Agent...................................................28
Section 22. Issuance of New Rights Certificates......................................29
Section 23. Redemption and Termination...............................................30
Section 24. Exchange.................................................................30
Section 25. Notice of Certain Events.................................................31
Section 26. Notices..................................................................32
Section 27. Supplements and Amendments...............................................33
Section 28. Successors...............................................................33
Section 29. Determinations and Actions by the Board of Directors, etc................34
Section 30. Benefits of this Agreement...............................................34
Section 31. Severability.............................................................34
Section 32. Governing Law............................................................34
Section 33. Counterparts.............................................................35
Section 34. Descriptive Headings.....................................................35
2
3
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of July 29, 1997, between Rainbow
Technologies, Inc., a Delaware corporation with a principal place of business
located at 00 Xxxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxxxx 00000 (the "Company"), and
U.S. Stock Transfer Corporation, a California corporation with a principal place
of business located at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxxx
00000 (the "Rights Agent").
WHEREAS, the Board of Directors of the Company has authorized and
declared a dividend (the "Rights Dividend") of one right (a "Right") for each
Common Share (as hereinafter defined) of the Company outstanding immediately
before the close of business on August 5, 1997 (the "Record Date"), each Right
representing the right to purchase one one-thousandth of a Common Share upon the
terms and subject to the conditions herein set forth, and, subject to such terms
and conditions, has further authorized the issuance of one Right (as such number
may hereafter be adjusted pursuant to the provisions hereof) with respect to
each Common Share that shall become outstanding (i) between the Record Date and
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are defined in Sections 3 and 7 hereof) or (ii)
after the Distribution Date but before the earlier of the Redemption Date or the
Final Expiration Date, if such Common Share became outstanding (A) upon the
exercise of a stock option, (B) pursuant to any employee plan or arrangement, or
(C) upon the conversion or exchange of a security which option, plan,
arrangement or security was granted, established or issued, as the case may be,
by the Company before the Distribution Date.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
a. "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter defined) of 15% or more of the Common Shares then
outstanding, but shall not include (i) the Company, any wholly-owned Subsidiary
(as such term is hereinafter defined) of the Company or any employee benefit
plan of the Company or any Subsidiary of the Company, or any Person or entity
holding Common Shares for or pursuant to the terms of any such plan or (ii) a
Person (A) who or which, together with all Affiliates and Associates of such
Person, inadvertently becomes Beneficial Owner of 15% or more of the Common
Shares, (B) delivers to the Company an Undertaking (as such term is hereinafter
defined) within five days of the first public announcement (which, for purposes
of this definition, shall include, without limitation, a report filed pursuant
to Section 13(d) under the Exchange Act) by the Company or such Person, that
such Person, together with all Affiliates or Associates of such Person, has
become Beneficial Owner of 15% or more of the outstanding Common Shares, and (C)
who or which, together with all Affiliates and Associates of such Person, has
not delivered another Undertaking within the preceding two years; provided that,
a Person described in clause (ii) shall cease to be subject to such clause and
shall be an Acquiring Person if (X) such Person, together with all Affiliates
and Associates
3
4
of such Person does not, pursuant to such Undertaking, reduce the number of
Common Shares Beneficially Owned by such Person to less than 15% of the
outstanding Common Shares within the 30 day period specified in the Undertaking
or (Y) if, in the sole opinion of the Board of Directors of the Company, such
Person has breached any representation or covenant contained in the Undertaking
delivered by such Person.
b. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
c. A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
i. which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
ii. which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (whether or not in writing), or upon
the exercise of conversion rights, exchange rights, rights (other than these
Rights), warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (2) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event (as hereinafter defined), or (3) securities issuable upon
exercise of Rights from and after the occurrence of a Triggering Event which
Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or Section
22 hereof (the "Original Rights") or pursuant to Section 11(i) hereof in
connection with an adjustment made with respect to any Original Rights; or (B)
the right to vote or dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or understanding (whether
or not in writing); provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
iii. which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person (or
any of such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section
1(c)(ii)(B)), or disposing of any securities of the Company; provided, however,
that nothing in this paragraph (iii) shall cause a person engaged in business as
an underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired
4
5
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
d. "Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
e. "Close of Business" on any given date shall mean 5:00 P.M., New York,
New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York, New York time, on the next
succeeding Business Day.
f. "Common Shares" when used with reference to the Company shall mean
shares of the Company's common stock, par value $.001 per share, and any other
class or classes or series of common stock of the Company resulting from any
subdivision, combination, recapitalization or reclassification of shares of such
common stock. "Common Shares" when used with reference to any Person other than
the Company shall mean the capital stock (or equity interest) with the greatest
voting power, or having power to control or direct the management, of such other
Person or, if such other Person is a Subsidiary of another Person, of the Person
or Persons which ultimately control such first mentioned Person.
g. "Continuing Director" shall mean a director who was a member of the
Board of Directors of the Company on the Distribution Date or who subsequently
became a director and whose election, or nomination for election by the
Company's shareholders, was approved by a vote of a majority of Continuing
Directors on the Board of Directors of the Company on the date of such election
or nomination.
h. "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
i. "Exchange Ratio" shall have the meaning set forth in Section 24
hereof.
j. "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
k. "NASDAQ" shall have the meaning set forth in Section 11(d) hereof.
l. "Person" shall mean any individual, firm, corporation, partnership,
association, trust, joint venture or other entity, and shall include any
successor (by merger or otherwise) of such entity.
m. "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
n. "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
o. "Record Date" shall have the meaning set forth in the recitals to
this Agreement.
p. "Redemption Date" shall have the meaning set forth in Section 7(a)
hereof.
5
6
q. "Section 11(a)(ii) Event" shall mean the event described in Section
11(a)(ii) hereof.
r. "Section 13 Event" shall mean any event described in clauses (i),
(ii) or (iii) of Section 13(a) hereof.
s. "Share Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
t. "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
u. "Triggering Event" shall mean the Section 11(a)(ii) Event or any
Section 13 Event.
v. "Undertaking" shall mean a binding and enforceable written
undertaking to the Company of any Person, in form reasonably satisfactory to the
Company, containing the following provisions and covenants:
i. a representation that the acquisition of Common Shares which
results in such Person, together with all Affiliates and Associates of such
Person, becoming a Beneficial Owner of 15% or more of the Common Shares was
inadvertent,
ii. an agreement to reduce such Person's beneficial ownership to
less than 15% of the outstanding Common Shares within 30 days,
iii. an agreement not to acquire additional Common Shares while
such Person is Beneficial Owner of 15% or more of the Common Shares (except as a
result of corporate action not caused, directly or indirectly, by such Person),
and
iv. an agreement that such Person will not, while such Person is
the Beneficial Owner of 15% of the Common Shares to which the Undertaking
relates, directly or indirectly, singly or as part of a "partnership, limited
partnership, syndicate or other group" (within the meaning of Section 13(d)(3)
of the Exchange Act), seek to acquire or affect the control of the Company.
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 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable.
6
7
Section 3. Issuance of Rights Certificates.
a. The Rights in respect of the issued and outstanding Common Shares
will be issued and become effective on the Record Date. A Common Share and the
Right or Rights issued or to be issued hereunder in respect thereof will not be
separately transferable until the date (the "Distribution Date") which is the
earlier of (i) the close of business on the tenth day after the Share
Acquisition Date (or, if the tenth day after the Share Acquisition Date occurs
before the Record Date, the close of business on the Record Date) or (ii) the
close of business on the tenth Business Day after the date of the commencement
of, or first public announcement of the intent of any Person (other than the
Company, any wholly-owned Subsidiary of the Company or any employee benefit plan
of the Company or of any Subsidiary of the Company or any entity holding Common
Shares for or pursuant to the terms of any such plan) to commence, a tender or
exchange offer the consummation of which would result in beneficial ownership by
a Person of 15% or more of the outstanding Common Shares (including any such
date which is after the date of this Agreement and prior to the issuance of the
Rights). Prior to the Distribution Date, each holder of Common Shares will be
the holder of the Rights associated with each such share so held, except as
otherwise provided in Section 7(e). (A Common Share and its associated Right or
Rights before the Distribution Date shall be collectively referred to as the
"Unit".) Until the Distribution Date, the Rights issued from time to time
hereunder shall be evidenced collectively by one or more certificates (the
"Rights Certificates") delivered to and registered in the name of the Rights
Agent, as Rights Agent under this Agreement; but the issuance of the Rights
hereunder shall not be affected by any failure to deliver a new or replacement
Rights Certificate to the Rights Agent in respect thereof. The initial Rights
Certificate and any additional or replacement Rights Certificates delivered to
the Rights Agent shall, prior to the Distribution Date, have a legend set forth
on the face thereof to the effect that the Rights represented thereby shall not
be exercisable until the Distribution Date. 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 Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate, in substantially the form of Exhibit A hereto,
evidencing one Right for each Common Share so held. As of the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates. The failure to
mail any such Rights Certificate shall not affect the legality or validity of
the Rights.
b. On the Record Date or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Common Shares, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Units as of
the close of business on the Record Date, at the address of such holder shown on
the records of the Company. The failure to send a copy of a Summary of Rights
shall not affect the legality or validity of the Rights.
7
8
c. Certificates for Common Shares issued after the Record Date but prior
to the earliest of the Distribution Date or the Redemption Date or the Final
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
"THE HOLDER OF THIS CERTIFICATE IS ENTITLED TO CERTAIN RIGHTS AS
SET FORTH IN A RIGHTS AGREEMENT BETWEEN RAINBOW TECHNOLOGIES,
INC. AND U.S. STOCK TRANSFER CORPORATION, DATED AS OF JULY 29,
1997, AS THE SAME MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO
TIME HEREAFTER (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON
FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF RAINBOW TECHNOLOGIES,
INC. ONE OR MORE CERTIFICATES EVIDENCING SUCH RIGHTS HAVE BEEN
DELIVERED TO AND REGISTERED IN THE NAME OF U.S. STOCK TRANSFER
CORPORATION, AS RIGHTS AGENT UNDER THE RIGHTS AGREEMENT. RAINBOW
TECHNOLOGIES, INC. WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A
COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A
WRITTEN REQUEST THEREFOR. AS DESCRIBED IN THE RIGHTS AGREEMENT,
RIGHTS ISSUED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS
DEFINED IN THE RIGHTS AGREEMENT) SHALL BECOME NULL AND VOID."
Section 4. Form of Rights Certificates.
a. The Rights Certificates (and the forms of election to purchase Common
Shares and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit A hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever issued, that are issued
in respect of Common Shares which were issued and outstanding as of the
Distribution Date, shall be dated as of the Distribution Date, and all Rights
Certificates that are issued in respect of other Common Shares shall be dated as
of the respective dates of issuance of such Common Shares, and in each such case
on their face shall entitle the holders thereof to purchase such number of one
one-thousandths of a Common Share as shall be set forth therein at the price per
one one-thousandth of a Common Share set forth therein (the "Purchase Price"),
but the amount and type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to adjustment as provided
herein.
b. Any Rights Certificate issued pursuant to Section 3(a) or Section 22
that represents Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee before or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring
8
9
Person to holders of equity interest in such Acquiring Person or to any Person
with whom such Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
of Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(e), and any Rights Certificate issued pursuant to Section 6 or Section 11 upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
"THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCE SPECIFIED IN SECTION 7(E) OF SUCH AGREEMENT."
Section 5. Countersignature and Registration. The Rights Certificates
shall be executed on behalf of the Company by its President, any Executive Vice
President, and by the Secretary, an Assistant Secretary, Treasurer or an
Assistant Treasurer of the Company, either manually or by facsimile signature,
and have affixed thereto the Company's seal or a facsimile thereof. The Rights
Certificates shall not be valid for any purpose unless manually countersigned by
an authorized signatory of the Rights Agent. In case any officer of the Company
who shall have signed any of the Rights Certificates shall cease to be such
officer of the Company before countersignature by the Rights Agent and issuance
and delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent, and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
The Rights Agent will keep or cause to be kept, at its principal
offices, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at or
prior to the close of business on the earlier of the Redemption Date or the
Final Expiration Date (as such terms are defined in Section 7 hereof), any
Rights Certificate or Rights Certificates (other than Rights Certificates
representing Rights that have become void pursuant to Section 7(e)) may be
transferred, split up, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of one one-thousandths of a Common Share (or, following a Triggering Event,
Common Shares, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder (or former holder
9
10
in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate shall make such
request in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall request. Thereupon the Rights Agent
shall, subject to Section 4(b), Section 7(e) and Section 14 hereof, countersign
and deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
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, at the Company's request,
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.
a. Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c) and Section 11(a)(iii) hereof) in whole
or in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent at the principal office
or offices of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandths of a Common Share (or other securities, cash or other assets, as
the case may be) as to which such surrendered Rights are then exercisable, at or
prior to the earlier of (i) the close of business on August 5, 2002 (the "Final
Expiration Date"), (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), or (iii) the time at which the Board
of Directors takes action ordering the exchange of such Rights as provided in
Section 24 hereof.
b. The Purchase Price for each one one-thousandth of a Common Share
pursuant to the exercise of a Right shall initially be $90, shall be subject to
adjustment from time to time as provided in Sections 11 and 13 hereof and shall
be payable in accordance with paragraph (c) below.
10
11
c. Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one- thousandth of a Common Share (or other shares, securities,
cash or other assets, as the case may be) to be purchased as set forth below and
an amount equal to any applicable transfer tax required to be paid by the holder
of such Rights Certificate in accordance with Section 9, the Rights Agent shall,
subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any
transfer agent of the Common Shares (or make available, if the Rights Agent is
the transfer agent for such shares) certificates for the total number of one
one-thousandths of a Common Share to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company shall have elected to deposit the total number of Common
Shares issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a Common Share as are to be purchased (in which
case certificates for the Common Shares represented by such receipts shall be
deposited by the transfer agent with the depositary agent) and the Company
hereby directs the depositary agent to comply with such request, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 14, (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, promptly deliver such
cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) shall be made (x) in cash or by certified
bank check or bank draft payable to the order of the Company, or (y) at the
election of the Company with respect to all exercisable Rights by delivery of a
certificate or certificates (with appropriate stock powers executed in blank
attached thereto) evidencing a number of Common Shares equal to the then
Purchase Price divided by the closing price (as determined pursuant to Section
11(d) hereof) per Common Share on the Trading Day (as hereinafter defined)
immediately preceding the date of such exercise, or (z) in the event the Company
permits payment with Common Shares, a combination thereof. In the event the
Company elects to accept Common Shares in payment of the Purchase Price, it
shall notify the Rights Agent of such election and of the closing price per
Common Share on the Trading Date immediately preceding the date of exercise to
which such election relates. In the event that the Company is obligated to issue
other securities of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
d. In case the registered holder of any Rights Certificate shall
exercise fewer 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 to the registered holder of such Rights Certificate or to
his duly authorized assigns, subject to the provisions of Section 14 hereof.
e. Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of the Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring
11
12
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee before or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
that 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 be void without any further action and any
holder of such Rights shall thereafter have no right whatsoever with respect to
such Rights (including, without limitation, the right to exercise such Rights)
under any provision of this Agreement or otherwise. No Rights Certificate shall
be issued pursuant to Section 3 that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof; no Rights Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Rights Certificate delivered to the Rights Agent for transfer to an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
shall be canceled. The Company shall use all reasonable efforts to insure that
the provisions of this Section 7(e) and Section 4(b) are complied with, but
shall have no liability to any holder of Rights Certificates or any other Person
as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
f. Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Rights Certificates to the Company.
Section 9. Reservation and Availability of Common Shares.
a. Subject to Section 11(a)(iii) of this Agreement, the Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued
12
13
Common Shares or any authorized and issued Common Shares held in treasury (and,
following the occurrence of a Triggering Event, out of any other securities) the
number of Common Shares (and, following the occurrence of a Triggering Event,
out of any other securities) that, as provided in this Agreement, will be
sufficient to permit the exercise in full of all outstanding Rights.
b. In the event the Common Shares (and, following the occurrence of a
Triggering Event, any other securities) issuable and deliverable upon the
exercise of Rights are listed on any national securities exchange, the Company
shall use its best efforts to cause, from and after such time as the Rights
become exercisable (but only to the extent that it is reasonably likely that the
Rights will be exercised), all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
c. The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of the
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined pursuant to this
Agreement (including in accordance with Section 11(a)(iii) hereof), a
registration statement under the Securities Act of 1933 (the "Act"), with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, (iii) cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Act) until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities, and (B) the Final Expiration Date, and (iv)
obtain such regulatory approvals as may be necessary for it to issue securities
purchasable upon the exercise of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not to
exceed 90 days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective or to obtain any
other required regulatory approval in connection with the exercisability of the
Rights. Upon any such suspension, the Company shall issue a public announcement
stating, and notify the Rights Agent, that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. In addition, if the Company shall determine
that a registration statement is required following the Distribution Date, the
Company may temporarily suspend the exercisability of the Rights until such time
as a registration statement has been declared effective. In the event any Right
is exercised prior to the occurrence of the Section 11(a)(ii) Event or a Section
13 Event, the Company may defer for up to 90 days the issuance of Common Shares
upon such exercise in order to obtain any necessary regulatory approval. If,
within 90 days after such exercise of any Right, the Company is unable to obtain
any required regulatory approval for the issuance of the Common Shares, or if
the Company is otherwise unable to issue the Common Shares under the terms of
its Certificate of Incorporation or for any other reason, then the Company shall
substitute for the Common Shares otherwise issuable upon exercise of the Right
(1) cash, (2) a reduction in the Purchase Price, (3) other equity securities of
the Company, except to the extent that the Company has not obtained any
necessary regulatory approval for such issuance, (4) debt securities of the
Company, except to the extent that the Company has not obtained any necessary
regulatory approval for such
13
14
issuance, (5) other assets, or (6) any combination of the foregoing, having an
aggregate value equal to the Current Market Price (as defined in Section 11(d))
of the Common Shares for which such Right is exercisable, where such aggregate
value has been determined by the Board of Directors of the Company based upon
the advice of a nationally recognized investment banking firm selected by the
Board of Directors of the Company. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained or the exercise thereof shall not be permitted under applicable
law.
d. The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all one one-thousandths of a Common Share (and,
following the occurrence of a Triggering Event, any other securities) delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
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 certificate for a number of one one-thousandths of a Common Share (other
securities, as the case may be) upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for a
number of one one-thousandths of a Common Share (or other securities, as the
case may be) in respect of a name other than that of, the registered holder of
the Rights Certificate evidencing Rights surrendered for exercise or to issue or
deliver any certificates or depositary receipts for a number of one
one-thousandths of a Common Share (or other securities, as the case may be) upon
the exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
Section 10. Common Shares Record Date. Each person in whose name any
certificate for a number of one one-thousandths of a Common Share is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Common Shares (or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Common Shares (or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Common Shares (or other
securities, as the case may be) transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Rights Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
14
15
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
a. i. In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the outstanding Common
Shares into a smaller number of Common Shares or (D) issue any shares of its
capital stock in a reclassification of the Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number and kind of
shares of capital stock issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the aggregate number
and kind of shares of capital stock which, if such Right had been exercised
immediately prior to such date and at a time when the Common Shares transfer
books of the Company were open, he would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
If an event occurs which would require an adjustment under both Section 11(a)(i)
and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii).
ii. Subject to Section 24 of this Agreement, in the event any
Person shall become an Acquiring Person (except pursuant to a tender offer made
in the manner prescribed by Section 14(d) of the Exchange Act and the rules and
regulations promulgated thereunder; provided, however, that (a) such tender
offer shall provide for the acquisition of all of the outstanding Common Shares
held by any Person other than such Acquiring Person and its Associates or
Affiliates for cash and (b) a majority of the Continuing Directors shall have
determined that such tender offer is fair), then proper provision shall be made
so that each holder of a Right, except as provided below and in Section 7(e),
shall thereafter have the right to receive, upon exercise thereof at the then
current Purchase Price, in accordance with the terms of this Agreement, in lieu
of a number of one one-thousandths of a Common Share, such number of Common
Shares as shall equal the result obtained by multiplying
(A) the then current Purchase Price by the then number
of one one-thousandths of a Common Share for which a Right was exercisable
immediately prior to the occurrence of the Section 11(a)(ii) Event, and dividing
that product (which product, following such occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by
(B) 50% of the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of the Common Shares (determined
pursuant to Section 11(d))
15
16
on the date of such occurrence (such number of shares, the "Adjustment Shares");
provided, that the Purchase Price and the number of Adjustment Shares shall be
further adjusted as provided in this Agreement to reflect any events occurring
after the date of such occurrence. Notwithstanding this Section 11(a)(ii), if
the transaction that would otherwise give rise to the forgoing adjustment is
also subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii).
iii. In the event that the number of Common Shares authorized by
the Company's Certificate of Incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights and the authorized
and issued shares held in its treasury and not reserved for issuance for
purposes other than upon exercise of the Rights is not sufficient to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) of this Section 11(a), or if any necessary regulatory approval for such
issuance has not been obtained by the Company, the Company shall: (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon the exercise
of a Right (the "Current Value") over (2) the Purchase Price (such excess, the
"Spread"), and (B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon exercise of the Rights, (1) cash, (2)
a reduction in the Purchase Price, (3) Common Shares or other equity securities
of the Company (including, without limitation, shares or units of shares of
preferred stock (if then authorized by the Company's Certificate of
Incorporation) which the Board of Directors of the Company has deemed to have
the same value as Common Shares (such shares or units of shares of preferred
stock are herein called "common stock equivalents")), except to the extent that
the Company has not obtained any necessary regulatory approval for such
issuance, (4) debt securities of the Company, except to the extent that the
Company has not obtained any necessary regulatory approval for such issuance,
(5) other assets, or (6) any combination of the foregoing, having an aggregate
value equal to the Current Value, where such aggregate value has been determined
by the Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the
Company; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days following
the later of (x) the first occurrence of the Section 11(a)(ii) Event and (y) the
date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated, subject to
Section 7(e), to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available), except to the extent that the Company has not obtained any necessary
regulatory approval for such issuance, and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the 30-day period set forth above may be
extended to the extent necessary, but not more than 90 days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval
for the authorization of such additional shares or take action to obtain such
regulatory approval (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need to be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such
16
17
action shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares, to take any action to
obtain any required regulatory approval and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Shares shall be the Current Market Price (as determined
pursuant to Section 11(d) hereof) per share of the Common Shares on the Section
11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be
deemed to have the same value as the Common Shares on such date.
b. In the event the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Common Shares entitling them (for
a period expiring within 45 calendar days after such record date) to subscribe
for or purchase Common Shares (or securities convertible into Common Shares) at
a price per Common Share (or having a conversion price per share, if a security
convertible into Common Shares) less than the Current Market Price per share of
the Common Shares (as defined in Section 11(d)) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares so to be offered
(or the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such Current Market Price and the denominator of
which shall be the number of Common Shares outstanding on such record date plus
the number of additional Common Shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which may be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Common Shares owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed;
and in the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
c. In the event the Company shall fix a record date for the making of a
distribution to all holders of the Common Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than a cash dividend (provided if such cash dividend occurs after the
Distribution Date, only if such cash dividend is approved by a majority of
Continuing Directors) or a dividend payable in Common Shares) or subscription
rights or warrants (excluding those referred to in Section 11(b)), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to
17
18
such record date by a fraction, the numerator of which shall be the Current
Market Price per share of the Common Shares (as defined in Section 11(d)) on
such record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to one Common Share and the denominator of which shall be
such Current Market Price per share of the Common Shares; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Purchase Price shall again be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.
d. For the purpose of any computation hereunder (other than computations
made pursuant to Section 11(a)(iii) hereof), the "Current Market Price" per
share of the Common Shares on any date shall be deemed to be the average of the
daily closing prices per share of such Common Shares for the 30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of the Common Shares on any date
shall be deemed to be the average of the daily closing prices per share of such
Common Shares for the ten consecutive Trading Days immediately following such
date; provided, however, that in the event that the Current Market Price per
share of the Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the expiration of the requisite 30 Trading Days or ten Trading Days, as set
forth above, after the ex-dividend date for such dividend or distribution or the
record date for such subdivision, combination or reclassification, then, and in
each such event, the Current Market Price shall be appropriately adjusted to
reflect the Current Market Price per Common Share equivalent. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Common Shares are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Shares
are listed or admitted to trading or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Common Shares are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Shares selected by the
Board of Directors of the Company. If on any such date no market maker is making
a market in the Common Shares, the fair value of such shares on such date as
determined in good faith by the Board of Directors of the Company shall be used.
The term "Trading Day" shall mean a day on which the principal national
securities exchange
18
19
on which the Common Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not listed or admitted to
trading on any national securities exchange, a Business Day.
e. Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share, as the
case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
f. If, as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock of the Company other than
Common Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Common Shares
shall apply on like terms to any such other shares.
g. All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
Common Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
h. Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price per one one-thousandth of a Common
Share, that number of one one-thousandths of a Common Share (calculated to the
nearest one one-millionth of a Common Share) obtained by (i) multiplying (x) the
number of one one-thousandths of a share covered by a Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
i. The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a Common Share purchasable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment in the number of Rights shall be exercisable for the number of one
one-thousandths of a Common Share for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one
19
20
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement, and notify the Rights Agent, of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Rights Certificates have been issued, shall be at least ten days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
j. Irrespective of any adjustment or change in the Purchase Price or the
number of one one-thousandths of a Common Share issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one one-thousandth of a share and the
number of one-thousandths of a share which were expressed in the initial Rights
Certificates issued hereunder.
k. Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-thousandth of the then par value, if any, of the
number of one one-thousandths of a Common Share 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 Common Shares at such adjusted Purchase
Price.
l. In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date of the
number of one one-thousandths of a Common Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-thousandths of a Common Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due xxxx or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
m. Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments
20
21
expressly required by this Section 11, as and to the extent that in their good
faith judgment the Board of Directors of the Company shall determine to be
advisable in order that any consolidation or subdivision of the Common Shares,
issuance wholly for cash of any of the Common Shares at less than the Current
Market Price, issuance wholly for cash of Common Shares or securities which by
their terms are convertible into or exchangeable for Common Shares, stock
dividends or issuance of rights, options or warrants referred to in this Section
11, hereafter made by the Company to holders of its Common Shares shall not be
taxable to such shareholders.
n. Anything herein to the contrary notwithstanding, in the event that at
any time after the date of this Agreement and prior to the Distribution Date,
the Company shall (i) declare or pay any dividend on the Common Shares payable
in Common Shares or (ii) effect a subdivision, combination or consolidation of
the Common Shares (by reclassification or otherwise than by payment of dividends
in Common Shares) into a greater or lesser number of Common Shares, then in any
such case (A) the number of one one-thousandths of a Common Share purchasable
after such event upon proper exercise of each Right shall be determined by
multiplying the number of one one-thousandths of a Common Share so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of Common Shares outstanding immediately before such event and the
denominator of which is the number of Common Shares outstanding immediately
after such event, and (B) each Common Share outstanding immediately after such
event shall have issued with respect to it that number of Rights which each
Common Share outstanding immediately prior to such event has issued with respect
to it. The adjustments provided for in this Section 11(n) shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with the transfer agent for the Common Shares a
copy of such 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 and shall not be deemed to have knowledge of any such
adjustment unless and until it shall have received such a certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
a. In the event that, following the Share Acquisition Date, directly or
indirectly, (i) the Company shall consolidate with, or merge with and into, any
other Person and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) any Person shall consolidate
with the Company, or merge with and into the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such merger, all or part of the outstanding Common Shares shall
be changed into or exchanged for stock or other securities of any other Person
(or the Company) or cash or any other property, or (iii) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or more transactions, assets or
21
22
earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons, then,
and in each such case, proper provision shall be made so that (A) each holder of
a Right (except as otherwise provided in Section 7(e) hereof) shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price, in accordance with the terms of this Agreement, such number of
validly authorized and issued, fully paid, nonassessable and freely tradeable
shares of Common Shares of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-thousandths
of a Common Share for which a Right is then exercisable (without taking into
account any adjustment previously made pursuant to Section 11(a)(ii)) and
dividing that product (which, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by (2) 50% of the Current Market Price per share of
the Common Shares of such Principal Party on the date of consummation of such
Section 13 Event; (B) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement; (C) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (D) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Shares in accordance
with Section 9) in connection with the consummation of any such transaction as
may be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to its Common Shares
thereafter deliverable upon the exercise of the Rights; and (E) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
b. "Principal Party" shall mean
i. in the case of any transaction described in clause (i) or (ii)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Shares of the Company are converted in such merger
or consolidation, and if no securities are so issued, the Person that is the
other party to such merger or consolidation; and
ii. in the case of any transaction described in clause (iii) of
the first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any such case, (1) if
the Common Shares of such Person are not at such time and have not been
continuously over the preceding 12-month period registered under Section 12 of
the Exchange Act, and such Person is a direct or indirect Subsidiary of another
Person the Common Shares of which is and has been so registered, "Principal
Party" shall refer to such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Shares
of two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value.
c. The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Shares which have not
22
23
been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the Company
and such Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any Section 13 Event, the Principal Party will
i. prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of the Rights
on an appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date; and
ii. will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act. The foregoing provisions set forth in this Section 13 shall
similarly apply to successive mergers or consolidations or sales or other
transfers. In the event that a Section 13 Event shall occur at any time after
the occurrence of a Section 11(a)(ii) Event, the Rights which have not
theretofore been exercised shall thereafter become exercisable in the manner
described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
a. The Company shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
b. The Company shall not be required to issue fractions of Common Shares
(other than fractions which are integral multiples of one one-thousandths of a
Common Share) upon
23
24
exercise of the Rights or to distribute certificates which evidence fractional
Common Shares (other than fractions which are integral multiples of one
one-thousandths of a Common Share). Fractions of Common Shares in integral
multiples of one one-thousandths of a Common Share may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
Beneficial Owners of the Common Shares. In lieu of fractional Common Shares the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Common Share. For purposes of this
Section 14(b), the current market value of a Common Share shall be the closing
price of a Common Share (as determined pursuant to the second sentence of
Section 11(d)) for the Trading Day immediately prior to the date of such
exercise.
c. The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 15. Rights of Action. All rights of action in respect to this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), 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 Shares), may, on his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
Section 16. Agreement of Right 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 the Common Shares;
b. after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
c. subject to Section 6 and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute
24
25
owner thereof and of the Rights evidenced thereby (notwithstanding any notations
of ownership or writing on the Rights Certificates or the associated Common
Shares certificate made by anyone other than the Company or the Rights Agent)
for all purposes whatsoever, and neither the Company nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall be required to be
affected by any notice to the contrary; and
d. notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. 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 Common Shares or any
other securities of the Company which may at any time be issuable upon the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the acceptance, exercise and performance of
its duties hereunder. The Company also agrees to indemnify the Rights Agent, its
officers, directors, employees and agents for, and to hold each of them harmless
against, any loss, liability, or expense, incurred without gross negligence, bad
faith or willful misconduct on the part of the Rights Agent or such other
indemnified party, for anything done, suffered or omitted by the Rights Agent or
such other indemnified party in connection with the acceptance and
administration of this Agreement or the exercise or performance of its duties
hereunder, including the costs and expenses of defending against any claim of
liability in the premises (including reasonable counsel fees and expenses).
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 or the exercise or performance of its
duties hereunder in reliance upon any Rights Certificate or certificate for the
Common Shares 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
25
26
be signed, executed and, where necessary, verified or acknowledged, by the
proper person or persons, or otherwise upon the advice of its counsel as set
forth in Section 20 hereof.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of the action.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, a successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement 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 written advice or opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken, suffered or omitted in good faith by it under the
provisions of this Agreement in reliance upon such written advice or opinion.
b. Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation,
26
27
the identity of any Acquiring Person and the determination of "Current Market
Price") be proved or established by the Company prior to taking, suffering or
omitting any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by a person
reasonably believed by the Rights Agent to be any one of the President or any
Executive Vice President or the Chief Financial Officer of the Company and
delivered to the Rights Agent; and such certificate shall be full and complete
authorization to the Rights Agent for any action taken, suffered or omitted in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
c. The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own gross negligence, bad faith or willful misconduct.
d. The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement, the Summary of
Rights or in the Rights Certificates (except its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
e. The Rights Agent shall not be under any responsibility in respect of
the validity of any provision 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 change in the exercisability of the Rights
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in this Agreement, or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Shares or other securities to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
Common Shares or other securities will, when issued, be validly authorized and
issued, fully paid and nonassessable.
f. The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
g. The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be any one of the President or
any Executive Vice President of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken, suffered or omitted to be taken in good faith by it under
the provisions of this Agreement in reliance upon instructions of any such
officer. At any time the Rights Agent may apply to the Company for written
instructions with respect to any matter arising in connection with the Rights
Agent's duties and obligations arising under this Agreement. Such application by
the Rights Agent for written instructions from the Company
27
28
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken and the Rights Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall not be less than three
Business Days after the Company receives such application, without the Company's
consent) unless, prior to taking or initiating such action, the Rights Agent has
received written instructions in response to such application specifying the
action to be taken or omitted.
h. The Rights Agent and any shareholder, 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 such attorneys or
agents or for any loss to the Company resulting from any such 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. If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
l. The Rights Agent undertakes only the express duties and obligations
imposed on it by this Agreement and no implied duties or obligations shall be
read into this Agreement against the Rights Agent.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days notice in writing mailed to the Company and to the transfer agent
of the Common Shares 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 the transfer
agent of the Common Shares 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
28
29
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 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 States of New York or 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 States of New York or California), in good standing, having
an office in the States of New York or 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 $50
million. 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 the transfer agent of the Common Shares,
and mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall, with
respect to Common Shares so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement (so long as such options, plan
or arrangement were granted or established, as the case may be, prior to the
Distribution Date), or upon the exercise, conversion or exchange of securities
issued by the Company after the date hereof and prior to the Distribution Date,
and (b) may, in any other case, if deemed necessary or appropriate by the Board
of Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale; provided,
however, that (i) no such Rights Certificate shall be issued if, and to the
extent that, the Company shall be advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or
the Persons to whom such Rights Certificate would be issued, and (ii) no such
Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
29
30
Section 23. Redemption and Termination.
a. The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth day following the
Share Acquisition Date (or, if the Share Acquisition Date shall have occurred
prior to the Record Date, the close of business on the fifteenth day following
the Record Date), or (ii) the Final Expiration Date, redeem all but not less
than all the then outstanding Rights at a redemption price of $.01 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price") and the Company
may, at its option, pay the Redemption Price either in Common Shares (based on
the "Current Market Price," as defined in Section 11(d)(i) hereof, of the Common
Shares at the time of redemption) or cash; provided, however, if the Board of
Directors of the Company authorizes redemption of the Rights in either of the
circumstances set forth in clauses (i) and (ii) below, then there must be
Continuing Directors then in office and such authorization shall require the
concurrence of a majority of such Continuing Directors: (i) such authorization
occurs on or after the time a Person becomes an Acquiring Person, or (ii) such
authorization occurs on or after the date of a change (resulting from a proxy or
consent solicitation) in a majority of the directors in office at the
commencement of such solicitation if any Person who is a participant in such
solicitation has stated (or, if upon the commencement of such solicitation, a
majority of the Board of Directors of the Company has determined in good faith)
that such Person (or any of its Affiliates or Associates) intends to take, or
may consider taking, any action which would result in such Person becoming an
Acquiring Person or which would cause the occurrence of a Triggering Event.
b. Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights (such action being adopted in the manner
required by paragraph (a) above), evidence of which shall have been filed with
the Rights Agent and without any further action and without any notice, the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly after
the action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the holders
of the then outstanding Rights by mailing such notice to all such holders at
each holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the transfer
agent for the Common Shares. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made.
Section 24. Exchange.
a. With the affirmative vote of a majority of the Continuing Directors,
the Company may at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights for Common
Shares at an exchange ratio of one Common Share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Company shall
not be empowered to effect such exchange at any time after any Person (other
than the Company,
30
31
any Subsidiary of the Company, any employee benefit plan of the Company or any
such Subsidiary, or any entity holding Common Shares for or pursuant to the
terms of any such plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
b. Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights will be exchanged. Any partial exchange
shall be effected pro rata based on the number of Rights held by each holder of
Rights.
c. In any exchange pursuant to this Section 24, the Company, at its
option, may substitute preferred shares (if then authorized by the Company's
Certificate of Incorporation), with dividend, liquidation and voting rights per
share comparable to a Common Share, for Common Shares exchangeable for Rights,
at the initial rate of such preferred share for each Common Share.
d. In the event that there shall not be sufficient Common Shares
authorized but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take all such action as may
be necessary to authorize additional Common Shares for issuance upon exchange of
the Rights.
e. The Company shall not be required to issue fractions of Common Shares
or to distribute certificates which evidence fractional Common Shares. In lieu
of such fractional Common Shares, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
subsection (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately after the public
announcement by the Company that an exchange is to be effected pursuant to this
Section 24.
Section 25. Notice of Certain Events. In case the Company shall propose
(a) to pay any dividend payable in stock of any class to the holders of its
Common Shares or to make any other distribution to the holders of its Common
Shares (other than a cash dividend (provided if such cash dividend occurs after
the Distribution Date, only if such cash dividend is approved by a majority of
Continuing Directors), or (b) to offer to the holders of its Common Shares
rights or warrants to subscribe for or to purchase any additional Common Shares
or shares of stock of
31
32
any class or any other securities, rights or options, or (c) to effect any
reclassification of its Common Shares (other than a reclassification involving
only the subdivision of outstanding Common Shares), or (d) to effect any
consolidation or merger into or with any other Person, or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, or (e) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause
(a) or (b) above at least 10 days prior to the record date for determining
holders of the Common Shares for purposes of such action, and in the case of any
such other action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares, whichever shall be the earlier.
In case the Section 11(a)(ii) Event shall occur, then, in any such case,
the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and all
references in the preceding paragraph to Common Shares shall be deemed
thereafter references to other securities, if appropriate.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Rainbow Technologies, Inc.
00 Xxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, President
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
U.S. Stock Transfer Corporation
0000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx (Xxxxx) Xxxxxx, Vice President
32
33
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.
Section 27. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company may and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing Common Shares. From and after the Distribution Date and subject to
the penultimate sentence of this Section 27, the Company may and the Rights
Agent shall, if the Company so directs, supplement or amend this Agreement
without the approval of any holders of Rights Certificates in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
shorten or lengthen any time period hereunder (which lengthening or shortening,
following the first occurrence of an event set forth in clauses (i) and (ii) of
the proviso to Section 23(a) hereof, shall be effective only if there are
Continuing Directors and shall require the concurrence of a majority of such
Continuing Directors), or (iv) 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 or an Affiliate or Associate of an Acquiring Person);
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence,
a. a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable, or
b. any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than any Acquiring Person and its Affiliates and
Associates). Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one-thousandths of a Common Share for which a Right is
exercisable. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of Common
Shares (other than an Acquiring Person). Notwithstanding anything contained in
this Agreement to the contrary, no supplement or amendment that changes the
rights and duties of the Rights Agent under this Agreement shall be effective
without the consent of the Rights Agent.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
33
34
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company (with, where specifically provided for
herein, the consent of a majority of the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board (with, where specifically
provided for herein, the consent of a majority of the Continuing Directors) or
to the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Agreement, (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not redeem the Rights or to amend the Agreement) and
(iii) make all factual determinations deemed necessary or advisable for the
administration of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, the Common Shares) 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 Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement, or any portion thereof, 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, including any portions of any thereof which are not held to be
invalid, void or unenforceable, shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Agreement to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company, with
the consent of a majority of the Continuing Directors after the Distribution
Date, determines in its good faith business judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the close of business on the tenth day
following the date of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement, each Right, and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such state.
34
35
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
RAINBOW TECHNOLOGIES, INC.
By: _________________________________
Xxxxxx X. Xxxxxx, President
U.S. STOCK TRANSFER CORPORATION
By: _________________________________
Xxxxxxx (Xxxxx) Xxxxxx,
Vice President
35
