EXHIBIT 1.2
ELECTRONIC CLEARING HOUSE, INC.
AND
OTR, INC.
RIGHTS AGENT
AMENDED AND RESTATED RIGHTS AGREEMENT
JANUARY 29, 2003
TABLE OF CONTENTS
SECTION 1. CERTAIN DEFINITIONS
SECTION 2. APPOINTMENT OF RIGHTS AGENT
SECTION 3. ISSUE OF RIGHTS CERTIFICATES
SECTION 4. FORM OF RIGHTS CERTIFICATES
SECTION 5. COUNTERSIGNATURE AND REGISTRATION
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES
SECTION 9. AVAILABILITY OF PREFERRED STOCK
SECTION 10. PREFERRED STOCK RECORD DATE
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER
OF RIGHTS
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES
SECTION 15. RIGHTS OF ACTION
SECTION 16. AGREEMENT OF RIGHTS HOLDERS
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER
SECTION 18. CONCERNING THE RIGHTS AGENT
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
SECTION 20. DUTIES OF RIGHTS AGENT
SECTION 21. CHANGE OF RIGHTS AGENT
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES
SECTION 23. REDEMPTION
SECTION 24. EXCHANGE
SECTION 25. NOTICE OF CERTAIN EVENTS
SECTION 26. NOTICES
SECTION 27. SUPPLEMENTS AND AMENDMENTS
SECTION 28. REGISTRATION OF SECURITIES
SECTION 29. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS
SECTION 30. SUCCESSORS
SECTION 31. BENEFITS OF THIS AGREEMENT
SECTION 32. SEVERABILITY
SECTION 33. GOVERNING LAW
SECTION 34. COUNTERPARTS
SECTION 35. DESCRIPTIVE HEADINGS
Exhibit A: Form of Certificate of Designation for Series A Junior
Participating Preferred Shares
Exhibit B: Form of Rights Certificate
Exhibit C: Summary of Rights to Purchase Preferred Shares
AMENDED AND RESTATED RIGHTS AGREEMENT
THIS AMENDED AND RESTATED RIGHTS AGREEMENT (the "Agreement), dated as of January
29, 2003 (the "Effective Date"), is between Electronic Clearing House, Inc., a
Nevada corporation ("Company"), and OTR, Inc. (formerly Oxford Transfer and
Registrar), an Oregon corporation ("Rights Agent").
A. Pursuant to that certain Rights Agreement, dated September 30, 1996 by
and between the Company and the Rights Agent (the "Original Agreement"), the
Board of Directors of the Company authorized, declared and distributed a
dividend of one preferred share purchase right ("Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding on September
30, 1996 ("Record Date"), each Right representing the right to purchase four
one-hundredths of a Preferred Stock share (as hereinafter defined), and further
authorized and directed the issuance of one Right with respect to each Common
Stock share that has or will become outstanding between the Record Date and the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date (as such terms are hereinafter defined).
B. This Agreement amends and is a complete restatement of the Original
Agreement, as so amended, and has been authorized and approved by the Board of
Directors of the Company. It is adopted, in part, to clarify the effects on each
Right of (i) dividends payable in common stock and (ii) subdivisions,
combinations or consolidations of Common Stock as the same have been declared
and implemented by the Company prior to the Effective Date. With respect to each
Right, the effect of this Agreement shall be retroactive to the Record Date so
that this Agreement applies to all dividends, subdivisions, combinations or
consolidations of Common Stock that have occurred prior to the Effective Date.
C. Concurrently with this Agreement, the Board of Directors of the Company
has authorized and declared, and hereby distributes as of the Effective Date, a
second dividend of one preferred share purchase right (the "Second Right") for
each share of Common Stock of the Company outstanding on the Effective Date,
each Second Right representing the right to purchase four one-hundredths of a
Preferred Stock shares, upon the terms and subject to the conditions herein set
forth, and further authorizes and directs the issuance of one Second Right with
respect to each Common Stock share that has or will become outstanding between
the Effective Date and the earliest of the Distribution Date, the Redemption
Date and the Final Expiration Date. Other than the applicable Purchase Price and
the Final Expiration Date, a Second Right shall have the same attributes in all
respects as a Right, as such attributes of such Right have been adjusted up to
the Effective Date.
Accordingly, 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 twenty-percent (20%) or more of the Common
Stock of the Company then outstanding, but shall not include the Company, any
Subsidiary (as such term is hereinafter defined) of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or of any
entity holding Common Stock for or pursuant to the terms of any such plan,
provided, however, that if a Person is the Beneficial Owner at the close of
business on the date of this Agreement of twenty-percent (20%) or more of the
Common Stock of the Company, such Person shall not be deemed an Acquiring Person
unless and until such Person acquires any additional Common Stock in any manner
other than pursuant to a stock dividend, stock split, recapitalization, or
similar transaction that does not affect the percentage of outstanding Common
Stock. Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result of an acquisition of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to twenty-percent (20%) or more of the
Common Stock of the Company then outstanding; provided, however, that if a
Person shall become the Beneficial Owner of twenty-percent (20%) or more of the
Common Stock of the Company then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Stock of the Company, then such Person
shall be deemed to be an "Acquiring Person." Notwithstanding the foregoing, if a
majority of the Board of Directors then in office determines in good faith that
a Person who should be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an Acquiring Person, as
defined pursuant to the foregoing provisions of this paragraph (a), then such a
Person shall not be deemed to be an "Acquiring Person" for any purposes to this
Agreement.
(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 ("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 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 (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or from and after, but only after, the exercise of
conversion rights, exchange rights, rights [other than the Rights or the Second
Rights at any time prior to the occurrence of a Flip-in-Event, but thereafter
including the Rights and the Second Rights acquired from and after the
Distribution Date (as defined in Section 3(a) below)], warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the Beneficial
Owner of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; 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 promulgated under 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 with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding whether or not in
writing (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent contemplated
by the proviso in Section 1(d)(ii)(B)) or disposing of any securities of the
Company; provided, however, that in no case shall an officer or director of the
Company be deemed the Beneficial Owner of securities held of record by the
trustee of any employee benefit plan of the Company or any Subsidiary of the
Company for the benefit of any employee of the Company or any Subsidiary of the
Company, other than the officer or director, by reason of any influence that
such officer or director may have over the voting of the securities held in such
plan.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder. Furthermore, directors and officers of the
Company shall not be deemed to beneficially own each others' Common Stock solely
due to their status as a director or officer of the Company.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 p.m., Los Angeles
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 p.m., Los Angeles time, on the next succeeding Business Day.
(g) "Common Stock" shall mean the Common Stock, $.01 par value, of the
Company (as such term is defined in the introductory paragraphs above) or any
other shares of capital stock of the Company into which the Common Stock shall
be reclassified or changed, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the shares of capital stock of
such Person if such Person is a corporation, of any class or series, or units of
equity interests in such Person, if such Person is not a corporation, of any
class or series, the term of which do not limit, as a fixed amount and not
merely in proportional terms, the amount of dividend or income payable or
distributable on such class or series upon any voluntary or involuntary
liquidation, dissolution, or winding up of such Person and do not provide that
such class or series is subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; provided, however, that if at any
time there shall be more than one such class or series of capital stock or
equity interests of such Person, "Common Stock" of such Person shall include all
such classes and series substantially in the proportion of the total number of
shares or other units of each class or series outstanding at such time.
(h) "Current Value" shall have the meaning set forth in Section 11(a)(iv)
hereof.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(k) "Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
(l) "Person" shall mean any individual, firm, partnership, joint venture,
corporation or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(m) "Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, no par value, of the Company having the rights and preferences
set forth in the Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock attached hereto as Exhibit A.
(n) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(o) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(p) "Registered Common Stock" shall have the meaning set forth in Section
13(b)(ii) hereof.
(q) "Stock Acquisition Date" shall mean the first date of public
announcement, which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act, by the
Company or an Acquiring Person that an Acquiring Person has become such or such
earlier date as a majority of the directors of the Company shall become aware of
the existence of an Acquiring Person.
(r) "Spread" shall have the meaning set forth in Section 11(a)(iv) hereof.
(s) "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.
(t) "Substitution Period" shall have the meaning set forth in Section
11(a)(iv) hereof.
(u) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
SECTION 2. APPOINTMENT OF RIGHTS AGENT
The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company may from time to time appoint such
Co-Rights Agent as it may deem necessary or desirable. In the event the Company
appoints one or more Co-Rights Agents, the respective duties of the Rights Agent
and any Co-Rights Agents shall be as the Company shall determine.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES
(a) Until the earlier of the close of business on (i) the tenth day after
the Stock Acquisition Date, or (ii) the tenth Business Day (or such later date
as may be determined by action of the Board of Directors prior to such time as
any Person becomes an Acquiring Person) after the date of the commencement by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Stock for or pursuant to the terms of any such plan) of, or of
the first public announcement of the intention of any person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any entity holding Common Stock for or
pursuant to the terms of any such plan) to commence, a tender or exchange offer
the consummation of which would result in any Person becoming the Beneficial
Owner of Common Stock aggregating twenty-percent (20%) or more of the then
outstanding Common Stock, irrespective of whether any shares of Common Stock are
actually purchased pursuant to such offer (including any such date which is
after the Record Date (with respect to Rights) and the Effective Date (with
respect to Second Rights) and prior to the issuance of the Rights or the Second
Rights, as the case may be, the earliest of such dates being herein referred to
as the "Distribution Date"), (x) the Rights/Second Rights will be evidenced,
subject to the provisions of Section 3(b) hereof, by the certificates for Common
Stock registered in the names of the holders thereof (which certificates shall
also be deemed to be Rights Certificates) and not be separate Rights
Certificates, and (y) the right to receive Rights Certificates will be
transferable only in connection with the transfer of Common Stock. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate, in substantially the form of
Exhibit B attached hereto ("Rights Certificate"), evidencing one Right or Second
Right, as the case may be, for each Common Stock share so held. As of the
Distribution Date, the Rights and Second Rights will be evidenced solely by such
Rights Certificates.
(b) On the Effective Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form of Exhibit C attached hereto ("Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of Common Stock as of
the close of business on the Record Date, at the address of such holder shown on
the records of the Company. With respect to certificates for Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights and
Second Rights will be evidenced by such certificates registered in the names of
the holders thereof regardless of whether a copy of the Summary of Rights is
attached thereto. Until the Distribution Date (or the earlier of the Redemption
Date or the Final Expiration Date), the surrender for transfer of any
certificate for Common Stock outstanding on the record date, with or without a
copy of the Summary of Rights attached thereto, shall also constitute the
transfer of the Rights and Second Rights associated with the Common Stock
represented thereby.
(c) Certificates for shares of Common Stock which become outstanding,
including, without limitation, reacquired shares of Common Stock referred to in
the last sentence of this paragraph (c), after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date shall not require any legend with respect to the Rights or Second Rights.
The Rights Agent shall send a copy of the Summary of Rights with such
certificates.
With respect to such certificates, until the earlier of the Distribution
Date or Final Expiration Date, the Rights and Second Rights associated with the
Common Stock represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificates
shall also constitute the transfer of the Rights and Second Rights associated
with the Common Stock represented thereby. In the event that the Company
purchases or acquires any Common Stock after the Record Date but prior to the
Distribution Date, the Company shall not be entitled to exercise any Rights or
Second Rights associated with such Common Stock while they are not outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES
(a) The Rights Certificates, and the forms of election to purchase
Preferred Stock and of assignment to be printed on the reverse thereof, shall be
substantially the same as Exhibit B attached 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 consistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or other organization on which the
Rights may from time to time be listed or quoted, or to conform to usage.
Subject to the provisions of Section 22 hereof, the Rights Certificates shall
entitle the holders thereof to purchase such number of one one-hundredth of a
Preferred Stock shares as shall be set forth therein at the price per one
one-hundredth of a Preferred Stock share set forth therein ("Purchase Price"),
but the number of such one one-hundredth of a Preferred Stock shares and the
Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights or Second 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 any such Associate or Affiliate, who
becomes a transferee after the Acquiring Person becomes such, except a
transferee purchasing from or through a nationally recognized broker-dealer
where such transferee and such transferee's Associate and Affiliates do not
collectively acquire, and will not have acquired during the preceding twenty
(20) calendar days, in combination with the proposed transfer, an amount of
Common Stock equal to more than one-percent (1%) of the outstanding shares of
Common Stock, and (iii) a transferee of an Acquiring Person, or any such
Associate or Affiliate, who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights and/or Second Rights
pursuant to either (A) a transfer, whether or not for consideration, from the
Acquiring Person to or on behalf of 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 and/or Second Rights or (B) a transfer which the Board of Directors
otherwise conclude in good faith is part of a plan, arrangement, or
understanding which has a primary purpose or effect of avoidance of Section 7(f)
hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement, or adjustment of any other Rights
Certificate referred to in this sentence, shall not require any legend but the
Rights Agent shall send a copy of the Summary of the Rights Agreement with any
Rights Certificate.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its Chief Executive Officer, its President, or any of
its Executive Vice Presidents, either manually or by facsimile signature, shall
have affixed thereto the Company's seal or a facsimile thereof, and shall be
attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights 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.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights and/or Second 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 14 hereof, at any time after the close
of business on the Distribution Date, and at or prior to the close of business
on the earlier of the Redemption Date or the Final Expiration Date, any Rights
Certificate or Rights Certificates (other than Rights Certificates representing
Rights or Second Rights that have become void pursuant to Section 11(a)(ii)
hereof or that have been exchanged pursuant to Section 24 hereof) 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-hundredth of a Preferred Stock shares as the Rights Certificate or
Rights Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates 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 of the Rights Agent. Thereupon the Rights Agent shall countersign and
deliver to the person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. 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 make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS
(a) The registered holder of any Rights Certificate may exercise the Rights
and/or Second Rights evidenced thereby (except as otherwise provided herein) in
whole or in part at any time after the Distribution Date upon surrender of the
Rights Certificate, with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the principal office of the Rights
Agent, together with payment of the Purchase Price for each one one-hundredth of
a Preferred Stock share as to which the Rights are exercised, at or prior to the
earliest of (i)(A) with respect to Rights, the close of business on September
30, 2006, or (B) with respect to Second Rights, the close of business on January
29, 2013 (each of the foregoing dates is, respectively, referred to herein as
the "Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof ("Redemption Date"), and (iii) the time at which
such Rights are exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Stock
share (i)(A) pursuant to the exercise of a Right shall initially be $0.50, and
(B) pursuant to the exercise of a Second Right shall initially be $0.50, (ii)
shall be subject to adjustment from time to time as provided in Sections 11 and
13 hereof or by amendment consistent with Section 27 hereof, and (iii) shall be
payable in lawful money of the United States of America or otherwise in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights
and/or Second Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased 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 hereof by cash,
certified check, cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i) (A) requisition from any
transfer agent of the Preferred Stock certificates for the number of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) requisition from the depositary
agent depositary receipts representing such number of one one-hundredth of a
Preferred Stock shares as are to be purchased (in which case certificates for
the Preferred Stock 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 to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt, deliver such cash to or upon the order of the
registered holder of such Rights Certificate.
The payment of the Purchase Price, as such amount may be reduced pursuant
to Section 11(a)(iii) hereof, shall be made in cash or by certified check,
cashier's check, bank draft, or money order payable to the order of the Company,
except that if so provided by the Board, the payment of the Purchase Price
following the Flip-In Event and until the first occurrence of an event described
in Section 13 may be made wholly or in part by delivery of a certificate or
certificates, with appropriate stock powers executed in blank attached thereto,
evidencing a number of shares of Common Stock of the Company equal to the then
Purchase Price divided by the closing price, as determined pursuant to Section
11(d) hereof, per share of Common Stock on the Trading Day immediately preceding
the date of such exercise. In the event that the Company is obligated to issue
other securities of the Company, pay cash, or distribute other property pursuant
to Section 11(a)(ii) hereof, subject to Section 14 hereof, the Company will make
all arrangements necessary so that such other securities, cash, or property are
available for distribution by the Rights Agent, if and when appropriate. In
addition, in the case of an exercise of the Rights by a holder pursuant to
Section 11(a)(ii), the Rights Agent shall return such Rights Certificate, or
otherwise indicating thereon that the rights represented by such Rights
Certificate no longer include the rights provided by Section 11(a)(ii) of the
Rights Agreement and if less than all the Rights and/or Second Rights
represented by such Rights Certificate were so exercised, the Rights Agent shall
indicate on the Rights Certificate the number of Rights represented thereby
which continue to include the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Rights Certificate shall exercise,
except pursuant to Section 11(a)(ii), less than all the Rights and/or Second
Rights evidenced thereby, a new Rights Certificate evidencing Rights and/or
Second Rights, as the case may be, equivalent to the Rights and/ or Second
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) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Stock or any
Preferred Stock held in its treasury, the number of Preferred Stock shares that
will be sufficient to permit the exercise in full of all outstanding Rights and
Second Rights in accordance with this Section 7.
(f) Notwithstanding anything in this Agreement to the contrary, from and
after the occurrence of a Flip-In Event, any Rights and/or Second Rights
beneficially owned by (a) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (b) except as provided below or in Section 4(b), a transferee
of an Acquiring Person, or any such Associate or Affiliate, who becomes a
transferee after the Acquiring Person becomes such, and (c) except as provided
below, a transferee of an Acquiring Person, or any such Associate or Affiliate,
who becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights and/or Second Rights pursuant to either
(i) a transfer, whether or not for consideration, from the Acquiring Person to
or on behalf of 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 and/or Second Rights or (ii) a
transfer which the Board of Directors otherwise concludes in good faith is part
of a plan, arrangement, or understanding which has as a primary purpose or
effect of avoidance of this Section 7(f), shall become null and void without any
further action, and any holder of such Rights and/or Second Rights shall
thereupon have no rights to exercise such Rights or such Second Rights under any
provision of this Agreement. A majority of the Board of Directors may in
appropriate circumstances waive application of this Section 7(f) and the
requirements of Section 4(b) to any transfer by an Acquiring Person in
connection with a transfer or series of transfers which cause an Acquiring
Person to become the Beneficial Owner of voting securities having less than
twenty-percent (20%) of the Common Stock of the Company. The Company shall use
all reasonable efforts to insure that the provisions of this Section 7(f) hereof
are complied with, but shall have no liability to any holder of Rights or of
Second Rights for the inability to make any determination with respect to an
Acquiring Person or any of their respective Affiliates, Associates, or
transferees thereunder.
(g) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of any Rights Certificate upon the occurrence of
any purported exercise as set forth in this Section 7 unless the certificate
contained in the appropriate form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise shall have
been completed and signed by the registered holder thereof and the Company shall
have been provided with such additional evidence of the identity of the
Beneficial Owner, or former Beneficial Owner, of such Rights Certificate 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 cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this 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 cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 9. AVAILABILITY OF PREFERRED STOCK
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock (and
following the occurrence of a Flip-In Event, Common Stock or other securities)
or any authorized and issued shares of Preferred Stock (and following the
occurrence of a Flip-In Event, Common Stock or other securities) held in its
treasury, the number of shares of Preferred Stock (and following the occurrence
of a Flip-In Event, Common Stock, or other securities) that, except as provided
in Section 11(a)(iii) and subject to section 7(f) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights and Second Rights.
(b) So long as shares of Preferred Stock (and following at the occurrence
of a Flip-In Event, Common Stock, or other securities) issuable upon the
exercise of the Rights or Second Rights may be listed on any national securities
exchange, the Company shall use its best efforts to cause from and after such
time as the Rights or Second Rights become exercisable, 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 Distribution Date, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the Rights and Second Rights
and the securities purchasable upon exercise of the Rights and Second Rights on
an appropriate form, (ii) cause such registration statement to become effective
as soon as practicable after such filing, and (iii) cause such registration
statement to remain effective with a prospectus at all times meeting the
requirements of the Act until the date of the expiration of the Rights and the
Second Rights. The Company will also take such action as may be appropriate
under the "blue sky" laws of the various states.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Stock delivered upon exercise of
Rights or Second Rights shall, at the time of delivery of the certificates for
such Preferred Stock, 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 to the issuance or delivery of the Rights Certificates or of
any Preferred Stock upon the exercise of Rights or Second Rights. The Company
shall not, however, be required to pay any transfer tax which may be payable in
respect to any transfer or delivery of Rights Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for the
Preferred Stock in a name other than that of, the registered holder of the
Rights Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depositary receipts for Preferred Stock upon the
exercise of any Right or any Second Right 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 reasonable
satisfaction that no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE
Each person in whose name any certificate for Preferred Stock is issued
upon the exercise of Rights or Second Rights shall for all purposes be deemed to
have become the holder of record of the Preferred Stock represented thereby on,
and such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights or Second Rights, as the case may be, was duly
surrendered and payment of the Purchase Price and any applicable transfer taxes
was made; provided, however, that if the date of such surrender and payment is a
date upon which the Preferred Stock transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such shares on,
and such certificates shall be dated, the next succeeding Business Day on which
the Preferred Stock transfer books of the Company are open. Prior to the
exercise of the Rights or Second Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a holder of Preferred
Stock for which the Rights or Second Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF
SHARES OR NUMBER OF RIGHTS
The Purchase Price, the number of Preferred Stock covered by each Right and
each Second Right and the number of Rights and Second Rights outstanding are
subject to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number of Preferred Stock or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock, including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation, and
except as otherwise provided in this Section 11(a) and in Section 7(f) 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 and any Second Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of capital stock which, if such Right or Second Right had been
exercised immediately prior to such date and at a time when the Preferred Stock
transfer books of the Company were open, the holder 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 or one Second Right, as
the case may be, be less than the aggregate par value of the shares of capital
stock of the Company issuable upon exercise of one Right or one Second Right, as
the case may be. 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, at the close of business
on the tenth (10th) day after the Stock Acquisition Date, or such later date as
may be provided by the Board of Directors under the terms of Section 23(a),
("Flip-In Event"), proper provision shall be made so that each holder of a Right
and/or a Second Right, except as provided in Section 7(f) hereof, shall
thereafter have a right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of shares
of Preferred Stock, such number of shares of Common Stock of the Company, such
number of shares being referred to herein as the "Adjustment Stock", as shall
equal the result obtained by (x) multiplying the then current Purchase Price by
the then number of one one-hundredth of a share of Preferred Stock for which a
Right or a Second Right, as the case may be, is then exercisable and dividing
that product by (y) 50% of the current per share market price, determined
pursuant to Section 11(d) hereof, of Common Stock on the date on which the first
of the events listed above in this subparagraph (ii) occurs. In the event that
any Person shall become an Acquiring Person and the Rights or the Second Rights
shall then be outstanding, the Company shall not take any action which would
eliminate or diminish the benefits intended to be afforded by the Rights and/or
the Second Rights.
(iii) The right to buy Common Stock of the Company pursuant to
subparagraph (ii) of this paragraph (a) shall not arise as a result of any
Person becoming an Acquiring Person through a purchase of Common Stock 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 such tender offer shall provide for the acquisition of all of the
outstanding Common Stock held by any Person other than such Person and its
Affiliates or Associates at a price and on terms determined by at least a
majority of the members of the Board of Directors who are not officers of the
Company and who are not representatives, nominees, Affiliates or Associates of
an Acquiring Person, after receiving advice from one or more investment or
financial advisers, to be (A) fair to stockholders from a financial perspective,
taking into account all factors which such members of the Board deem relevant
including, without limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize maximum
value, or (B) otherwise in the best interests of the Company and its
stockholders, employees, customers and communities in which the Company does
business.
(iv) In the event that there shall not be sufficient Common Stock
authorized but unissued to permit the exercise in full of the Rights and/or
Second Rights in accordance with the foregoing subparagraph (ii), the Company
shall; (A) determine the excess of (1) the value of the Adjustment Stock
issuable upon the exercise of a Right or a Second Right, as the case may be,
("Current Value"), over (2) the Purchase Price, such excess being hereinafter
referred to as the "Spread", and (B) with respect to each Right or each Second
Right as the case may be, make adequate provision to substitute for such
unavailable Adjustment Stock, upon payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) other equity securities of the
Company, including without limitation, Preferred Stock, (4) debt securities of
the Company, (5) other assets, or (6) any combination of the foregoing, having,
together with the Adjustment Stock issued upon exercise of such Right or such
Second Right, as the case may be, 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, within
30 days following the date of the Flip-In Event, the Company shall have not made
adequate provision to deliver value pursuant to clause (B) above, then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right or a Second Right and without requiring payment of the Purchase Price,
Common Stock, to the extent such shares are available, and then, if necessary,
cash, which shares 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 Stock could be authorized for issuance
upon exercise in full of the Rights and/or the Second Rights, the 30-day period
set forth above may be extended to the extent necessary, but not more than 120
days following the date of the occurrence of the Flip-In Event, in order that
the Company may seek shareholder approval for the authorization of such
additional shares; such period, as it may be extended, hereinafter referred to
as the "Substitution Period." To the extent that the Company determines that
action need be taken pursuant to the first or second sentences of this Section
11(a)(iv), the Company (A) shall provide, subject to Section 11(a)(ii) hereof,
that such action shall apply uniformly to all outstanding Rights and Second
Rights, and (B) may suspend that exercisability of the Rights and Second Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares 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 and the Second
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)(iv), the value of the Common Stock shall be the current per share market
price, as determined pursuant to Section 11(d) hereof, per Common Stock shares
on the date of the occurrence of the earliest of the Flip-In Event.
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them, for a
period expiring within forty-five (45) calendar days after such record date, to
subscribe for or purchase Preferred Stock (or shares having the same rights,
privileges and preferences as the Preferred Stock ("equivalent preferred
shares") or securities convertible into Preferred Stock or equivalent preferred
shares at a price per Preferred Stock shares or equivalent preferred shares (or
having a conversion price per share, if a security convertible into Preferred
Stock or equivalent preferred shares) less than the then current per share
market price of the Preferred Stock, 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
Preferred Stock outstanding on such record date plus the number of Preferred
Stock which the aggregate offering price of the total number of Preferred Stock
or equivalent preferred shares so to be offered (or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be the
number of Preferred Stock outstanding on such record date plus the number of
additional Preferred Stock or equivalent preferred 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 or one Second Right
be less than the aggregate par value of the shares of capital stock of the
Company issuable upon exercise of one such Right or one such Second Right, as
the case may be. In case such subscription price may be paid in a consideration
part or all of which shall be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a statement filed with
the Rights Agent. Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such record date is fixed;
and in the event that such rights, options of warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidence of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Stock) or subscription rights or warrants, excluding those referred to
in Section 11(b) hereof, the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price of the Preferred Stock on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one Preferred Stock share and the denominator of which shall be
such current per share market price of the Preferred Stock; provided, however,
that in no event shall the consideration to be paid upon the exercise of one
Right or one Second Right be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise of one such Right or
Second Right, as the case may be. 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) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the twenty (20) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares, or (B) any subdivision, combination or reclassification of such Security
and prior to the expiration of twenty (20) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. 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 Security is 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 Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last reported trade in the over-the-counter market, as reported by
the NASDAQ National Market ("NASDAQ") or such other system then in use, or, if
on any such date the Security is not quoted by any such organization, the
average of the closing bids and asked prices as furnished by a professional
market maker making a market in the security selected by the Board of Directors
of the Company. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the Security is listed or admitted to
trading is open for the transaction of business or, if the Security is not
listed or admitted to trading on any national securities exchange, a Business
Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Stock shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Stock are not
publicly traded, the "current per share market price" of the Preferred Stock
shall be conclusively deemed to be the current per share market price of the
Common Stock as determined pursuant to Section 11(d)(i), appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof, multiplied by one hundred. If neither the Common Stock
nor the preferred Stock are publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) 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 one one-millionth of a
Preferred Stock share or one ten-thousandth of any other share or security, 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 and Second Rights.
(f) If, as a result of an adjustment made pursuant to Section 11(a) or
Section 13 hereof, the holder of any Right or any Second Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right or any Second Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k), and (m), inclusive, and
the provisions of Section 7, 9, 10, 13, and 14, with respect to the Preferred
Stock, shall apply on like terms to any such other shares.
(g) All Rights and Second 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-hundredth of a Preferred Stock shares purchasable from time to time
hereunder upon exercise of such Rights or such Second Rights, as the case may
be, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right and each Second Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredth of a Preferred Stock shares, calculated to the nearest one
one-millionth of a Preferred Stock share, obtained by (i) multiplying (x) the
number of one one-hundredth of a share covered by a Right or a Second Right, as
the case may be, 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 and/or Second Rights, in
substitution for any adjustment in the number of one one-hundredth of a
Preferred Stock shares purchasable upon the exercise of a Right or a Second
Right, as the case may be. Each of the Rights and Second Rights outstanding
after such adjustment of the number of Rights and Second Rights shall be
exercisable for the number of one one-hundredth of a Preferred Stock shares for
which a Right or a Second Right, as the case may be, was exercisable immediately
prior to such adjustment. Each Right and each Second Right held of record prior
to such adjustment of the number of Rights and Second Rights shall become that
number of Rights or Second Rights, as the case may be, calculated to the nearest
one ten-thousandth, obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights and
Second Rights, indicating the record date for the adjustment, and, if known at
the time, the amount of the adjustment to be made. This record date may be the
date on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights and Second 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 and/or Second 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 and/or Second Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein 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-hundredth of a Preferred Stock shares issuable upon the
exercise of the Rights or the Second Rights, the Rights Certificates theretofore
and thereafter issued may continue to express the Purchase Price and the number
of one one-hundredth of a Preferred Stock shares 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-hundredth of the then par value, if any, of the
Preferred Stock issuable upon exercise of the Rights or the Second 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 Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specific
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right or any Second Right exercised after such
record date of the Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due ▇▇▇▇ or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exchangeable for Preferred Stock, dividends on Preferred
Stock payable in Preferred Stock or issuance of rights, options or warrants
referred to hereinabove in Section 11(b), hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with, or merge with and into, any other
Person, other than a Subsidiary of the Company in a transaction that complies
with Section 11(o), (ii) permit or cause any Person to consolidate with the
Company, or merge with and into the Company, other than a Subsidiary of the
Company in a transaction that complies with Section 11(o), or (iii) sell or
otherwise transfer, or permit any Subsidiary to sell or transfer, in one of more
transactions, assets or earning power aggregating fifty-percent (50%) or more of
the assets or earning power of the Company and its Subsidiaries, taken as a
whole, to any other Person or Persons, other than the Company or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o), if at the time of or immediately after such consolidation, merger or sale
there are any rights, warrants or other instruments or securities outstanding or
agreements in effect that would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or the Second Rights.
(o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23, Section 24 or Section 27 hereof,
take, or permit any Subsidiary of the Company to take, any action if at the time
such action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights or the Second Rights.
(p) 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 Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock, by
reclassification or otherwise than by payment of dividends in Common Stock, into
a greater or lesser number of Common Stock, then in any such case (A) the number
of one one-hundredth of a Preferred Stock shares purchasable after such event
upon proper exercise of each Right and each Second Right (hereinafter "Adjusted
1/100th Preferred Stock Share(s)") shall be determined by multiplying the number
of one one-hundredth of a Preferred Stock shares so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
Common Stock outstanding immediately before such event and the denominator of
which is the number of Common Stock outstanding immediately after such event,
(B) after such calculation, the resulting number of Adjusted 1/100th Preferred
Stock Shares shall be substituted in this Agreement for each one one-hundredth
of a Preferred Stock share and (C) each Common Stock shares outstanding
immediately after such event shall have been issued with respect to it that
number of Rights which each Common Stock shares outstanding immediately prior to
such event had issued with respect to it. The adjustments provided for in this
Section 11(p) shall be made and numbered successively whenever such a dividend
is declared or paid or such a subdivision, combination or consolidation is
effected.
(q) The exercise of Rights and Second Rights under Section 11(a)(ii) shall
only result in the loss of rights under Section 11(a)(ii) to the extent so
exercised and shall not otherwise affect the rights represented by the Rights
and Second Rights under this Rights Agreement, including the rights represented
by Section 13.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR
NUMBER OF SHARES
Whenever an adjustment is made as provided in Section 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment, (b) file with
the Rights Agent and with each transfer agent for the Common Stock or the
Preferred Stock a copy of such certificate and (c) mail a brief summary to each
holder of a Rights Certificate in accordance with Section 25 hereof.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER
(a) If, following the Distribution 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 merger and, in connection with such merger, all or
part of the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property,
(iii) any Person shall acquire all or a majority of the Common Stock pursuant to
a statutory plan of exchange, or (iv) 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 earning power aggregating fifty-percent
(50%) or more of the assets or earning power of the Company and its
Subsidiaries, taken as a whole, to any other Person other than the Company or
one or more of its wholly-owned Subsidiaries, then, and in each such case,
proper provision shall be made so that (A) each holder of a Right and/or a
Second Right, except as otherwise provided herein, shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredth of a Preferred
Stock shares for which a Right or a Second Right, as the case may be, is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Stock, such number of Common Stock of the Principal Party, as
hereinafter defined, not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall equal the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredth
of a Preferred Stock shares for which a Right or a Second Right, as the case may
be, is then exercisable and dividing that product by (2) fifty-percent (50%) of
the then current per share market price of the Common Stock, determined pursuant
to Section 11(d) hereof, of such Principal Party on the date of consummation of
such consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, 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 provision of
Section 11 shall apply only to such Principal Party after the first occurrence
of an event described in this Section 13(a); (D) such Principal Party shall take
such steps, including, but not limited to, the reservation of a sufficient
number of its Common Stock in accordance with Section 9 hereof, in connection
with such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the Common Stock thereafter deliverable upon the exercise of the Rights or the
Second Rights; and (E) the provisions of Section 11(a)(ii) shall be of no
further effect following the first occurrence of any event described in this
Section 13(a).
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (i), (ii) or
(iii) of Section 13(a), (A) the Person that is the issuer of any securities into
which Common Stock of the Company are converted in such merger, consolidation or
for which they are exchanged in such statutory plan of exchange, or, if there is
more then one such issuer, the issuer of Common Stock that has the highest
aggregate current per share market price, determined in accordance with Section
11(d), and (B) if no securities are so issued, the Person that is the other
party to such merger, consolidation or statutory plan of exchange; or, if there
is more than one such Person, the Person, the Common Stock of which has the
highest aggregate current per share market price, determined in accordance with
Section 11(d); and
(ii) in the case of any transaction described in clause (iv) of
Section 13(a), the Person that is the party receiving the largest portion of the
assets or earning power transferred pursuant to such transaction or
transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest aggregate
current per share market price, determined in accordance with Section 11(d);
provided, however, that in any such case, (A) if the Common Stock of such Person
are not at such time and have not been continuously over the preceding
twelve-month period registered under Section 12 of the Exchange Act ("Registered
Common Stock"), or such Person is not a corporation, and such Person is a direct
or indirect Subsidiary of another Person that has Registered Common Stock
outstanding, "Principal Party" shall refer to such other Person; (B) if the
Common Stock of such Person are not Registered Common Stock or such Person is
not a corporation, and such Person is a direct or indirect Subsidiary of another
Person but is not a direct or indirect Subsidiary of another Person which has
Registered Common Stock outstanding, "Principal Party" shall refer to the
ultimate parent entity of such first-mentioned Person; (C) if the Common Stock
of such Person are not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons is
the issuer of the registered Common Stock having the highest aggregate current
per share market price, determined in accordance with Section 11(d); and (D) if
the Common Stock of such Person are not Registered Common Stock or such Person
is not a corporation, and such Person is directly or indirectly controlled by
more than one Person, and none of such other Persons have Registered Common
Stock outstanding, "Principal Party" shall refer to whichever ultimate parent
entity is the corporation having the greatest shareholders' equity or, if no
such ultimate parent entity is a corporation, shall refer to whichever ultimate
parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such consolidation, merger,
statutory plan of exchange, sale or transfer unless prior thereto the Company
and the Principal Party shall have executed and delivered to the Rights Agent a
supplement agreement confirming that (i) such Principal Party shall, upon
consummation of such consolidation, merger, statutory plan of exchange or sale
or transfer of assets or earning power, assume this Agreement in accordance with
Section 13, (ii) all rights of first refusal or preemptive rights in respect of
the issuance of Common Stock of such Principal Party upon exercise of
outstanding Rights and Second Rights have been waived, (iii) any provision of
the authorized securities of such Principal Party or of its charter, bylaws or
other instruments governing its corporate affairs which would obligate such
Principal Party to issue in connection with, or as a consequence of, the
consummation of a transaction referred to in Section 13(a), Common Stock of such
Principal Party at less than the then current per share market price, determined
in accordance with Section 11(d)(i), or securities exercisable for, or
convertible into, such Common Stock at less than such then current per share
market price (other than to the holders of Rights and/or Second Rights pursuant
to this Section 13) have been waived or canceled, and (iv) such transaction
shall not result in a default by such Principal Party under this Agreement and
further providing that, as soon as practicable after the date of any
consolidation, merger, statutory plan of exchange or sale or transfer of assets
or earning power referred to in Section 13(a), such Principal Party will:
(A) prepare and file a registration statement under the
Securities Act of 1933, as amended, with respect to the Rights and the Second
Rights and the securities purchasable upon exercise thereof on an appropriate
form, use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and use its best efforts to
cause such registration statement to remain effective, with a prospectus at all
times meeting the requirements of the Securities Act of 1933, as amended, until
the Final Expiration Date of the Rights and the Second Rights, and similarly
comply with applicable state securities laws;
(B) use its best efforts to qualify or register the Rights and
the Second Rights and the securities purchasable upon exercise thereof under the
Blue Sky laws of such jurisdictions as may be necessary or appropriate;
(C) use its best efforts to list, or continue the listing of, the
Rights and the Second Rights and the securities purchasable upon exercise
thereof or to meet the eligibility requirements for quotation of the Rights and
Second Rights and such securities on NASDAQ or other system then in use; and
(D) deliver to holders of the Rights and Second Rights historical
financial statements for such Principal Party which comply in all respects with
the requirements for registration on Form 10, or any successor for, under the
Exchange Act.
In the event that at any time after the occurrence of an event described in
Section 11(a)(ii) hereof some or all of the Rights and Second Rights shall not
have then been exercised at the time of the occurrence of an event described in
Section 13(a) hereof, the Rights and Second Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a), without taking into account any prior adjustment required by
Section 11(a)(ii).
(d) The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
(e) Notwithstanding anything in this Agreement to the contrary, this
Section 13 shall not be applicable to a transaction described in Section
13(a)(i), (ii) or (iii) if:
(i) such transaction is consummated with a Person or Persons who
acquired Common Stock pursuant to a tender offer described in Section
11(a)(iii), or with a wholly-owned Subsidiary of any such Person or Persons,
(ii) the price per Common Stock shares offered in such transaction is
not less than the price per Common Stock shares paid to all holders of Common
Stock whose shares were purchased pursuant to such tender or exchange offer, and
(iii) the form of consideration being offered to the remaining holders
of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer. Upon consummation of any such
transaction contemplated by this Section 13(e), all Rights and Second Rights
shall expire.
The Company shall not enter into any transaction of the kind referred to in
this Section 13 if at the time of such transaction there are any rights,
warrants, instruments, or securities outstanding, or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and/or the Second Rights. The provisions of this Section 13 shall
similarly apply to successive mergers or consolidations or sales or other
transfers. The rights under this Section 13 shall be in addition to the rights
to exercise Rights or Second Rights and adjustments under Section 11(a)(ii) and
shall survive any exercise thereof.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Company shall not be required to issue fractions of Rights or
Second Rights or to distribute Rights Certificates which evidence fractional
Rights or fractional Second Rights. In lieu of such fractional Rights or
fractional Second Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights and such
fractional Second Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right or a whole Second
Right, as the case may be. For the purpose of this Section 14(a), the current
market value of a whole Right or a whole Second Right shall be the closing price
of the Rights or the Second Rights, as the case may be, for the Trading Day
immediately prior to the date on which such fractional Rights or such fractional
Second 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 or the Second 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 and the Second
Rights are listed or admitted to trading, or if the Rights and Second Rights are
not listed or admitted to trading on any national securities exchange, the last
reported trade 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 and Second 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 and the Second 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 and
the Second Rights, the fair value of the Rights and the Second 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 Preferred
Stock, other than fractions which are integral multiples of one one-hundredth of
a Preferred Stock share, upon exercise of the Rights or the Second Rights or to
distribute certificates which evidence fractional Preferred Stock, other than
fractions which are integral multiples of one one-hundredth of a Preferred Stock
share. Fractions of Preferred Stock in integral multiples of one one-hundredth
of a Preferred Stock share may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it; provided, however, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Stock represented by such depositary receipts. In lieu of
fractional Preferred Stock that are not integral multiples of one one-hundredth
of a Preferred Stock share, the Company shall pay to the registered holders of
Rights Certificates at the time such Rights and Second Rights are exercised as
herein provided an amount in cash equal to the same fraction of the current
market value of one Preferred Stock share. For the purposes of this Section
14(b), the current market value of a Preferred Stock share shall be the closing
price of a Preferred stock share, as determined pursuant to the second sentence
of Section 11(d)(i) hereof, for the Trading Day immediately prior to the date of
such exercise.
(c) The holder of a Right or a Second Right by the acceptance of the Right
or a Second Right, as the case may be, expressly waives the right to receive any
fractional Rights or any fraction Second Rights or any fractional shares upon
exercise of a Right or a Second Right, except as provided above.
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 Stock; and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock) without the consent of the Rights Agent or the holder of
any other Rights Certificate (or, prior to the Distribution Date, of the Common
Stock), may, in the holder's own behalf and for the holder's own benefit,
enforce, and may institute and maintain any lawsuit, legal action or proceeding
against the Company to enforce, or otherwise act in respect of, the holder's
right to exercise the Rights and/or Second 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 and/or Second Rights, it is specifically acknowledged that the
holders of Rights and/or Second Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligation under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to this Agreement. Holders
of Rights and/or Second Rights shall be entitled to recover the reasonable costs
and expenses, including attorney's fees, incurred by them in any action to
enforce the provisions of this Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS
Every holder of a Right and/or a Second Right, by accepting the same,
consents and agrees with the Company and with every other holder of a Right
and/or Second Right that:
(a) prior to the Distribution Date, the Rights and Second Rights will be
transferable only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company may deem and treat the person in whose name the Rights
Certificate or, prior to the Distribution Date, the associated Common Stock
certificate, is registered as the absolute owner thereof and of the Rights and
Second Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Rights Certificate or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER
No holder of any Rights Certificate, by reason of being a holder of such
Rights Certificate, shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights or
Second Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, any of the rights of a stockholder of the Company or any right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting stockholders, except
as provided in Section 25 hereof, or to receive dividends or subscription
rights, or otherwise, until the Right(s) or Second Right(s) evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for the Preferred Stock or Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
person or persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF
NAME OF RIGHTS AGENT
(a) 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
stock transfer or 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
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of 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, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all 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 opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter, including, without limitation, the identity of
any Acquiring Person and the determination of "current per share market price,"
unless other evidence in respect thereof be herein specifically prescribed, may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Executive Vice President, or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct. 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 of damage and regardless
of the form of action.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificate, except its countersignature thereof, or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery 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 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 the Second
Rights, including the Rights and/or the Second Rights becoming void pursuant to
Section 11(a)(ii) hereof, or any adjustment in the terms of the Rights and/or
the Second Rights, including the manner, method or amount thereof, provided for
in Section 3, 11, 13, 23, or 24, or the ascertaining of the existence of facts
that would require any such change or adjustment, except with respect to the
exercise of Rights and/or Second 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 of warranty as to the
authorization or reservation of any Preferred Stock to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Stock
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
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Executive Vice President, or the Secretary of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights and/or Second 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 of 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 of 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.
SECTION 21. CHANGE OF RIGHTS AGENT
The Rights Agent or any successor Rights Agent may resign and be discharged
from its duties under this Agreement upon thirty (30) days' notice in writing
mailed to the Company and to each transfer agent of the Common Stock or
Preferred Stock by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon thirty (30) days' notice in writing, mailed
to the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate for inspection (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
any state of the United States so long as such corporation is authorized under
such laws to exercise corporate trust or stock transfer powers, is in good
standing, and is subject to supervision or examination by federal or state
authority, and has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $1 million. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it has 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 with the predecessor Rights Agent and each transfer
agent of the Common Stock or Preferred Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, 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
and/or the Second Rights to the contrary, the Company may at its option, issue
new Rights Certificates evidencing Rights and/or Second 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 of class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to
the earlier of the Redemption Date and the Final Expiration Date, the Company
(i) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee plan or arrangement, or upon
the exercise, conversion or exchange of securities, notes or debentures issued
by the Company, and (ii) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issues Certificates
representing the appropriate number of Rights and/or Second Rights in connection
with such issuance or sale; provided, however, that no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and no such Rights Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.
SECTION 23. REDEMPTION
(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 (10th) day
following the Stock Acquisition Date, which ten-day period may be extended by
the Board of Directors for successive periods of ten days, not to exceed an
aggregate of thirty (30) days following the Stock Acquisition Date, or (ii) the
Final Expiration Date, redeem all but not less than all the then outstanding
Rights and Second Rights at a redemption price of $0.001 per Right and per
Second 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;"
provided, however, that if, following the occurrence of a Stock Acquisition Date
and following the expiration of the right of redemption hereunder but prior to
any Triggering Event, (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of shares of Common Stock in one
transaction or series of transactions, not direct or indirectly involving the
Company or any of its Subsidiaries, which did not result in the occurrence of a
Triggering Event such that such Person is thereafter a Beneficial Owner of 10%
or less of the outstanding shares of Common Stock, and (ii) there are no other
Persons, immediately following the occurrence of the event described in clause
(i), who are Acquiring Persons, then the right of redemption shall be reinstated
and thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement or the contrary, the Rights and the Second
Rights shall not be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Company's right of redemption hereunder
has expired. The Company, may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the "current market price," as defined in
Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights and Second Rights pursuant to paragraph
(a) of this Section 23, and without any further action and without any notice,
the right to exercise the Rights and Second Rights will terminate and the only
right thereafter of the holders of Rights and/or Second rights shall be to
receive the Redemption Price. The Company shall promptly give public notice of
any such redemption; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. Within ten
(10) days after such action of the Board of Directors ordering the redemption of
the Rights and Second Rights, the Company shall mail a notice of redemption to
all the holders of the then outstanding Rights and Second Rights at their last
address as they appear upon the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
SECTION 24. EXCHANGE
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights and Second Rights, which shall not include
Rights or Second Rights that have become void pursuant to the provisions of
Section 11(a)(ii) hereof, for Common Stock at an exchange ratio of one Common
Stock share per Right or per Second Right, as the case may be, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof, such exchange ratio being hereinafter referred
to as the "Exchange Ratio." Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any such Subsidiary, or of any entity holding
Common Stock 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 Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights and Second Rights pursuant to subsection (a)
of this Section 24 and without any further action and without any notice, the
right to exercise such Rights and Second Rights shall terminate and the only
right thereafter of a holder of such Rights and/or Second Rights shall be to
receive that number of Common Stock equal to the number of such Rights or such
Second Rights, as the case may be, 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
and/or Second Rights at their last address as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
Common Stock for Rights and/or for Second Rights will be effected and, in the
event of any partial exchange, the number of Rights and Second Rights which will
be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights and Second Rights, as the case may be, other than Rights and
Second Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof, held by each holder of Rights and/or Second Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock, or equivalent preferred shares, as such
term is defined in Section 11(b) hereof, for Common Stock exchangeable for
Rights or Second Rights, at the initial rate of one one-hundredth of a Preferred
Stock share, or equivalent preferred share, for each Common Stock share, as
appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to the terms thereof, so that the fraction of a
Preferred Stock share delivered in lieu of each Common Stock share shall have
the same voting rights as one Common Stock share.
(d) In the event that there shall not be sufficient Common Stock or
Preferred Stock issued but outstanding or authorized but unissued to permit any
exchange of Rights or Second Rights as contemplated in accordance with this
Section 24, the Company shall use its best efforts to cause all such action to
be taken as may be necessary to authorize additional Common Stock or Preferred
Stock for issuance upon exchange of the Rights and/or Second Rights.
(e) The Company shall not be required to issue fractions of Common Stock or
to distribute certificates which evidence fractional Common Stock. In lieu of
such fractional Common Stock, the Company shall pay to the registered holders of
the Rights Certificates with regard to which such fractional Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Stock share. For the purposes of this
paragraph (e), the current market value of a whole Common Stock share shall be
the closing price of a Common Stock share, as determined pursuant to the second
sentence of section 11(d)(i) hereof, for the Trading Day immediately prior to
the date of exchange pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS
(a) In case the Company shall propose (i) to pay any dividend payable in
stock of any class to the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock, other than a regular
quarterly cash dividend, (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional Preferred
Stock or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Stock, other than
a reclassification involving only the subdivision of outstanding Preferred
Stock, (iv) to effect any consolidation or merger into or with, 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 fifty-percent (50%)
or more of the assets or earning power of the Company and its Subsidiaries,
taken as a whole, to any other Person, (v) to effect the liquidation,
dissolution or winding up of the Company, or (vi) to declare or pay any dividend
on the Common Stock payable in Common Stock or to effect a subdivision,
combination or consolidation of the Common Stock, by reclassification or
otherwise than by payment of dividends in Common Stock, 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 Stock or
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) and (ii) above at least
ten (10) days prior to the record date for determining holders of the Preferred
Stock for purposes of such action, and in the case of any such other action, at
least ten (10) days prior to the date of the taking of such proposed action or
the date of participation therein by the holders of the Common Stock or
Preferred Stock, whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then 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 notice shall describe such event and the
consequences of such event to holders of Rights and/or Second Rights under
Section 11(a)(ii) hereof.
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:
Electronic Clearing House, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Post Office Box 3040
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: 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:
OTR, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
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
The Board of Directors and the Rights Agent may from time to time, if the
Board so directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order to cure any ambiguity, to correct or
supplement any provisions contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights and/or the Second Rights which the Company may deem
necessary or desirable, any such supplement or amendment to be evidenced by a
writing signed by the Company and the Rights Agent; provided, however, that from
and after such time as any Person becomes an Acquiring Person, this Agreement
shall not be amended in any manner which would adversely affect the interests of
the holders of Rights and/or Second Rights. Without limiting the foregoing, the
Company may at any time prior to such time as any Person becomes an Acquiring
Person amend this Agreement to raise or lower the thresholds set forth in
Sections 1(a) and 3(a), provided the threshold may not be lowered to less than
the greater of (a) any percentage greater than the largest percentage of the
outstanding Common Stock then known by the Company to be beneficially owned by
any Person, other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Stock for or pursuant to the terms of any such plan, and (b)
twenty-percent (20%). This Agreement shall not be supplemented or amended in any
way following the Distribution Date unless such amendment is approved by a
majority of the Board of Directors whose determination shall be final. 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 have determined in good faith that
such supplement or amendment would not adversely affect its interest under this
Agreement. Prior to the Distribution Date, the interests of holders of Rights
and/or Second Rights shall be deemed coincident with the interests of holders of
Common Stock.
SECTION 28. REGISTRATION OF SECURITIES
The Company may temporarily suspend, for a period of time not to exceed
ninety (90) days, the exercisability of the Rights or the Second Rights in order
to prepare and file, if deemed necessary by the Company, such registration
statements and other filings under the Securities Act of 1933, as amended, and
the securities or "blue sky" laws of any state, with respect to any securities
purchasable upon the exercise of the Rights or the Second Rights, and to permit
the same to become effective. Upon any such suspension, the Company shall issue
a public announcement stating that the exercisability of the Rights and/or the
Second Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. Notwithstanding any
provision of this Agreement to the contrary, the Rights and the Second Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
has been obtained or a registration statement has become effective in such
jurisdiction.
SECTION 29. DETERMINATION AND ACTIONS BY THE BOARD
OF DIRECTORS
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determination deemed necessary or advisable for the
administration of this Agreement, including a determination to redeem or to not
redeem the Rights and/or the Second Rights or to amend the Agreement. All such
actions, calculations, interpretations and determinations, including, for
purposes of clause (y) below, all omissions with respect to the foregoing, which
are done or made by the Board in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and/or
Second Rights and all other parties, and (y) not subject the Board to any
liability to the holders of the Rights and/or Second Rights.
SECTION 30. SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 31. 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
Stock, any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates, and, prior
to the Distribution Date, the Common Stock.
SECTION 32. SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
SECTION 33. GOVERNING LAW
This Agreement and each Rights Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of California 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.
SECTION 34. 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 35. DESCRIPTIVE HEADINGS
Descriptive headings of the several Sections of this Agreement are inserted
for convenience only and shall not control or affect the meaning or construction
of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ELECTRONIC CLEARING HOUSE, INC. OTR, INC.
By: ______________________________ By: ___________________________
▇▇▇▇ ▇. ▇▇▇▇▇ Name: ___________________________
Chairman of the Board and Title: ___________________________
Chief Executive Officer
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
OF
ELECTRONIC CLEARING HOUSE, INC., A NEVADA CORPORATION
Pursuant to Section 78.195 of the Nevada Corporations Code:
We, ▇▇▇▇ ▇. ▇▇▇▇▇, Chairman of the Board & Chief Executive Officer, and
▇▇▇▇▇ ▇▇▇▇▇▇, Corporate Secretary, of Electronic Clearing House, Inc., a
corporation organized and existing under the laws of the State of Nevada
("Corporation"), do hereby certify as follows:
1. The authorized number of shares of the Corporation's preferred stock is
5,000,000.
2. Pursuant to the authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, the Board of Directors on
September 30, 1996, adopted the following resolution creating a series of
200,000 shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock:
RESOLVED, that the Board of Directors authorize, to implement the Rights
pursuant to the Corporation's Rights Agreement signed September 30, 1996 and
pursuant to the authority vested in the Board of Directors of this Corporation
in accordance with the provisions of its Articles of Incorporation, a series of
Preferred Stock of the Corporation be and hereby is created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
"SERIES A JUNIOR PARTICIPATING PREFERRED STOCK:
Paragraph 1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Junior Preferred Stock") and the
number of shares constituting the Series A Junior Preferred Stock shall be
200,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors, provided, that no decrease shall reduce the number of
shares of Series A Junior Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series A
Junior Preferred Stock.
Paragraph 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Junior Preferred Stock with respect to dividends, the holders of shares of
Series A Junior Preferred Stock, in preference to the holders of Common Stock,
par value of $0.01 (the "Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, dividends
payable in cash (each payment date determined by the Board of Directors being
referred to herein as a "Dividend Payment Date"), commencing on the first
Dividend Payment Date after the first issuance of a share or fraction of a share
of series A Junior Preferred Stock, in an amount per share (subject to the
provisions for adjustment hereinafter set forth) equal to 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of the Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Dividend Payment Date or, with respect to the first Dividend Payment date, since
A-1
the first issuance of any share or fraction of a share of Series A Junior
Preferred Stock. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision of combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock, then in each such case the amount to which holders of shares of
Series A Junior Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Preferred Stock as provided in paragraph (A) of this Paragraph 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall not be
more than 60 days prior to the date fixed for the payment thereof.
Paragraph 3. VOTING RIGHTS.
The holders of shares of Series A Junior Preferred Stock shall have the
following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth, each
share of Series A Junior Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the shareholders of the Corporation.
In the event the Corporation shall at any time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Junior Preferred Stock were entitled immediately prior to such an event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Amendment to the Certificate of Incorporation or Certificate of Designation
creating a series of Preferred Stock or any similar stock, or by law, the
holders of shares of Series A Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders of
Series A Junior Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Paragraph 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Preferred Stock as provided in Paragraph 2 are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the series A Junior
Preferred Stock;
A-2
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Junior Preferred Stock, except dividends paid ratably on the
series A Junior Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior
Preferred Stock, provided that the Corporation may at times
redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Junior Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Junior Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Paragraph
4, purchase or otherwise acquire such shares at such time and in such manner.
Paragraph 5. REACQUIRED SHARES
Any shares of Series A Junior Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
mat be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Certificate of Amendment to the Certificate of
Incorporation or Certificate of Designation creating a series of Preferred Stock
or any similar stock or as otherwise required by law.
Paragraph 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Preferred Stock unless, prior thereto, the holders of shares of
Series A Junior Preferred Stock shall have reached $100.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, provided that the holders of
shares of Series A Junior Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount distributed per share to
holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Junior Preferred Stock, except distributions made
ratably on the Series A Junior Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount of which holders of shares of Series A Junior Preferred Stock
were entitled immediately prior to such event under the proviso in clause (1) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
A-3
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Paragraph 7. CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash or any other
property, then in any such case each share of Series A Junior Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock into a greater or lesser number
of shares of Common Stock), then in each case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Junior Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Paragraph 8. NO REDEMPTION.
The shares of Series A Junior Preferred Stock shall not be redeemable.
Paragraph 9. RANK.
The Series A Junior Preferred Stock shall rank, with respect to the payment
of dividends and the distribution of assets, junior to all series of any other
class of the Corporation's Preferred Stock.
Paragraph 10. AMENDMENT.
The Certificate of Incorporation shall not be amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series A Junior Preferred Stock so as to affect them adversely without, in
addition to any other vote of shareholders required by law, the affirmative vote
of the holders of at least 60% of the outstanding shares of Series A Junior
Preferred Stock, voting together as a single class.
Paragraph 11. FRACTIONAL SHARES.
The Series A Junior Preferred Stock may be issued in fractions of a share
which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of the
Series A Junior Participating Preferred Stock."
Executed on this day, September 30, 1996. The under signed affirm under
penalties of perjury that the foregoing instrument is the act and deed of the
Corporation and that the facts stated therein are true.
ELECTRONIC CLEARING HOUSE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
Chairman of the Board & C.E.O.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
Corporate Secretary
▇-▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ )
) ss
COUNTY OF LOS ANGELES )
On this day, September 30, 1996, before me a Notary Public in and for said
County and State, personally appeared ▇▇▇▇ ▇. ▇▇▇▇▇ proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or entity on
behalf of which the person acted, executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
(Notary Seal) Signed: /s/
ACKNOWLEDGEMENT
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On this day, September 30, 1996, before me a Notary Public in and for said
County and State, personally appeared ▇▇▇▇▇ ▇▇▇▇▇▇ proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that she executed the same in her authorized
capacity, and that by her signature on the instrument the person, or entity on
behalf of which the person acted, executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
(Notary Seal) Signed: /s/
A-5
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
CERTIFICATE NO. R ___________ RIGHTS
___________ SECOND RIGHTS
NOT EXERCISABLE AFTER SEPTEMBER 30, 2006, IN THE CASE OF RIGHTS, AND AFTER
JANUARY 29, 2013, IN THE CASE OF SECOND RIGHTS, OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS AND SECOND RIGHTS ARE SUBJECT TO REDEMPTION AT
$0.001 PER RIGHT OR SECOND RIGHT, AS THE CASE MAY BE, AND TO EXCHANGE ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS CERTIFICATE
Electronic Clearing House, Inc.
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights and Second Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Amended and Restated Rights Agreement, dated as of January 29,
2003 ("Rights Agreement"), between Electronic Clearing House, Inc., a Nevada
corporation ("Company"), and OTR, Inc. ("Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) prior to 5:00 p.m., Los Angeles time, on September 30, 2006 in
the case of Rights, and on 822, 2013 in the case of Second Rights, at the
principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-hundredth of a fully paid non-assessable share of Series A
Junior Participating Preferred Stock ("Preferred Stock"), of the Company, at a
purchase price of $0.50 (in the case of Rights) and $0.50 (in the case of Second
Rights) per one one-hundredth of a Preferred Share ("Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase Duly executed. The number of Rights and Second Rights evidenced by
this Rights Certificate (and the number of one one-hundredth of a Preferred
Share which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of
September 30, 1996 in the case of Rights, and January 29, 2003 in the case of
Second Rights, based on the Preferred Shares as constituted at such date. As
provided in the Rights Agreement, the Purchase Price and the number of one
one-hundredth of a Preferred Share which may be purchased upon the exercise of
the Rights and/or the Second Rights evidenced by this Rights Certificate are
subject to modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights and/or Second Rights entitling the holder to purchase a like
aggregate number of Preferred Shares as the Rights and/or Second Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
and/or Second Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights and/or Second
Rights evidenced by this Certificate (i) may be redeemed by the Company at a
redemption price of $0.001 per Right or Second Right, as the case may be, or
(ii) may be exchanged in whole or in part for Preferred Shares or shares of the
Company's Common Stock, no par value.
B-1
No fractional Preferred Shares will be issued upon the exercise of any
Right or Second Right evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise thereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
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 the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right(s) or Second Right(s) evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _____________.
ATTEST: COUNTERSIGNED:
ELECTRONIC CLEARING HOUSE, INC. OTR, INC.
By: _____________________ By: _____________________
Authorized Signature Authorized Signature
B-2
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________________ hereby sells,
assigns and transfers unto
_____________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all Rights and Second Rights, and all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________ Attorney, to transfer the within Rights Certificate
on the books of the within-named Company, with full power of substitution.
Dated:
Signature: _____________________
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an eligible institution (as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934) which may include a
commercial bank, trust company, savings association, credit union or a member
firm of the American Stock Exchange, New York Stock Exchange, Pacific Stock
Exchange or Midwest Stock Exchange.
The undersigned hereby certifies that the Rights and Second Rights evidenced by
this Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Association thereof (as defined in the Rights Agreement).
______________________________
Signature
B-3
Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
To ELECTRONIC CLEARING HOUSE, INC.:
The undersigned hereby irrevocably elects to exercise Rights and/or Second
Rights represented by this Rights Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and/or Second Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights and/or Second Rights shall not be all the Rights and/or
Second Rights evidenced by this Rights Certificate, a new Rights Certificate for
the balance remaining of such Rights and/or Second Rights shall be registered in
the name of and delivered to:
Please insert social security or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: _______________
______________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an eligible institution (as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934) which may include a
commercial bank, trust company, savings association, credit union or a member
firm of the American Stock Exchange, New York Stock Exchange, Pacific Stock
Exchange or Midwest Stock Exchange.
B-4
Form of Reverse Side of Certificate -- continued
The undersigned hereby certifies that the Rights and Second Rights evidenced by
this Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Association thereof (as defined in the Rights Agreement).
______________________________
Signature
NOTICE
The signature in the foregoing Forms of Assignment and Election must conform to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or the
Form of Election to Purchase, as the case may be, is not completed, the Company
and the Rights Agent will deem the beneficial owner of the Rights and Second
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
B-5
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
1. On September 30, 1996, the Board of Directors (the "Board") of Electronic
Clearing House, Inc. ("Company") implemented a Rights Agreement between the
Company and its stock transfer agent, OTR, Inc. ("Rights Agent"). The purpose of
the Rights Agreement is to protect Company shareholders in the event of an
unsolicited attempt to acquire the Company for an inadequate price and to
protect against abusive practices that do not treat all Company shareholders
equally, such as, among others, partial and two tier tender offers, coercive
offers, and creeping stock accumulation programs, etc. The Rights Agreement is
intended to make the cost of such abusive practices prohibitive and create an
incentive for a potential acquirer to negotiate in good faith with the Board.
The Rights Agreement is not intended to, and will not, prevent all unsolicited
offers to acquire the Company.
2. As of September 16, 1996, there were 11,501,804 shares of Common Stock
issued and outstanding (including treasury stock). On June 11, 2001 the Board
authorized a 4:1 reverse split of the Company's Common Stock. On September 11,
2001, the Company's Common Stock began trading post reverse split shares,
resulting in 5,447,662 shares outstanding as of that date. Under the terms of
the Rights Agreement, a right ("Right(s)") attached to all Common Stock
certificates that entitled the shareholder of record, when the Right is
exercised, to purchase from the Company, at a price of $0.50 ("Purchase Price"),
one one-hundredth share of Series A Junior Participating Preferred Stock, no par
value ("Preferred Stock"). Each one one-hundredth share of Preferred stock
carries with it a bundle of rights. As a result of the September 11, 2001
reverse split, each Right will currently entitle each shareholder of record to
purchase one (1) Adjusted 1/100th Preferred Stock Share at a Purchase Price of
$2.00 with the identical bundle of rights defined in paragraph 4, herein. Any
Rights that are owned by an Acquiring Person become null and void. The Company
reserved 200,000 shares of Preferred Stock for issuance upon exercise of Rights.
3. On January 29, 2003, the Board authorized and adopted an Amended and
Restated Rights Agreement (the "Restatement") which is a complete restatement of
and supercedes the Rights Agreement. The purpose of the Restatement was to (i)
clarify the effects on each Right of (a) dividends payable in common stock and
(b) subdivisions, combinations or consolidations of Common Stock, as the same
have been declared and implemented by the Company prior to the effective date of
the Restatement, and (ii) authorize, declare and distribute a second dividend of
one preferred share purchase right (the "Second Right") for each share of Common
Stock of the Company outstanding on the effective date of the Restatement. The
purpose of the Second Right is to provide additional protection to Company
shareholders in the event of an unsolicited attempt to acquire the Company for
an inadequate price and to protect against abusive practices that do not treat
all Company shareholders equally. The Restatement is intended to make the cost
of such abusive practices prohibitive and create an incentive for a potential
acquirer to negotiate in good faith with the Board. The Restatement is not
intended to, and will not, prevent all unsolicited offers to acquire the
Company.
4. The Rights and Second Rights separate from the Common Stock and become
exercisable for Preferred Stock and a Distribution Date will occur upon the
earlier of (i) 10 days following the public announcement that, without prior
consent of the Board, a person of group of persons ("Acquiring Person") have
acquired 20% of the outstanding Common Stock ("Stock Acquisition Date"), and
(ii) at least 10 business days following the commencement of, or the
announcement of an intention to make a tender offer for 20% or more the such
outstanding Common Stock. As soon as practicable following the Distribution
Date, Rights Certificates will be mailed to holders of record of Common Stock as
of the close of business on the Distribution Date. Such Rights Certificates
alone will evidence the Rights and Second Rights, and any Rights and/or Second
Rights owned by an Acquiring Person shall become null and void. The final
expiration date of all Rights is September 30, 2006 and all Second Rights is
January 29, 2013, unless the Rights and/or Second Rights are earlier redeemed or
exchanged by the Company (See paragraph 5). Until a Right or Second Right is
exercised, the holder of a Right and/or Second Right will not, by reason of
being such a holder, have rights as a Company stockholder.
5. After exercise of a Right or Second Right, each resulting Adjusted
1/100th Preferred Stock Share will have four votes, voting together with Common
Stock and, should a dividend be declared on Common Stock, a minimum preferential
C-1
dividend payment of quadruple the dividend declared for the Common Stock. In the
event of a merger, consolidation, or other transaction in which Common Stock is
exchanged, each Adjusted 1/100th Preferred Stock Share will receive quadruple
the amount received per share of Common Stock. Should a liquidation occur, each
Adjusted 1/100th Preferred Stock Share will receive a $4.00 minimum preferential
liquidation payment, in addition to quadruple the payment made for each share of
Common Stock. Lastly, in the event that the Company is acquired in a merger or
other transaction where the Company is not the surviving corporation, or in the
event that 50% or more of its assets or earning power is sold, each Adjusted
1/100th Preferred Stock Share will receive common stock of the acquiring entity
that has a value of eight times the Purchase Price.
6. At any time prior to or after the acquisition by a person or group of
affiliated or associated persons of 20% or more of outstanding Common Stock, the
Board may exchange Rights and/or Second Rights, in whole or in part, at an
exchange ratio of four shares of Common Stock or one Adjusted 1/100th Preferred
Stock Share (or one share of a class or series of the Company's preferred stock
having equivalent rights, preferences and privileges), per Right and per Second
Right. At any time prior to the earlier to occur of (i) the tenth day after the
Stock Acquisition Date, and (ii) the expiration of the Rights or the expiration
of the Second Rights, as the case may be, the Company may redeem the Rights in
whole, but not in part, at a price of $0.004 per Right and per Second Right
("Redemption Price"), or, following the Stock Acquisition date, redeem Rights
and Second Rights in whole, but not in part, at the Redemption Price providing
either (a) the Acquiring person reduces his ownership to less than 20% of the
Common Stock, or (b) such redemption is incidental to a merger or other business
combination transaction involving the Company but not involving an Acquiring
Person. In addition, if an unsolicited offer is made, and the Board determines
that it is fair and in the best interests of the Company and its shareholders,
then, pursuant to the terms of the Rights Agreement, the Board has the authority
to redeem the Rights and Second Rights and permit the offer to proceed. Upon the
payment of the Redemption Price, the right to exercise any Right or any Second
Right will terminate.
7. The Purchase Price, manner of exercising Rights and Second Rights, number
of Rights and Second Rights, terms of the Rights and Second Rights, number of
one Adjusted 1/100th Preferred Stock Shares issuable upon exercise of a Right or
a Second Right, are subject to adjustment and amendment without the consent of
the holders of the Rights and/or Second Rights, in any manner by the Board for
business purposes, i.e., preventing dilution, adjustment in the event of a stock
split, declaration of a dividend, etc., except that from and after such time as
any person becomes an Acquiring Person, or after the Distribution Date, no such
adjustment or amendment may adversely affect the interests of the holders of the
Rights or of the Second Rights.
8. Copies of the Rights Agreement and Restatement and any amendments
thereto, as filed with the Securities and Exchange Commission, are available
free of charge from the Company. This summary description of the Rights and
Second Rights does not purport to be complete and is qualified in its entirety
by reference to the Rights Agreement and the Restatement.
C-2
