EXHIBIT 1
SHARE RIGHTS AGREEMENT
APA OPTICS, INC.
AND
▇▇▇▇▇ FARGO BANK MINNESOTA, N.A.
RIGHTS AGENT
DATED AS OF OCTOBER 23, 2000
TABLE OF CONTENTS
Section 1. Certain Definitions............................................1
Section 2. Appointment of Rights Agent....................................4
Section 3. Issue of Right Certificates....................................4
Section 4. Form of Right Certificates.....................................6
Section 5. Countersignature and Registration..............................6
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Lost, Stolen, Destroyed or
Mutilated Right Certificates...................................7
Section 7. Exercise of Rights, Purchase Price, Expiration Date of Rights..8
Section 8. Cancellation and Destruction of Right Certificates.............9
Section 9. Reservation and Availability of Series B Preferred Shares......9
Section 10. Series B Preferred Shares Record Date.........................10
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights..............................................10
Section 12. Certificate of Adjusted Purchase Price or Number of Shares....18
Section 13. Consolidation, Merger, Statutory Share Exchange or Sale or
Transfer of Assets or Earning Power...........................18
Section 14. Fractional Rights and Fractional Shares.......................21
Section 15. Rights of Action..............................................22
Section 16. Agreement of Right Holders....................................22
Section 17. Right Certificate Holder Not Deemed a Shareholder.............23
Section 18. Concerning the Rights Agent...................................23
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....24
Section 20. Duties of Rights Agent........................................24
Section 21. Change of Rights Agent........................................26
Section 22. Issuance of New Right Certificates............................27
Section 23. Redemption....................................................27
Section 24. Exchange......................................................28
Section 25. Notice of Certain Events......................................29
Section 26. Notices.......................................................30
Section 27. Supplements and Amendments....................................30
Section 28. Successors....................................................31
Section 29. Benefits of this Agreement....................................31
Section 30. Severability..................................................31
Section 31. Governing Law.................................................31
Section 32 Counterparts..................................................32
Section 33. Descriptive Headings..........................................32
Exhibit A -- Certificate of Designation, Preferences and Rights
of Series B Junior Participating
Preferred Shares
Exhibit B -- Form of Right Certificate
Exhibit C -- Summary of Rights to Purchase Series B Preferred
Shares
ii
SHARE RIGHTS AGREEMENT
Agreement, dated as of October 23, 2000, between APA Optics, Inc., a
Minnesota corporation (the "Company"), and ▇▇▇▇▇ Fargo Bank Minnesota, N.A. (the
"Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (individually a "Right" and
collectively the "Rights") for each Common Share (as defined in this Agreement)
of the Company outstanding at the Close of Business (as defined in this
Agreement) on November 13, 2000 (the "Record Date"), each Right initially
representing the right to purchase one one-hundredth of a Series B Preferred
Share (as defined in this Agreement), upon the terms and subject to the
conditions set forth in this Agreement, and has further authorized the issuance
of one Right (as such number may hereafter be adjusted pursuant to the
provisions of Section 11) with respect to each Common Share that shall become
outstanding (i) at any time between the Record Date and the earliest of the
Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are defined in this Agreement) or (ii) upon the exercise or conversion,
prior to the earlier of the Redemption Date or the Final Expiration Date, of any
option or other security exercisable for or convertible into Common Shares,
which option or other such security is outstanding on the Distribution 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 defined
in this Agreement) who or which, together with all Affiliates and Associates (as
such terms are defined in this Agreement) of such Person, shall be the
Beneficial Owner (as such term is defined in this Agreement) of the Threshold
Percentage (as such term is defined in this Agreement) or more of the Common
Shares of the Company then outstanding, but shall not include an Exempt Person
(as such term is defined in this Agreement). Notwithstanding the foregoing, no
Person shall become an "Acquiring Person" as the result of an acquisition of
Common Shares by the Company which, by reducing the number of Common Shares
outstanding, increases the proportionate number of shares beneficially owned by
such Person to at least the Threshold Percentage of the Common Shares of the
Company then outstanding; provided, HOWEVER, that if a Person shall, together
with all Affiliates or Associates of such Person, become the Beneficial Owner of
at least the Threshold Percentage of the Common Shares of the Company then
outstanding by reason of share acquisitions by the Company and if such Person or
such Person's Affiliates or Associates shall, after such share acquisitions by
the Company, become the Beneficial Owner of any additional Common Shares of the
Company, and, immediately after becoming the Beneficial Owner of such additional
Common Shares, such Person shall, together with all Affiliates and Associates of
such Person, be the Beneficial Owner of the Threshold Percentage or more of the
Common Shares of the Company then outstanding, then such Person
(unless such Person shall be an Exempt Person) shall be deemed an "Acquiring
Person." An entity other than the Company or any Subsidiary of the Company
holding Common Shares for or pursuant to the terms of an employee benefit plan
of the Company or of any Subsidiary of the Company and in addition being the
Beneficial Owner of Common Shares that are not held for or pursuant to the terms
of any such plan shall be deemed to constitute an Acquiring Person,
notwithstanding anything herein stated, if, but only if, it, together with its
Affiliates and Associates, shall be the Beneficial Owner of at least the
Threshold Percentage, exclusive of those Common Shares held by it for or
pursuant to the terms of any such plan, of the Common Shares then outstanding.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person," as defined pursuant to the foregoing provisions of this paragraph, has
become such inadvertently (including, without limitation, because (A) such
Person was unaware that it beneficially owned a percentage of the Common Shares
that would otherwise cause such Person to be an "Acquiring Person" or (B) such
Person was aware of the extent of its beneficial ownership but had no actual
knowledge of the consequences of such beneficial ownership under this
Agreement), and without any intention of changing or influencing control of the
Company, and such Person divests as promptly as practical a sufficient number of
Common Shares so that such Person would no longer be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph, then such Person
shall not be deemed to be an "Acquiring Person" for any purposes of 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 (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own" or have "beneficial ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, including without
limitation securities with respect to which such Person or any of such Person's
Affiliates or Associates has "beneficial ownership" pursuant to Rule 13d-3 of
the General Rules and Regulations under the Exchange Act;
(ii) which such Person or any of such Person's Affiliates or
Associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or after the passage of time) pursuant to 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), or upon the exercise
of conversion rights, exchange rights, other rights (other than the Rights),
warrants or options, or otherwise; PROVIDED, HOWEVER, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, or to have beneficial
ownership of, any securities pursuant to subparagraph (i), (ii) or (iii) of this
paragraph (c) solely because such securities are 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 or dispose of (including without
limitation pursuant to any agreement, arrangement or understanding (whether or
not in writing)); PROVIDED, however, that a Person shall not be deemed
2
the Beneficial Owner of, or to beneficially own, or to have beneficial ownership
of, any securities pursuant to subparagraph (i), (ii) or (iii) of this paragraph
(c) solely because of the right to vote such securities pursuant to an
agreement, arrangement or understanding if the agreement, arrangement or
understanding to vote such securities (1) arises solely from a revocable proxy
or consent given to such Person or any of such Person's Affiliates or Associates
in response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Exchange Act and
(2) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report) as being beneficially owned
by such Person; or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (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
pursuant to a revocable proxy as described in the final proviso to subparagraph
(ii) of this paragraph (c)) or disposing of any voting securities of the
Company.
Notwithstanding anything in these definitions of "Beneficial Owner,"
"beneficially own" or "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 beneficially own
under this Agreement.
(d) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in the State of New York or Minnesota are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M.,
Minneapolis, Minnesota time, on such date; PROVIDED, HOWEVER, that if such date
is not a Business Day, it shall mean 5:00 P.M., Minneapolis, Minnesota time, on
the next succeeding Business Day.
(f) "Common Shares," when used with reference to the Company, shall
mean the Common Stock, par value $.01 per share, of the Company. "Common
Shares," when used with reference to any Person other than the Company, shall
mean the capital stock (or equity interest) with the greatest voting power of
such other Person.
(g) "Distribution Date" shall have the meaning set forth in Section 3.
(h) "Exempt Person" shall mean (i) the Company, (ii) any Subsidiary of
the Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company, or (iv) any Person holding Common Shares for or pursuant to the
terms of any such plan described in clause (iii) of this sentence.
(i) "Final Expiration Date" shall have the meaning set forth in Section
7.
3
(j) "Person" shall mean any individual, firm, corporation, partnership
or other entity, and shall include any successor (by merger or otherwise) of any
such entity.
(k) "Series B Preferred Shares" shall mean Series B Junior
Participating Preferred Shares, par value $.01 per share (as such par value may
be changed from time to time), of the Company having the rights and preferences
set forth in the Form of Certificate of Designation, Preferences and Rights
attached to this Agreement as Exhibit A hereto.
(l) "Redemption Date" shall have the meaning set forth in Section 7.
(m) "Section 11(a)(ii) Event" shall mean an event described in the
first sentence of Section 11 (a)(ii).
(n) "Section 13 Event" shall mean any event described in clauses (w),
(x), (y) or (z) of Section 13(a).
(o) "Shares 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.
(p) "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 other equity interests entitled to vote in the election of directors (or
Persons with comparable responsibilities if the entity has no directors) is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.
(q) "Threshold Percentage" shall mean 15 percent.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3, shall prior to the Distribution Date also be the
holders of the Common Shares) in accordance with the terms and conditions of
this Agreement, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issue of Right Certificates.
(a) Until the earlier of (i) the Close of Business on the 15th day
after the Shares Acquisition Date or (ii) the Close of Business on the 15th day
(or such later date as may be determined by action of the Board of Directors of
the Company prior to such time as any Person becomes an Acquiring Person) after
the date of the first public announcement (as defined in Rule 14d-2 of the
General Rules and Regulations under the Exchange Act) by any Person (other than
an Exempt Person) relating to a tender offer or an exchange offer the
consummation of which would result in beneficial ownership by a Person (other
than an Exempt Person) of at least the Threshold Percentage of the then
outstanding Common Shares (including any such date that is
4
after the date of this Agreement and prior to the issuance of the Rights, the
earlier of such dates being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates where
the context so requires) and not by separate Right Certificates, and (y) the
right to receive Right Certificates will be transferable only in connection with
the transfer of Common Shares. 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, postage-prepaid mail, to each record holder of
Common Shares as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more Right
Certificates, in substantially the form of Exhibit B hereto (the "Right
Certificates"), evidencing one Right for each Common Share so held, subject to
adjustment pursuant to Section 11(i). In the event that an adjustment in the
number of Rights per Common Share has been made pursuant to Section 11(i), at
the time Right Certificates are distributed, the Company may, to the extent
provided in Section 14(a), make the necessary and appropriate adjustments (as
set forth in Section 14(a)) so that Right Certificates are distributed
representing only whole numbers of Rights and pay cash in lieu of fractional
Rights pursuant to Section 14(a). As of and after the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Series B Preferred
Shares, in substantially the form of Exhibit C hereto (the "Summary of Rights"),
by first-class, postage-prepaid mail, to each record holder of Common Shares 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 Shares
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders
thereof, and the registered holders of the Common Shares shall also be the
registered holders of the associated Rights. 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 Shares 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 associated with the Common Shares
represented thereby.
(c) Certificates for Common Shares which become outstanding after the
Record Date and (i) prior to the earliest of the Distribution Date, the
Redemption Date or the Final Expiration Date, or (ii) upon the exercise or
conversion, prior to the earlier of the Redemption Date or the Final Expiration
Date, of any option or other security exercisable for or convertible into Common
Shares, which option or other security is outstanding on the Distribution Date,
shall have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in a Share Rights
Agreement between APA Optics, Inc. and ▇▇▇▇▇ Fargo Bank
Minnesota, N.A., dated as of October 23, 2000 (the "Rights
Agreement"), the terms of which (including restrictions on the
transfer of such Rights) are hereby incorporated herein by
reference and a copy of which is on file
5
with the Secretary at the principal executive offices of the
Company. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor to its Secretary
from such holder. Under certain circumstances, as set forth in
the Rights Agreement, Rights that are or were acquired or
beneficially owned by an Acquiring Person or any Associate or
Affiliate thereof (as such terms are defined in the Rights
Agreement) may become null and void.
With respect to certificates containing the foregoing legend, until the earliest
of the Distribution Date, the Redemption Date or the Final Expiration Date, the
Rights associated with the Common Shares represented by such certificates shall
be evidenced by such certificates alone, the registered holders of the Common
Shares shall also be the registered holders of the associated Rights and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby. In
the event that the Company purchases or acquires any Common Shares after the
Record Date but prior to the Distribution Date, any Rights associated with such
Common Shares shall be deemed canceled and retired so that the Company shall not
be entitled to exercise any Rights associated with the Common Shares which are
no longer outstanding.
Section 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase Series B Preferred Shares and of assignment to be
printed on the reverse thereof) shall be in substantially the form of Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law, rule or regulation
(including, without limitation, any rule or regulation of any stock exchange on
which the Rights may from time to time be listed) or to conform to usage or to
reflect adjustments to the Rights made pursuant to this Agreement. Subject to
the provisions of Section 11 and Section 22, the initial Right Certificates,
whenever distributed, shall entitle the holders thereof to purchase such number
of one one-hundredths of a Series B Preferred Share as shall be set forth
therein at the price per one one-hundredth of a Series B Preferred Share set
forth therein (the price per one-hundredth of a Series B Preferred Share being
herein called the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price shall be
subject to adjustment as provided in this Agreement.
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company
by any one of its Chief Executive Officer, its President, its Chief Financial
Officer or any of its Vice Presidents, either manually or by facsimile
signature. The Right Certificates shall be countersigned, either manually or by
facsimile signature, by the Rights Agent and shall not be valid for any purpose
unless so countersigned. In case any officer of the Company who shall have
signed any of the Right Certificates shall cease to be such officer of the
Company before
6
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right 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 Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the signing of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this 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 or the office or offices designated as
the appropriate place for surrender of Right Certificates upon exercise or
transfer, books for registration and transfer of the Right Certificates. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Lost, Stolen, Destroyed or Mutilated Right Certificates.
(a) 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
Right Certificate or Right Certificates (other than Right Certificates
representing 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 Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a Series B Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Right Certificate or Right Certificates shall make
such request in writing delivered to the Rights Agent and shall surrender the
Right Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office or offices of the Rights Agent designated for such
purpose. Thereupon the Rights Agent shall, subject to Section 14 hereof,
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment by the registered holder 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 Right Certificates. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate until the
registered holder shall have duly completed and executed the form of assignment
on the reverse side of such Right Certificate and shall have provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of such Right Certificate or Affiliates or Associates thereof
as the Company shall reasonably request.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right 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 Right
7
Certificate if mutilated, the Company will make and deliver a new Right
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Right Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights, Purchase Price, Expiration Date of
Rights.
(a) Subject to Section 11(a)(ii) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided in this Agreement) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly completed and executed, to
the Rights Agent at the office or offices of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each one
one-hundredth of a Series B Preferred Share as to which the Rights are
exercised, prior to the earliest of (i) the Close of Business on November 13,
2010 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24.
(b) The Purchase Price for each one one-hundredth of a Series B
Preferred Share purchasable pursuant to the exercise of a Right shall initially
be $80.00, shall be subject to adjustment from time to time as provided in
Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly completed and 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 Right Certificate in accordance with Section 9 in cash, or by certified
check or bank cashier's check or money order payable to the order of the
Company, the Rights Agent shall, subject to Section 20(k), thereupon promptly
(i)(A) requisition from any transfer agent of the Series B Preferred Shares (or
make available, if the Rights Agent is the transfer agent for such shares)
certificates for the number of Series B Preferred Shares to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of Series B Preferred Shares issuable upon exercise of the Rights under this
Agreement with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-hundredths of a Series B
Preferred Share as are to be purchased (in which case certificates for the
Series B Preferred Shares represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
interests in shares in accordance with Section 14, (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 Right Certificate, registered in such
name or names as may be designated by such holder and (iv) when appropriate,
after receipt, deliver such cash for fractional interests in shares to or upon
the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights
8
remaining unexercised shall be issued by the Rights Agent and delivered to the
registered holder of such Right Certificate or to such holder's duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section unless such registered holder shall have (i) duly
completed and executed the form of election to purchase set forth on the reverse
side of the Right Certificate surrendered for such exercise and (ii) provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of such Right Certificate or Affiliates or Associates thereof
as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All
Right Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company within eighteen months after
cancellation of the Certificates. The Company may then destroy the Certificates,
after any Securities and Exchange Commission required retention period.
Section 9. Reservation and Availability of Series B Preferred Shares.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Series B Preferred Shares,
the number of Series B Preferred Shares that will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) The Company will prepare and file, as soon as practicable following
expiration of the Company's right of redemption pursuant to Section 23, a
registration statement under the Securities Act of 1933, as amended (the "Act"),
with respect to the Rights and the Company's securities purchasable upon
exercise of the Rights, on an appropriate form, and use its best efforts to
cause such registration statement to (i) become effective as soon as practicable
after such filing and (ii) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities or (B) the Final
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed 90 days after the
date the registration statement is filed, the exercisability of the Rights in
order to permit the registration statement to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any
9
jurisdiction if the requisite qualification in such jurisdiction shall not have
been obtained or the exercise thereof is not permitted under applicable law.
(c) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Series B Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
Series B Preferred Shares (subject to payment of the Purchase Price and any
applicable transfer taxes), be duly and validly authorized and issued and fully
paid and nonassessable shares.
(d) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any Series B Preferred Shares upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax that may be payable in respect
of any transfer or delivery of Right Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Series B
Preferred Shares in a name other than that of, the registered holder of the
Right Certificate evidencing Rights surrendered for exercise, or to issue or to
deliver any certificates or depositary receipts for Series B Preferred Shares
upon the exercise of any Rights, until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Series B Preferred Shares Record Date. Each person in whose
name any certificate for Series B Preferred Shares is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Series B Preferred Shares represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price (and any applicable
transfer taxes) was made; PROVIDED, HOWEVER, that if the date of such surrender
and payment is a date upon which the Series B Preferred Shares transfer books of
the Company are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Series B Preferred Shares transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate as such shall not be entitled to any rights of a
holder of Series B Preferred Shares for which the Rights shall be exercisable,
including without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Series B Preferred Shares payable
in Series B Preferred Shares, (B) subdivide the outstanding Series B Preferred
Shares, (C) combine the outstanding Series B Preferred Shares into a smaller
number of Series B Preferred Shares or (D) issue any
10
shares of its capital stock in a reclassification of the Series B Preferred
Shares (including any such reclassification in connection with a consolidation,
merger or statutory share exchange in which the Company is the continuing,
surviving or acquiring corporation), except as otherwise provided in this
Section 11(a), 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 pursuant to the exercise of the Rights, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in effect (and any
applicable transfer taxes), the aggregate number and kind of shares of capital
stock which, if such Right had been exercised immediately prior to such date and
at a time when the Series B Preferred Shares transfer books of the Company were
open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in this
Section 11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event any
Person shall become an Acquiring Person (other than pursuant to any Section 13
Event occurring after the Distribution Date or within 15 days prior thereto),
proper provision shall be made so that each holder of a Right, subject to
Section 11(a)(iii), shall thereafter have a right to receive, upon exercise
thereof by payment of the amount equal to the product of the number of one
one-hundredths of a Series B Preferred Share which would otherwise be issuable
upon exercise of a Right and the then current Purchase Price in accordance with
the terms of this Agreement, in lieu of Series B Preferred Shares, such number
of Common Shares of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Series B Preferred Share for which a Right is exercisable immediately prior
to the occurrence of the Section 11(a)(ii) Event and (y) dividing that product
by 50% of the then current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date of such occurrence.
From and after the first occurrence of a Section 11(a)(ii) Event or a
Section 13 Event, any Rights that are beneficially owned by any Acquiring Person
(or any Associate or Affiliate thereof) or were beneficially owned by any
Acquiring Person (or any Associate or Affiliate thereof) after the Acquiring
Person became an Acquiring Person shall become null and void without any further
action and no holder of such Rights shall thereafter have any rights to exercise
such Rights or any other rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. No Right Certificate shall
be issued pursuant to Section 3 that represents Rights that would be void
pursuant to the preceding sentence; no Right Certificate shall be issued at any
time upon the transfer of any Rights to or from an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
of such an Acquiring Person or any nominee of such Acquiring Person, Associate
or Affiliate; and any Right Certificate delivered to the Rights Agent for
transfer to or from an Acquiring Person or any Associate or Affiliate of such
Acquiring Person whose Rights would be void pursuant to the preceding sentence
shall be canceled. The Company shall use all reasonable efforts to insure that
the provisions of this Section 11(a)(ii) are complied with, but shall have no
11
liability to any holder of a Right Certificate or other Person as a result of
its failure in good faith to make any determinations with respect to an
Acquiring Person or its Affiliates or Associates.
(iii) If, on the date of the occurrence of a Section 11(a)(ii)
Event (the "Adjustment Date"), the Company does not have sufficient authorized,
unissued and unreserved Common Shares available to permit the exercise in full
of all Rights that are exercisable on the Adjustment Date for the number of
Common Shares per Right provided for in Section 11(a)(ii), then the Exercise
Price (as defined below) and the number of Common Shares to be delivered by the
Company upon exercise of a Right shall be further adjusted as provided in this
subparagraph (iii).
(1) Definitions:
(A) The "Aggregate Market Value" is the product of (i) the
number of Available Shares and (ii) the current per share market price of the
Common Shares on the Adjustment Date, determined as provided in Section 11(d)
hereof.
(B) The "Available Shares" are all unreserved Common Shares
which are authorized and unissued immediately prior to the Adjustment Date.
(C) The "Exercise Price" is the amount of the payment that
must be made by the holder of a Right in connection with the exercise of one
Right immediately prior to the Adjustment Date.
(D) The "Deficiency" is the amount by which (i) two times
the Exercise Price exceeds (ii) the quotient obtained by dividing the Aggregate
Market Value by the number of Rights remaining outstanding immediately prior to
the Adjustment Date (the "Remaining Rights") (which number shall not include the
Rights that are beneficially owned by any Acquiring Person (or any Associate or
Affiliate thereof) or were beneficially owned by any Acquiring Person (or any
Associate or Affiliate thereof) after the Acquiring Person became an Acquiring
Person that shall have become void pursuant to Section 11(a)(ii) hereof).
(2) If the Deficiency is less than or equal to the Exercise
Price, then
(A) the number of Common Shares to be delivered by the
Company upon exercise of a Right shall be adjusted to be equal to the number of
Available Shares divided by the number of Remaining Rights; and
(B) the amount of cash required to be delivered by the
holder of a Right upon the exercise thereof shall be adjusted (the "New Exercise
Price") to equal the Exercise Price minus the Deficiency; PROVIDED, HOWEVER,
that in no event will the New Exercise Price be less than the aggregate par
value of the Common Shares required to be delivered upon the exercise of one
Right pursuant to subparagraph (2)(A) above.
(3) If the Deficiency is greater than the Exercise Price, then
12
(A) the number of Common Shares to be delivered by the
Company upon exercise of a Right shall be adjusted to equal the quotient
obtained by dividing the Exercise Price by the current per share market price of
the Common Shares on the Adjustment Date;
(B) the New Exercise Price shall equal the aggregate
par value of the Common Shares required to be delivered upon the exercise of one
Right pursuant to subparagraph (3)(A) above; and
(C) in lieu of issuing Common Shares (in whole or in
part upon the exercise of Rights) the Company may issue, upon the exercise of
Rights at the New Exercise Price, other equity securities of the Company
(including, without limitation, shares, or units or fractions of shares, of
preferred stock) which the Board of Directors of the Company has determined to
have substantially the same value, voting rights and other rights as Common
Shares (such equity securities are herein called "Common Share equivalents"). To
the extent that such Common Share equivalents (or fractions thereof) are
substituted for Common Shares upon exercise of the Rights following the
occurrence of a Section 11(a)(ii) Event, they shall be substituted on a pro-rata
basis with respect to all Rights (other than Rights that are beneficially owned
by any Acquiring Person (or any Associate or Affiliate thereof) or were
beneficially owned by any Acquiring Person (or any Associate or Affiliate
thereof) after the Acquiring Person became an Acquiring Person that shall have
become void pursuant to Section 11(a)(ii) hereof). Such Common Share equivalents
shall not be included in Available Shares, and all of the Available Shares shall
be reserved, as of the Adjustment Date, for issuance, on a pro-rata basis, upon
exercise of the Rights and may not be substituted for with Common Share
equivalents upon the exercise of any Right except to the extent that the number
of Common Shares required to be delivered under subparagraph (3)(A) upon the
exercise of such Right exceeds the quotient of the number of Available Shares
divided by the number of Remaining Rights.
(4) If, at the time any adjustment is required pursuant to
this 11(a)(iii), the Common Shares shall have no par value, then for the
purposes of this Section 11(a)(iii), the par value of the Common Shares shall be
deemed to be $.0l per share.
(5) In the event that there shall not be sufficient authorized
but unissued and unreserved Common Shares (or Common Share equivalents the
issuance of which is permitted under Section 11(a)(iii)(3)(C)) to permit the
exercise in full of the Rights in accordance with this subparagraph (iii), the
Company shall use its best efforts to cause the authorization of sufficient
additional Common Shares or Common Share equivalents to permit such exercise
and, if the Board of Directors of the Company shall determine in good faith that
it is likely that sufficient additional Common Shares or Common Share
equivalents could be authorized to permit such exercise, the Company may suspend
the exercisability of the Rights for a period not to exceed 90 days in order to
seek any authorization of additional Common Shares or other Common Share
equivalents. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect.
13
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Series B Preferred Shares
entitling them (for a period expiring within 45 calendar days after such record
date) to subscribe for or purchase Series B Preferred Shares (or shares having
the same rights, privileges and preferences as the Series B Preferred Shares
("equivalent preferred shares")) or securities convertible into Series B
Preferred Shares or equivalent preferred shares at a price per Series B
Preferred Share or equivalent preferred share (or having a conversion price per
share, if a security convertible into Series B Preferred Shares or equivalent
preferred shares) less than the current per share market price of the Series B
Preferred Shares (as determined pursuant to Section 11(d) hereof) 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 Series
B Preferred Shares outstanding on such record date, plus the number of Series B
Preferred Shares which the aggregate offering price of the total number of
Series B Preferred Shares and/or equivalent preferred shares so to be offered
(and/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 Series B Preferred Shares
outstanding on such record date, plus the number of additional Series B
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
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 and shall be binding on the Rights Agent and the
holders of the Rights. Series B Preferred Shares owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights or warrants are not so
issued, the Purchase Price shall again 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 Series B Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation or in a statutory share
exchange) of evidences of indebtedness or cash or non-cash assets (other than a
regular quarterly cash dividend or a dividend payable in Series B Preferred
Shares) 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 Series B Preferred Shares (as
determined pursuant to Section 11(d) hereof) on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the evidences of indebtedness or cash or non-cash
assets so to be distributed on, or of such subscription rights or warrants
applicable to, one Series B Preferred Share, and the denominator of which shall
be such then current per share market price of the Series B Preferred Shares;
PROVIDED, HOWEVER, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock
14
of the Company to be issued upon exercise of one Right. Such adjustments shall
be made successively whenever such a record date is fixed; and in the event that
such distribution is not so made, the Purchase Price shall again be adjusted to
be the Purchase Price that 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 30 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
such Security or securities convertible into such Security (other than the
Rights) or (B) any subdivision, combination or reclassification of such
Security, and prior to the expiration of 30 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 quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported on the
Nasdaq National Market or the Nasdaq SmallCap Market or such other system then
in use, or, if on any such day the Security is not so quoted or reported, the
average of the closing bid 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. Except as provided in Section 11(d)(ii) with respect to Series B
Preferred Shares, if on any such day the Security is not publicly held or no
professional market maker is making a market in the Security, the fair value of
such Security on such day as determined in good faith by the Board of Directors
of the Company (whose determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and the holders of the
Rights) shall be used in lieu of the closing price for such day. 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) If the Series B Preferred Shares are not publicly held or
traded in a manner described in Section 11(d)(i) hereof, then, notwithstanding
anything to the contrary provided in Section 11(d)(i) hereof, the "current per
share market price" of the Series B Preferred Shares shall be conclusively
deemed to be the current per share market price of the Common Shares as
determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date of
this Agreement) multiplied by one hundred. If neither the Common Shares nor the
Series B Preferred Shares are publicly held or so
15
traded, the "current per share market price" of the Series B Preferred Shares
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights.
(e) Except as provided in the third sentence of this Section 11(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 Series B Preferred
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, but for the first sentence of this Section 11(e),
shall be made no later than the earlier of (i) three years from the date of the
transaction that requires such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13(a), the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Series B Preferred
Shares, thereafter the number of such other shares so receivable upon exercise
of any 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
Series B Preferred Shares contained in Section 11(a) through (c), inclusive, and
the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Series B
Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price under this Agreement shall evidence the
right to purchase, at the adjusted Purchase Price, the number of one
one-hundredths of a Series B Preferred Share (or other securities) purchasable
from time to time under this Agreement upon exercise of the Rights, all subject
to further adjustment as provided in this Agreement.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
Series B Preferred Share (calculated to the nearest one one-millionth of a
Series B Preferred Share) obtained by (i) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a Series B Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a Series B Preferred Share for which a Right was
exercisable
16
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued on or after the Distribution Date, shall be at
least 10 days later than the date of the public announcement. If Right
Certificates have been issued on or after the Distribution Date, upon each
adjustment of the number of Rights pursuant to this Section 11(i) the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Right Certificates on such record date Right Certificates evidencing, subject
to Section 14 hereof, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Right
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Right Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for in this Agreement, shall
bear the adjusted Purchase Price, and shall be registered in the names of the
holders of record of Right Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a Series B Preferred Share issuable upon the
exercise of the Rights, the Right Certificates theretofore issued may continue
to express the Purchase Price and the number of one one-hundredths of a Series B
Preferred Share which were expressed at the time of the issuance of such Right
Certificates under this Agreement.
(k) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date of
the Series B Preferred Shares and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the Series B
Preferred Shares 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.
(1) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board of Directors of the Company shall determine to be
advisable in order that any (i) consolidation or subdivision of the Series B
Preferred Shares, (ii) issuance wholly for cash of any of the Series B Preferred
Shares at less than the current per share market price, (iii) issuance wholly
for cash of Series B Preferred Shares or securities which by their terms are
convertible into or exchangeable for Series B Preferred
17
Shares, (iv) dividends on Series B Preferred Shares payable in Series B
Preferred Shares or (v) issuance of rights, options or warrants referred to in
Section 11(b) hereof, hereafter made by the Company to holders of its Series B
Preferred Shares shall not be taxable to such shareholders.
(m) Anything in this Agreement or the Rights to the contrary
notwithstanding, in the event that at any time after the date of this Agreement
and prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Shares payable in Common Shares or (ii) effect a
subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common Shares,
then in any such case (x) the number of one one-hundredths of a Series B
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-hundredths of a Series
B Preferred Share so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event and (y) each Common Share outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each Common Share outstanding immediately prior to such event had
issued with respect to it. The adjustments provided for in this Section 11(m)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected. If an event occurs
which would require an adjustment under Section 11(a)(ii) and this Section
11(m), the adjustments provided for in this Section 11(m) shall be in addition
and prior to any adjustment required pursuant to Section 11(a)(ii).
(n) If any adjustment in the Purchase Price pursuant to paragraph (b)
or (c) of this Section 11 would not be permitted by law, under the Company's
Articles of Incorporation or under the Certificate of Designation, Preferences
and Rights establishing the Series B Preferred Shares, no such issuance of
securities or distribution of evidences of indebtedness or other assets or
subscription rights or warrants, as the case may be, that would require such an
adjustment but for the limitations established by law, the Company's Articles of
Incorporation or such Certificate of Designation, Preferences and Rights shall
be made by the Company.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Common Shares or the
Series B Preferred Shares a copy of such certificate and (c) if such adjustment
is made after the Distribution Date, mail a brief summary thereof to each holder
of record of a Right Certificate in accordance with Section 26. The Rights Agent
shall be fully protected in relying on such certificate and on any adjustment
therein contained.
Section 13. Consolidation, Merger, Statutory Share Exchange or Sale or
Transfer of Assets or Earning Power.
(a) In the event, after the Distribution Date or within 15 days prior
thereto, directly or indirectly,
18
(w) 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,
(x) any Person shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding Common Shares of the
Company held by existing shareholders of the Company shall be changed into or
exchanged for stock or other securities of any other Person (or the Company) or
money or any other property (except as a result of the exercise of statutory
dissenters' rights),
(y) the Company shall effect a statutory share exchange with
outstanding Common Shares of the Company being exchanged for stock or other
securities of any other Person, money or other property, or
(z) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one transaction
or a series of related transactions, assets or earning power aggregating 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 one or
more of its wholly owned Subsidiaries),
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof by payment of the amount equal
to the product of the number of one one-hundredths of a Series B Preferred Share
which would otherwise be issuable upon exercise of a Right and the then current
Purchase Price in accordance with the terms of this Agreement and in lieu of
Series B Preferred Shares, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable Common Shares of the Principal Party
(as hereinafter defined), not subject to any liens, encumbrances, rights of
first refusal or adverse claims, as shall be equal to the result obtained by (x)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Series B Preferred Share for which a Right is, immediately prior to the
occurrence of the Section 13 Event, exercisable and (y) dividing that product by
50% of the then current per share market price of the Common Shares of such
Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such merger,
consolidation, statutory share exchange, sale or transfer, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall thereafter be deemed to refer to such Principal Party; and (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares to permit the exercise
of all outstanding Rights) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
Common Shares thereafter deliverable upon the exercise of the Rights.
19
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clauses (w),
(x) or (y) of the first sentence of Section 13(a), the Person (including,
without limitation, the Company as successor thereto or as the surviving
corporation) that is the issuer of any securities into which Common Shares of
the Company are converted in such merger, consolidation or exchange, or if no
securities are so issued, the Person that is the other party to such merger,
consolidation or exchange; and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;
PROVIDED, HOWEVER, that in any such case, (1) if the Common Shares of such
Person are not at such time or have not been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common Shares of which
are and have been so registered, "Principal Party" shall refer to such other
Person, and (2) in case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the Common Shares having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized, unreserved Common
Shares which have not been issued or are held in treasury to permit the exercise
in full of the Rights in accordance with this Section 13 and unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and further providing that, as soon
as practicable after the date of any Section 13 Event, the Principal Party will:
(i) prepare and file a registration statement under the Act,
with respect to the Rights and the securities purchasable upon exercise of the
Rights, on an appropriate form, and use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (1) the date as of which the
Rights are no longer exercisable for such securities or (2) the Final Expiration
Date;
(ii) take such action as may be appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercisability of the Rights; and
(iii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
(d) The 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
20
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.
The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, statutory share exchanges or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there may be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported on the Nasdaq National Market
or the Nasdaq SmallCap Market or such other system then in use or, if on any
such date the Rights are not so quoted or reported, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Rights selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Rights, the fair value of
the Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used in lieu of the closing price for such day.
(b) The Company shall not be required to issue fractions of Series B
Preferred Shares (other than fractions that are integral multiples of one
one-hundredth of a Series B Preferred Share, or, if a Right shall then be
exercisable for a fraction other than one one-hundredth of a Series B Preferred
Share, integral multiples of that fraction) upon exercise of the Rights or to
distribute certificates which evidence fractions of Series B Preferred Shares
(other than fractions that are integral multiples of one one-hundredth of a
Series B Preferred Share or, if a Right shall then be exercisable for a fraction
other than one one-hundredth of a Series B Preferred Share, integral multiples
of that fraction). Fractions of Series B Preferred Shares in integral multiples
of one one-hundredth of a Series B Preferred Share or, if a Right shall then be
exercisable for a fraction other than one one-hundredth of a Series B Preferred
Share, integral multiples of that fraction may, at the election of the Company,
be evidenced by depositary receipts pursuant to an appropriate agreement between
the Company and a depositary selected by it, PROVIDED, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Series B Preferred Shares represented by such depositary receipts. In lieu
of fractional Series B Preferred
21
Shares that are not integral multiples of one one-hundredth of a Series B
Preferred Share, or, if a Right shall then be exercisable for a fraction other
than one one-hundredth of a Series B Preferred Share, integral multiples of that
fraction, the Company may pay to the registered holders of Right Certificates at
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one Series B Preferred Share.
For purposes of this Section 14(b), the current market value of a Series B
Preferred Share shall be the closing price of a Series B Preferred Share (as
determined pursuant to Section 11(d)(ii)) for the Trading Day immediately prior
to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives such holder's right to receive any fractional Rights or any fractional
shares (except as provided above) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of any Common Share), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of any other Common Share), may, in such holder's own behalf
and for such holder's own benefit, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise the Rights evidenced by such Right
Certificate (or, prior to the Distribution Date, the associated Common Share
certificate) in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Share certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificate or the associated Common Share certificate
made by anyone other than the Company or the Rights Agent) for all purposes
22
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary;
(d) the Company may issue Rights after the Record Date as provided in
this Agreement; and
(e) notwithstanding anything in this Agreement or the Rights to the
contrary, the Company, the Rights Agent and the Board of Directors of the
Company shall not have any liability to any holder of a Right or other Person as
a result of the inability of the Company or the Rights Agent to perform any of
its obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Right Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Series B Preferred
Shares or any other securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall anything contained
in this Agreement or in any Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions of this Agreement.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it under this Agreement 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 under this Agreement.
The Company also agrees to indemnify the Rights Agent for, and to hold it
harmless against, any loss, liability or expense (including the costs and
expenses of defending against any claim of liability), 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.
(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 Right
Certificate or certificate for the Series B Preferred Shares or Common Shares or
for other securities of the Company, instrument of assignment or transfer, power
of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of its counsel as set
forth in Section 20 hereof.
23
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
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement; PROVIDED, HOWEVER, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. If at the time such successor Rights Agent
shall succeed to the agency created by this Agreement any of the Right
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 Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right 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 Right Certificates shall have the full force provided in the
Right 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 Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right 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 Right Certificates
(or, prior to the Distribution Date, the Common Share certificates), by their
acceptance of the Rights, 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
(including, without limitation, the identity of any Acquiring Person and the
determination of the "current per share market price") be proved or established
by the Company prior to taking or suffering any action under this Agreement,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chief Executive Officer, the
President, the Chief Financial Officer, any Vice President or the Secretary of
the Company and delivered to the Rights Agent; and such
24
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.
(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 Right
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the 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 evidenced by Right Certificates after actual
notice that such change or adjustment is required); nor shall it by any act
under this Agreement be deemed to make any representation or warranty as to the
authorization or reservation of any Series B Preferred Shares or Common Shares
to be issued pursuant to this Agreement or any Right Certificate or as to
whether any Series B Preferred Shares or Common Shares 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 under this Agreement
from any one of the Chief Executive Officer, the President, the Chief Financial
Officer, any 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 to be taken by it in good
faith in accordance with instructions of any such officer or for delay in acting
while waiting for those instructions.
(h) The Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company or its Subsidiaries may be interested, or contract with or
lend money to the Company or its Subsidiaries or otherwise act as fully and
freely as though it were not Rights Agent under this Agreement. Nothing in this
25
Agreement shall preclude the Rights Agent from acting in any other capacity for
the Company or its Subsidiaries 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 under this Agreement either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties under this Agreement or in the exercise of its
rights or powers if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the form of assignment or form of election to
purchase, as the case may be, has either not been duly completed and executed or
indicates an affirmative response to enumerated clause 1 and/or 2 on the reverse
side of the applicable Right Certificate, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer without first
consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Shares and Series B Preferred Shares by registered or certified
mail, and, if such notice is mailed after the Distribution Date, to the holders
of the Right Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon 30 days' notice in writing mailed to
the Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Shares and Series B Preferred Shares by registered
or certified mail, and, if such notice is mailed after the Distribution Date, to
the holders of the Right Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit such holder's Right
Certificate for inspection by the Company), then the registered holder of any
Right 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) a corporation organized and
doing business under the laws of the United States or of the State of Minnesota
or New York (or of any other state of the United States so long as such
corporation is authorized to do business as a banking institution in the State
of Minnesota or New York), in good standing, having an office in the State of
Minnesota or New York which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its
26
appointment as Rights Agent a combined capital and surplus of at least $50
million or (b) an affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it under this Agreement and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Common
Shares and Series B Preferred Shares, and, if such notice is filed after the
Distribution Date, mail a notice thereof in writing to the registered holders of
the Right Certificates. Failure to give any notice provided for in this Section,
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 Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
Section 23. Redemption.
(a) Subject to the provisions of Section 27, the Board of Directors of
the Company may, at its option, at any time prior to the earlier of (x) the
Close of Business on the Shares Acquisition Date or (y) the Close of Business on
the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of this Agreement (such redemption price being
hereinafter referred to as the "Redemption Price"). The Redemption Price shall
be payable in cash by the Company. The redemption of the Rights by the Board of
Directors of the Company may be made effective at such time and on such basis
and with such conditions as the Board of Directors of the Company in its sole
discretion may establish. Except for the obligation to pay the Redemption Price,
the Board of Directors and the Company shall not have any liability to any
Person as a result of the redemption of Rights pursuant to the terms of this
Section 23.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights pursuant to paragraph (a) of this
Section 23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors of the Company ordering the
redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the transfer agent for the Common Shares; PROVIDED, HOWEVER,
that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. Any notice which is mailed in the manner provided
in this paragraph shall be
27
deemed given whether or not the holder receives the notice. The notice of
redemption will state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner
except as specifically set forth in this Section or in Section 24 or in
connection with the purchase of Common Shares prior to the Distribution Date.
Section 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any
time after the date the Rights first become exercisable for Common Shares
pursuant to Section 11(a)(ii), exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Shares, with
each Right to be exchanged for such number of Common Shares as shall equal the
result obtained by dividing (x) the Exercise Price (as defined in Section
11(a)(iii)) by (y) the current per share market price of the Common Shares
(determined pursuant to Section 11(d)) on the date the Rights first become
exercisable for Common Shares pursuant to Section 11(a)(ii) (such number of
shares being hereinafter referred to as the "Exchange Ratio"). The Exchange
Ratio shall be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction affecting the Common Shares that occurs after the date
the Rights first become exercisable for Common Shares pursuant to Section
11(a)(ii). Notwithstanding the foregoing, the Board of Directors of the Company
shall not be empowered to effect such exchange at any time after any Person
(other than an Exempt Person), together with all Affiliates and Associates of
such Person, becomes the Beneficial Owner of 50% or more of the Common Shares
then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to paragraph (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of Common Shares equal to the
number of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; PROVIDED,
HOWEVER, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall promptly mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. The notice of exchange will state the method
by which the exchange of the Common Shares for Rights will be effected and, in
the event of any partial exchange, the number of Rights which will be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights
(other than Rights which have become void pursuant to the provisions of Section
11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
authorized, unissued and unreserved to permit the exchange of Rights as
contemplated in accordance with this Section 24, the Company, at its option, may
substitute Series B Preferred Shares (or equivalent preferred shares, as such
term is defined in Section 11(b), or Common Share equivalents, as such term is
defined in Section 11(a)(iii)(3)(C) hereof), for Common Shares exchangeable for
Rights, at the initial rate of one one-hundredth of a Series B Preferred Share
(or equivalent preferred share) or
28
one Common Share equivalent for each Common Share, as appropriately adjusted to
reflect stock splits, stock dividends or similar transactions affecting the
Common Shares that occur after the date of this Agreement.
(d) In the event that there shall not be sufficient Common Shares,
Series B Preferred Shares, equivalent preferred shares or Common Share
equivalents, authorized, unissued and unreserved to permit the exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional Common Shares
or Series B Preferred Shares, equivalent preferred shares or Common Share
equivalents for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares. In
lieu of such fractional Common Shares, the Company may pay to the registered
holders of the Right Certificates with regard to which such fractional Common
Shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Share. For the purposes of this
paragraph (e), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of 11(d)(i) hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section. The Board of Directors and the Company shall
not have any liability to any Person as a result of the exchange of Rights
pursuant to the terms of this Section.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of its Series B Preferred Shares or to make any other distribution to
the holders of its Series B Preferred Shares (other than a regular quarterly
cash dividend), or (ii) to offer to the holders of its Series B Preferred Shares
rights or warrants to subscribe for or to purchase any additional Series B
Preferred Shares or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Series B Preferred
Shares (other than a reclassification involving only the subdivision of
outstanding Series B Preferred Shares), or (iv) to effect any consolidation or
merger into or with any other Person, or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer), in one transaction or a series of related transactions, of 50% or
more of the assets or earning power of the Company and its Subsidiaries (taken
as a whole) to any other Person or Persons (other than the Company and/or any of
its wholly owned Subsidiaries), or (v) to effect any statutory share exchange
with outstanding Common Shares of the Company being exchanged for stock or other
securities of any other corporation or money or other property, or (vi) to
effect the liquidation, dissolution or winding-up of the Company, or (vii) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise), then, in each such case, the Company shall give
to each holder of a Right Certificate, to the extent feasible and in accordance
with Section 26, 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, exchange, liquidation, dissolution, or winding-up is to take
place and the date of participation therein by the holders of the Common Shares
and/or Series B Preferred
29
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least 10 days
prior to the record date for determining holders of the Series B Preferred
Shares for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Shares and/or Series
B Preferred Shares, whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each holder of
a Right Certificate, in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii).
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 Right 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:
APA Optics, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
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:
▇▇▇▇▇ Fargo Bank Minnesota, N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇. ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Stock Transfer Manager
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right 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 maintained by the Rights Agent.
Section 27. Supplements and Amendments. The Company may and the Rights
Agent shall, if so directed by the Company, from time to time supplement or
amend this Agreement without the approval of any holders of Common Shares or
Right Certificates in order (i) to extend the Final Expiration Date, (ii) to
cure any ambiguity, or to correct or supplement any provision contained in this
Agreement which may be defective or inconsistent with any other provisions in
this Agreement, (iii) prior to the Distribution Date, to otherwise change or
supplement any provision in this Agreement in any manner which the Company may
deem necessary or desirable, or (iv) following the Distribution Date, to
otherwise change or supplement any provision in this Agreement in any manner
which the Company may deem
30
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than Right Certificates evidencing Rights
that shall have become null and void pursuant to Section 11(a)(ii)). Without
limiting the foregoing, the Company may at any time prior to such time as any
Person becomes an Acquiring Person amend this Agreement to lower the Threshold
Percentage set forth in Sections l(q) and 3(a) hereof to not less than the
greater of (i) the sum of .001% and the largest percentage of the outstanding
Common Shares then known by the Company to be beneficially owned by any Person
(other than an Exempt Person) or (ii) 10%.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement.
(a) Nothing in this Agreement shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
Common Shares) any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the registered holders of Common Shares).
(b) The Board of Directors of the Company shall have the exclusive
power and total and complete authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors or
the Company or necessary or advisable in the administration of this Agreement,
including without limitation the right and power to interpret this Agreement and
to make conclusively all determinations deemed necessary or advisable for the
administration of this Agreement. All such acts, calculations, interpretations
and determinations (including, for purposes of clause (y) below, all omissions
with respect to the foregoing) that are done or made by the Board of Directors
in good faith shall (x) be final, conclusive and binding on the Company, the
Rights Agent and the holders of the Rights and all other parties and (y) not
subject the Board of Directors to any liability to the holders of the Rights or
any other party.
Section 30. 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 31. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Minnesota and for all purposes shall be governed by and construed in
accordance with the laws of the State of Minnesota applicable to contracts to be
made and performed entirely within such state.
31
Section 32. 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 33. 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 of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
APA OPTICS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
Its: Chief Executive Officer
▇▇▇▇▇ FARGO BANK MINNESOTA, N.A.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Its: Assistant Vice President
32
EXHIBIT A
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES B
JUNIOR PARTICIPATING PREFERRED SHARES OF
APA OPTICS, INC.
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the Secretary of APA Optics, Inc., a corporation
organized and existing under the Business Corporation Act of the State of
Minnesota, in accordance with the provisions of Section 302A.401 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the corporation, as amended (the
"Articles of Incorporation"), the Board of Directors on October 23, 2000,
adopted the following resolution creating a series of preferred stock, par value
$.01 per share, designated as Series B Junior Participating Preferred Shares:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the corporation in accordance with the provisions of its
Restated Articles of Incorporation, as amended, a series of preferred stock of
this corporation be, and it hereby is, created from the undesignated shares of
the corporation, and that the designation and amount thereof and the relative
rights and preferences of the shares of such series, are as follows:
1. Designation and Amount. The shares of such series shall be
designated as "Series B Junior Participating Preferred Shares" (the "Series B
Preferred Shares"), the par value of the shares constituting such series shall
be $.01 per share and the number of shares constituting such series shall be
Five Hundred Thousand (500,000). The number of shares constituting such series
may, unless prohibited by the Articles of Incorporation or by applicable law of
the State of Minnesota, be increased or decreased by resolution of the Board of
Directors; PROVIDED, that no decrease shall reduce the number of Series B
Preferred Shares to a number less than the number of shares then outstanding
plus the number of shares issuable upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the corporation convertible into Series B Preferred Shares.
2. Dividends and Distributions.
(i) The holders of Series B Preferred Shares, in preference to the
holders of Common Stock, par value $.01 per share, of the Company (the "Common
Shares") 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, quarterly dividends payable in cash on the last day of March, June,
September, and December in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a Series B Preferred Share, or fraction
thereof, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter
set forth, one hundred (100) times the aggregate per share amount of all cash
dividends, and one hundred (100) times the aggregate per share amount (payable
in kind) of all non-cash dividends or other distributions, other than a dividend
payable in Common Shares or a subdivision of the outstanding Common Shares (by
reclassification or otherwise),
1
declared on the Common Shares since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any Series B Preferred Share, or fraction thereof.
In the event the corporation shall at any time after November 13, 2000, declare
or pay any dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common Shares,
then in each such case the amount to which holders of Series B Preferred Shares
were entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(ii) The corporation shall declare a dividend or distribution on the
Series B Preferred Shares as provided in subparagraph (i) of this paragraph 2
simultaneously with its declaration of a dividend or distribution on the Common
Shares (other than a dividend payable in Common Shares or a subdivision of the
outstanding Common Shares); PROVIDED that, in the event no dividend or
distribution shall have been declared on the Common Shares during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series B Preferred
Shares shall nevertheless be payable, out of funds legally available for such
purpose, on such subsequent Quarterly Dividend Payment Date.
(iii) Dividends shall begin to accrue and be cumulative on
outstanding Series B Preferred Shares from their date of issue. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the Series B
Preferred Shares in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares outstanding at that time. The Board
of Directors may fix a record date for the determination of holders of Series B
Preferred Shares entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be not more than sixty (60) days prior
to the date fixed for the payment thereof.
3. Voting Rights. The holders of Series B Preferred Shares shall have
the following voting rights:
(i) Subject to the provision for adjustment hereinafter set forth,
each Series B Preferred Share shall entitle the holder thereof to one hundred
(100) votes on all matters submitted to a vote of the shareholders of the
corporation. In the event the corporation shall at any time after November 13,
2000, declare or pay any dividend on Common Shares payable in Common Shares, or
effect a subdivision or combination or consolidation of the outstanding Common
Shares (by reclassification or otherwise) into a greater or lesser number of
Common Shares, then in each such case the number of votes per share to which
holders of Series B Preferred Shares were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction, the numerator
of which is the number of Common Shares outstanding immediately after such event
and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
2
(ii) Except as otherwise provided herein, in any other
Certificate of Designation, Preferences and Rights creating a series of
Preferred Stock or by law, the holders of Series B Preferred Shares and the
holders of Common Shares and any other capital shares of the corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of the shareholders of the corporation.
(iii) Except as otherwise provided herein or by law, the
holders of Series B Preferred Shares 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 Shares and any other capital stock of the
corporation having general voting rights as set forth herein) for taking any
corporate action.
4. Certain Restrictions.
(i) Whenever quarterly dividends or other dividends or distributions
payable on the Series B Preferred Shares as provided in paragraph 2 hereof are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on Series B Preferred Shares outstanding
shall have been paid in full, the corporation shall not:
(a) 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 B Preferred Shares;
(b) 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 B Preferred Shares,
except dividends paid ratably on the Series B Preferred Shares 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;
(c) 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 B Preferred Shares, PROVIDED that the
corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of stock of the corporation ranking
junior (both as to dividends and upon liquidation, dissolution or winding-up) to
the Series B Preferred Shares; or
(d) redeem or purchase or otherwise acquire for consideration
any Series B Preferred Shares, or any shares of stock ranking on a parity with
the Series B Preferred Shares, 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.
(ii) 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
3
corporation could, under subparagraph (i) of this paragraph 4, purchase or
otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any Series B Preferred Shares purchased or
otherwise acquired by the corporation in any manner whatsoever shall constitute
authorized but unissued shares and may be reissued as part of a new series of
shares by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Certificate of Designation, Preferences and
Rights creating a series of capital stock or as otherwise required by law.
6. Liquidation, Dissolution or Winding-Up. Upon any liquidation,
dissolution or winding-up of the corporation, no distributions shall be made (a)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding-up) to the Series B Preferred Shares unless,
prior thereto, the holders of Series B Preferred Shares shall have received the
greater of (i) $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (ii) an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to one hundred (100) times the
aggregate amount to be distributed per share to holders of Common Shares, or (b)
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 B Preferred
Shares, except distributions made ratably on the Series B Preferred Shares and
all other such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding-up. In the event the corporation shall at any time after November 13,
2000, declare or pay any dividend on the Common Shares payable in Common Shares,
or effect a subdivision or combination or consolidation of the outstanding
Common Shares (by reclassification or otherwise) into a greater or lesser number
of Common Shares, then in each such case the aggregate amount to which holders
of Series B Preferred Shares were entitled immediately prior to such event under
clause (a)(ii) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
7. Consolidation, Merger, Exchange, etc. In case the corporation shall
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series B Preferred Shares 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 one hundred (100) times the aggregate amount of
stock, securities, money and/or any other property (payable in kind), as the
case may be, into which or for which each Common Share is changed or exchanged.
In the event the corporation shall at any time after November 13, 2000, declare
or pay any dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common Shares,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of Series B Preferred Shares shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of Common Shares outstanding immediately after such
4
event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
8. No Redemption. The Series B Preferred Shares shall not be
redeemable.
9. Rank. The Series B Preferred Shares shall rank junior in terms of
dividend and liquidation, dissolution and winding-up rights to all series of the
corporation's Preferred Stock hereafter issued that specifically provide that
they shall rank senior to the Series B Preferred Shares.
10. Fractional Shares. Series B Preferred Shares may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to receive dividends, participate in distributions
and to have the benefit of all other rights of holders of Series B Preferred
Shares.
IN WITNESS WHEREOF, I have executed this Certificate of Designation,
Preferences and Rights this __ day of November, 2000.
---------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Secretary
5
EXHIBIT B
[FORM OF RIGHT CERTIFICATE]
Certificate No. R- _____________ Rights
---------------
NOT EXERCISABLE AFTER ___________, 2010 OR SUCH EARLIER DATE AS THE
BOARD OF DIRECTORS ORDERS REDEMPTION OR EXCHANGE OF THE RIGHTS. THE RIGHTS ARE
SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT (SUBJECT
TO ADJUSTMENT) AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE SHARE RIGHTS AGREEMENT, RIGHTS THAT
ARE OR WERE ACQUIRED OR BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
SHARE RIGHTS AGREEMENT) MAY BECOME NULL AND VOID.
Right Certificate
APA OPTICS, INC.
This certifies that, ___________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Share
Rights Agreement dated as of October 23, 2000 (the "Rights Agreement") between
APA Optics, Inc., a Minnesota corporation (the "Company"), and ▇▇▇▇▇ Fargo Bank
Minnesota, N.A. (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 P.M. (Minneapolis, Minnesota time) on November 13, 2010 at the
office or offices of the Rights Agent designated for such purpose, or of its
successor as Rights Agent, one one-hundredth of a fully paid, nonassessable
Series B Junior Participating Preferred Share, par value $.01 per share (the
"Series B Preferred Shares"), of the Company, at a purchase price of $80.00 per
one one-hundredth of a Series B Preferred Share (the "Purchase Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase duly completed and executed. The number of Rights evidenced by this
Right Certificate (and the number of one one-hundredths of a Series B Preferred
Share which may be purchased upon exercise thereof) set forth above, and the
Purchase Price set forth above, are, except for adjustments required pursuant to
the Rights Agreement, the number and Purchase Price as of November 13, 2000,
based on the Series B Preferred Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number
of one one-hundredths of a Series B Preferred Share which may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
1
This Right 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 which
contains 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 Right Certificates (which limitations of rights include the voiding of
the Rights under certain circumstances specified in the Rights Agreement).
Copies of the Rights Agreement are on file with the Secretary at the principal
executive office of the Company and will be mailed without charge by the Company
or the Rights Agent to the holder of this certificate promptly following receipt
by the Company or the Rights Agent of a written request therefor.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), any Rights evidenced by this Right Certificate
that are beneficially owned by an Acquiring Person or an Associate or Affiliate
of such Acquiring Person (as such terms are defined in the Rights Agreement) or
were beneficially owned by any Acquiring Person or an Associate or Affiliate of
such Acquiring Person after the Acquiring Person becomes an Acquiring Person
shall be null and void from and after the occurrence of such Section 11(a)(ii)
Event, and any holder of such Rights shall thereafter have no right to exercise
such Rights under any provision of the Rights Agreement.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of one one-hundredths of a Series B Preferred Share as the
Rights evidenced by the Right Certificate or Right Certificates surrendered then
entitled such holder to purchase. If this Right Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Right Certificate or Right Certificates for the number of Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate (i) may, but are not required to, be redeemed by the
Company at a redemption price of $.001 per Right, subject to adjustment as
provided in the Rights Agreement, payable in cash and (ii) may, but are not
required to, be exchanged by the Company in whole or in part for Common Shares
or other shares of capital stock of the Company. The Board of Directors of the
Company and the Company shall not have any liability to any person as a result
of the redemption or exchange of the Rights pursuant to the provisions of the
Rights Agreement.
No fractional Series B Preferred Shares will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractional shares
which are integral multiples of one one-hundredth of a Series B Preferred Share
or, if a Right shall then be exercisable for a fraction other than one
one-hundredth of a Series B Preferred Share, integral multiples of that
fraction, which may, at the election of the Company, be evidenced by depositary
receipts), if in lieu thereof a cash payment is made, as provided in the Rights
Agreement.
2
No holder of this Right Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Series B
Preferred Shares or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a 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 or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the manual or facsimile signature of the proper officer of the
Company.
Dated:
------------------------
APA OPTICS, INC.
By:
------------------------
Its:
------------------------
Countersigned:
▇▇▇▇▇ FARGO BANK MINNESOTA, N.A.
By:
-----------------------------
Authorized Manual or
Facsimile Signature
3
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
--------------------
--------------------------------------------------------------------------------
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ______________________ Attorney,
to transfer the within Right Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
-------------------------
--------------------------------
Signature
Signature Medallion Guaranteed:
Signatures must be medallion guaranteed by a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States or by an eligible guarantor institution
(bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended.
4
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
[ ] are
or
[ ] are not
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who, at
any time that such Person beneficially owned such Rights, is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
------------------------------------
Signature
NOTICE
The signature on the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
5
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
TO: APA OPTICS, INC.
The undersigned hereby irrevocably elects to exercise ___________Rights
represented by this Right Certificate to purchase the Series B Preferred Shares
issuable upon the exercise of such Rights (or such other securities of the
Company or of any other person which may be issuable upon exercise of the
Rights) and requests that certificates for such 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 shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
---------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Please print name and address)
Dated: __________________
------------------------------
Signature
Signature Medallion Guaranteed:
Signatures must be medallion guaranteed by a member firm of a
registered national securities exchange, a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States or by an eligible guarantor institution
(bank, stockbroker, savings and loan association or credit union with membership
in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15
promulgated under the Securities Exchange Act of 1934, as amended.
6
CERTIFICATE
The undersigned hereby certifies (after due inquiry and to the best of
its knowledge) by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate
[ ] are
or
[ ] are not
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who, at
any time that such Person beneficially owned such Rights, is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
------------------------------
Signature
NOTICE
The signature on the foregoing Election to Exercise and Certificate
must correspond to the name as written upon the face of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
7
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE
SERIES B PREFERRED SHARES
OF
APA OPTICS, INC.
On October 23, 2000, the Board of Directors of APA Optics, Inc. (the
"Company"), declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of Common Stock, par value $.01 per share
(the "Common Shares"), of the Company. The dividend is payable on November 13,
2000 (the "Record Date") to shareholders of record on that date.
Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a Series B Junior Participating Preferred Share, par value
$.01 per share (the "Series B Preferred Shares"), of the Company at a price of
$80.00 per one one-hundredth of a Series B Preferred Share (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Share Rights Agreement (the "Rights Agreement"), dated as of October
23, 2000, between the Company and ▇▇▇▇▇ Fargo Bank Minnesota, N.A., as Rights
Agent (the "Rights Agent").
Initially, the Rights will attach to all certificates representing
Common Shares then outstanding and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares and a Distribution
Date for the Rights will occur, subject to certain exceptions, upon the earlier
of:
(i) the close of business on the fifteenth day following a
public announcement that a person or group of affiliated or associated persons
has become an "Acquiring Person" (i.e., has become, subject to certain
exceptions, the beneficial owner of 15% or more of the outstanding Common
Shares); or
(ii) the close of business on the fifteenth day following the
commencement or public announcement of a tender offer or exchange offer the
consummation of which would result in a person or group of affiliated or
associated persons becoming, subject to certain exceptions, the beneficial owner
of 15% or more of the outstanding Common Shares.
Until the Distribution Date,
(i) the Rights will be evidenced by the Common Share
certificates and will be transferred with and only with the Common Shares,
(ii) new Common Share certificates issued after the Record
Date upon transfer or new issuance of the Common Shares will contain a notation
incorporating the Rights Agreement by reference, and
1
(iii) the surrender for transfer of any Common Share
certificate, even without such notation or a copy of this Summary of Rights
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.
As promptly as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on November 13, 2010, unless extended or earlier redeemed or
exchanged by the Company as described below.
The Purchase Price payable, and the number of Series B Preferred Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution:
(i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Series B Preferred Shares,
(ii) upon the grant to holders of the Series B Preferred
Shares of certain rights, options or warrants to subscribe for or purchase
Series B Preferred Shares or convertible securities at less than the then
current market price of the Series B Preferred Shares, or
(iii) upon the distribution to holders of the Series B
Preferred Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends or dividends payable in Series B Preferred Shares) or of
subscription rights or warrants (other than those described in clause (ii)
hereof).
The number of Series B Preferred Shares issuable upon the exercise of a
Right is also subject to adjustment in the event of a dividend on Common Shares
payable in Common Shares, or a subdivision, combination or consolidation of the
Common Shares.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
the Purchase Price. No fractional Series B Preferred Shares will be issued
(other than fractional shares which are integral multiples of one one-hundredth
(subject to adjustment) of a Series B Preferred Share, which may, at the
election of the Company, be evidenced by depositary receipts) if in lieu thereof
a payment in cash is made based on the closing price (pro-rated for the
fraction) of the Series B Preferred Shares on the last trading date prior to the
date of exercise.
In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights that are or were beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise thereof at the then current exercise price of the Right
that number of Common Shares having a market value of two times the
2
exercise price of the Right, subject to certain possible adjustments. For
example, if the exercise price were $80, each holder of a Right would be
entitled to purchase $160 in market value of Common Shares for $80.
In the event that, after the Distribution Date or within 15 days prior
thereto, the Company is acquired in certain mergers or other business
combination transactions or 50% or more of the assets or earning power of the
Company and its subsidiaries (taken as a whole) are sold after the Distribution
Date or within 15 days prior thereto in one transaction or a series of related
transactions, each holder of a Right (other than Rights which have become void
under the terms of the Rights Agreement) will thereafter have the right to
receive, upon exercise thereof at the then current exercise price of the Right,
that number of common shares of the acquiring company (or, in certain cases, one
of its affiliates) having a market value of two times the exercise price of the
Right. Thus, if the exercise price were $80, each holder of a Right would be
entitled to purchase $160 in market value of common shares of the acquiring
company for $80.
In certain events specified in the Rights Agreement, the Company is
permitted to temporarily suspend the exercisability of the Rights.
At any time after a person or group of affiliated or associated persons
becomes an Acquiring Person (subject to certain exceptions) and prior to the
acquisition by a person or group of affiliated or associated persons of 50% or
more of the outstanding Common Shares, the Board of Directors of the Company may
exchange all or part of the Rights (other than Rights which have become void
under the terms of the Rights Agreement) for Common Shares or equivalent
securities at an exchange ratio per Right equal to the result obtained by
dividing the exercise price of a Right by the current per share market price of
the Common Shares, subject to adjustment.
At any time prior to the close of business on the date of a public
announcement that a person or group of affiliated or associated persons has
become an Acquiring Person, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.001 per Right, subject to
adjustment (the "Redemption Price"), payable in cash. The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish. The
Board of Directors and the Company shall not have any liability to any person as
a result of the redemption or exchange of the Rights pursuant to the provisions
of the Rights Agreement.
The terms of the Rights may be amended by the Board of Directors of the
Company, subject to certain limitations after the Distribution Date, without the
consent of the holders of the Rights, including an amendment prior to the date a
person or group of affiliated or associated persons becomes an Acquiring Person,
to lower the 15% threshold for exercisability of the Rights to not less than the
greater of (i) the sum of .001% and the largest percentage of the outstanding
Common Shares then known by the Company to be beneficially owned by any person
or group of affiliated or associated persons (subject to certain exceptions) or
(ii) 10%.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
3
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
November 8, 2000.
A copy of the Rights Agreement is available free of charge from the
Company by contacting the Secretary at APA Optics, Inc., ▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. This summary description of the Rights does not purport
to be complete and is qualified in its entirety by reference to the Rights
Agreement, which is hereby incorporated herein by reference.
4