Exhibit 4.2
RIGHTS AGREEMENT
Dated as of May 24, 2002
between
N2H2, INC.
and
MELLON INVESTOR SERVICES LLC
as Rights Agent
TABLE OF CONTENTS
PAGE
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1. Certain Definitions.................................................................1
2. Appointment of Rights Agent.........................................................5
3. Issuance of Rights Certificates.....................................................5
4. Form of Rights Certificates.........................................................7
5. Countersignature and Registration...................................................8
6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates.......................................8
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.......................9
8. Cancellation and Destruction of Rights Certificates................................11
9. Reservation and Availability of Preferred Shares...................................11
10. Preferred Shares Record Date.......................................................12
11. Adjustment of Purchase Price, Number of Shares or Number of Rights.................13
12. Certificate of Adjusted Purchase Price or Number of Shares.........................20
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...............21
14. Fractional Rights and Fractional Shares............................................23
15. Rights of Action...................................................................24
16. Agreement of Rights Holders........................................................25
17. Rights Certificate Holder Not Deemed a Shareholder.................................25
18. Concerning the Rights Agent........................................................25
19. Merger or Consolidation or Change of Name of Rights Agent..........................26
20. Duties of Rights Agent.............................................................26
21. Change of Rights Agent.............................................................29
22. Issuance of New Rights Certificates................................................30
23. Redemption.........................................................................30
24. Exchange...........................................................................31
25. Notice of Certain Events...........................................................33
26. Notices............................................................................33
27. Supplements and Amendments.........................................................34
28. Successors.........................................................................34
29. Determinations and Actions by the Board of Directors, etc..........................34
30. Benefits of this Agreement.........................................................35
31. Severability.......................................................................35
32. Governing Law......................................................................35
33. Counterparts.......................................................................35
34. Descriptive Headings...............................................................35
EXHIBITS
-i-
N2H2, INC.
RIGHTS AGREEMENT
Rights Agreement, dated as of May 24, 2002 (the "Agreement"), between
N2H2, Inc., a Washington corporation (the "Company"), and Mellon Investor
Services LLC, a New Jersey limited liability company, as Rights Agent (the
"Rights Agent").
RECITALS
On May 24, 2002 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend of one preferred
share purchase right (a "Right") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on May 31, 2002 (the "Record Date"), each Right representing the right to
purchase one one-thousandth of a share of Series A Participating Cumulative
Preferred Stock (as such number may be adjusted pursuant to the provisions of
this Agreement), having the rights, preferences and privileges set forth in the
form of Designation of Rights and Preferences of Series A Participating
Cumulative Preferred Stock attached to this Agreement as Exhibit A, upon the
terms and subject to the conditions herein set forth, and further authorized and
directed the issuance of one Right (as such number may be adjusted pursuant to
the provisions of this Agreement) with respect to each Common Share that shall
become outstanding between the Record Date and the earlier of the Distribution
Date and the Expiration Date (as such terms are hereinafter defined), and in
certain circumstances after the Distribution Date.
AGREEMENT
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as hereinafter defined)
who or which, together with all Affiliates and Associates (as such terms are
hereinafter defined) of such Person, shall be the Beneficial Owner (as
hereinafter defined) of 15% or more of the Common Shares then outstanding, but
shall not include the Company, any Subsidiary (as hereinafter defined) of the
Company or any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person holding Common Shares for or pursuant to the terms of any
such plan. Notwithstanding the foregoing, no Person shall be deemed to be an
Acquiring Person as the result of an acquisition of Common Shares by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% or more of the Common
Shares of the Company then outstanding; provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding by reason of share purchases by the Company and shall,
after such share purchases by the Company, become the Beneficial Owner of any
additional Common Shares of the Company (other than pursuant to a dividend or
distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), then such Person shall be deemed to be an
Acquiring Person unless upon becoming the Beneficial Owner of such additional
Common Shares of the Company such Person does not beneficially own 15% or more
of the Common Shares of the Company then outstanding. Notwithstanding the
foregoing, (i) if the Board of Directors determines in good faith that a Person
who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), 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," as defined pursuant to the foregoing
provisions of this Section 1(a) or (B) such Person was aware of the extent of
the Common Shares it beneficially owned 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 if such Person
divested or divests as promptly as practicable 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 Section 1(a), then such Person
shall not be deemed to be or to have become an "Acquiring Person" for any
purposes of this Agreement; and (ii) if, as of the date hereof, any Person is
the Beneficial Owner of 15% or more of the Common Shares outstanding, such
Person shall not be or become an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), unless and until such time as such
Person shall become the Beneficial Owner of additional Common Shares (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Person is not then the Beneficial Owner of
15% or more of the Common Shares then outstanding.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, 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, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not be deemed
pursuant to this Section l(c)(ii)(A) to be the Beneficial Owner of, or to
beneficially own, (1) securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange
or (2) securities which a Person or any of such Person's Affiliates or
Associates may be deemed to have the right to acquire pursuant to any merger or
other acquisition agreement
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between the Company and such Person (or one or more of its Affiliates or
Associates) if such agreement has been approved by the Board of Directors prior
to a Triggering Event; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security under this
Section l(c)(ii)(B) if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person's Affiliates or Associates has any agreement, arrangement
or understanding (whether or not in writing) (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section l(c)(ii)(B))
or disposing of any securities of the Company; provided, however, that in no
case shall an officer or director of the Company be deemed (x) the Beneficial
Owner of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such Persons in their capacity
as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director, by
reason of any influence that such officer or director may have over the voting
of the securities held in the plan.
(d) "Board of Directors" shall mean the Board of Directors of the
Company then in office.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the States of New Jersey or Washington
are authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 p.m.,
Seattle, Washington time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 p.m., Seattle, Washington time, on the
next succeeding Business Day.
(g) "Common Shares" when used with reference to the Company shall
mean the shares of common stock of the Company, no par value. "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 or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(h) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day (or such later date as may be determined by action of
a majority of the Board of Directors) after the Shares Acquisition Date (or, if
the tenth day after the Shares Acquisition Date occurs before the Record Date,
the Close of Business on the Record Date) or (ii) the Close of Business on the
tenth day (or such later date as may be determined by action of a majority of
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the Board of Directors) after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if,
assuming the successful consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding.
(i) "Equivalent Shares" shall mean Preferred Shares and any other
class or series of capital stock of the Company that is entitled to participate
in dividends and other distributions, including distributions upon the
liquidation, dissolution or winding up of the Company, on a proportional basis
with the Common Shares. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11 of this Agreement, the number of
shares, or fractions of a share, of such class or series of capital stock that
is entitled to the same dividend or distribution as a whole Common Share shall
be deemed to be one share.
(j) "Expiration Date" shall mean the earliest of (i) the Close of
Business on the Final Expiration Date, (ii) the Redemption Date, (iii) the time
at which the Board of Directors orders the exchange of the Rights as provided in
Section 24 of this Agreement or (iv) the consummation of a transaction
contemplated by Section 13(a) of this Agreement.
(k) "Final Expiration Date" shall mean May 24, 2012.
(l) "Person" shall mean any individual, firm, corporation, limited
liability company, partnership, trust or other entity, and shall include any
successor (by merger or otherwise) thereof or thereto.
(m) "Preferred Shares" shall mean shares of Series A Participating
Cumulative Preferred Stock of the Company.
(n) "Purchase Price" shall have the meaning set forth in Section 4(a)
of this Agreement.
(o) "Record Date" shall have the meaning set forth in the recitals at
the beginning of this Agreement.
(p) "Redemption Date" shall mean the time at which the Board of
Directors orders redemption of the Rights as provided in Section 23 of this
Agreement.
(q) "Redemption Price" shall have the meaning set forth in Section
23(a) of this Agreement.
(r) "Right" shall have the meaning set forth in the recitals at the
beginning of this Agreement.
(s) "Rights Certificate" shall have the meaning set forth in Section
3(a) of this Agreement.
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(t) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(u) "Section 13 Event" shall mean any event described in clause (i),
(ii) or (iii) of Section 13(a) of this Agreement.
(v) "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;
provided that, if such person is determined not to have become an Acquiring
Person pursuant to Section l(a) of this Agreement, then no Shares Acquisition
Date shall be deemed to have occurred.
(w) "Subsidiary" of any Person shall mean any Person of which an
amount of voting securities sufficient to elect a majority of the directors or
Persons having similar authority of such Person is beneficially owned, directly
or indirectly, by such Person, or any Person otherwise controlled by such
Person.
(x) "Total Exercise Price" shall have the meaning set forth in
Section 4(a) of this Agreement.
(y) "Trading Day" shall have the meaning set forth in Section 11(d)
of this Agreement.
(z) A "Triggering Event" shall be deemed to have occurred upon any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any Person
holding Common Shares for or pursuant to the terms of any such plan), together
with all Affiliates and Associates of such Person, becoming an Acquiring Person.
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as rights agent for the Company 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. The Rights Agent shall have no duty to
supervise, and in no event shall be liable for, the acts or omissions of any
such co-Rights Agent.
3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) of this Agreement) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights Certificates
will be transferable only in connection with the transfer of Common Shares.
Until the earlier of the Distribution Date or the Expiration Date, the surrender
for transfer of such certificates for Common Shares shall also constitute the
surrender for transfer of the Rights associated with the Common Shares
represented thereby. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and
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the Company will send or cause to be sent (and the Rights Agent will, if
requested and provided with all necessary information, send) by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate in substantially the form of
Exhibit B to this Agreement (a "Rights Certificate"), evidencing one Right for
each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11(a)(i), Section 11(i) or Section 11(p) of this Agreement,
then at the time of distribution of the Rights Certificates, the Company shall
make the necessary and appropriate rounding adjustments (in accordance with
Section 14(a) of this Agreement) so that Rights Certificates representing only
whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates and may be transferred by the
transfer of the Rights Certificates as permitted hereby, separately and apart
from any transfer of one or more Common Shares, and the holders of such Rights
Certificates as listed in the records of the Company or any transfer agent or
registrar for the Rights shall be the record holders thereof. The Company shall
promptly notify the Rights Agent in writing upon the occurrence of the
Distribution Date and, if such notification is given orally, the Company shall
confirm the same in writing on or prior to the Business Day next following.
Until such notice is received by the Rights Agent, the Rights Agent may presume
conclusively for all purposes that the Distribution Date has not occurred.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send (or cause to be sent) a copy of a Summary of Rights in
substantially the form of Exhibit C to this Agreement (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.
(c) Unless the Board of Directors, by resolution adopted at or before
the time of the issuance (including pursuant to the exercise of rights under the
Company's benefit plans) of any Common Shares, specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the Record
Date but prior to the earlier of the Distribution Date or the Expiration Date
or, in certain circumstances provided in Section 22 of this Agreement, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between N2H2, Inc.
("N2H2") and Mellon Investor Services LLC, as Rights Agent, dated as of
May 24, 2002 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of N2H2. 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. N2H2
will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring
Person or any Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement), whether currently held by or on behalf of such
Person or by any subsequent holder, may become null and void.
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With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, 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.
4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
Preferred Shares and of assignment to be printed on the reverse thereof) shall
be substantially in the form of Exhibit B to this Agreement and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate (but which do
not affect the rights, duties or responsibilities of the Rights Agent) and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 of this Agreement, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date (or in
the case of Rights issued with respect to Common Shares issued by the Company
after the Record Date, as of the date of issuance of such Common Shares), shall
show the date of countersignature by the Rights Agent, and on their face shall
entitle the holders thereof to purchase such number of one-thousandths of a
Preferred Share as shall be set forth therein at the price set forth therein
(such exercise price per one one-thousandth of a Preferred Share being
hereinafter referred to as the "Purchase Price" and the aggregate exercise price
of all Preferred Shares issuable upon exercise of one Right being hereinafter
referred to as the "Total Exercise Price"), but the number and type of
securities purchasable upon the exercise of each Right and the Purchase Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 of this Agreement that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer that the Board of Directors has determined is part of a
plan, arrangement or understanding that has as a primary purpose or effect
avoidance of Section 7(e) of this Agreement, and any Rights Certificate issued
pursuant to Section 6 or Section 11 of this Agreement upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent the Rights Agent has notice thereof and
to the extent feasible) the following legend:
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The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement between N2H2, Inc. and Mellon Investor
Services LLC, as Rights Agent, dated as of May 24, 2002 (the "Rights
Agreement")). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances
specified in Section 7(e) of the Rights Agreement.
5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its President
or any Vice President, either manually or by facsimile signature, and by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal (if any)
or a facsimile thereof. The Rights Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on behalf of the
Company by any Person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
Person was not such an officer.
(b) Following the Distribution Date, receipt by the Rights Agent of
notice to that effect and all other relevant information referred to in Section
3(a) to this Agreement, the Rights Agent will keep or cause to be kept, at its
office designated for such purposes, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Sections 7(e), 14 and 24 of this
Agreement, at any time after the Close of Business on the Distribution Date, and
at or prior to the Close of Business on the Expiration Date, any Rights
Certificate or Rights Certificates (other than Rights Certificates representing
Rights that have become null and void pursuant to Section 7(e) hereof or that
have been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of one-thousandths of
a Preferred Share (or, following a Triggering Event, other securities, cash or
other assets, as the case may be) as the Rights Certificate or Rights
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or
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Rights Certificates shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate or Rights Certificates until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to Sections 7(e), 14 and 24 of this Agreement, countersign and deliver
to the Person entitled thereto a Rights Certificate or Rights Certificates, as
the case may be, as so requested. The Company may require payment from the
holders of Rights Certificates of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates. The Rights Agent shall have
no duty or obligation to take any action under any Section of this Agreement
which requires the payment by a Rights holder of applicable taxes and
governmental charges unless and until the Rights Agent is satisfied that all
such taxes and/or charges have been paid.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security satisfactory to them, and, at the Company's or Rights Agent's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will make and
deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered holder in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Sections 7(e), 23(b) or 24 of this Agreement, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate, with the
form of election to purchase on the reverse side thereof duly executed and
properly completed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the Purchase Price for
each one-thousandth of a Preferred Share as to which the Rights are exercised,
and an amount equal to any tax or charge required to be paid under Section 9(e)
hereof, at or prior to the Expiration Date.
(b) The Purchase Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be $2.75, shall be
subject to adjustment from time to time as provided in Sections 11 and 13 of
this Agreement and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed and properly
completed, accompanied by payment of the Purchase Price for the number of
one-thousandths of a Preferred Share (or other securities or property, as the
case may be) to be purchased and an amount equal to any applicable
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tax or charge required to be paid by the holder of such Rights Certificate in
cash, or by certified check or cashier's check payable to the order of the
Company, the Rights Agent shall, subject to Section 20(k) of this Agreement,
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares (or make available, if the Rights Agent is the transfer agent for the
Preferred Shares) a certificate or certificates for the number of
one-thousandths of a Preferred Share to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests or
(B) if the Company shall have elected to deposit the total number of
one-thousandths of a Preferred Share issuable upon exercise of the Rights
hereunder with a depository agent, requisition from the depository agent of
depository receipts representing such number of one-thousandths of a Preferred
Share as are to be purchased (in which case certificates for the Preferred
Shares represented by such receipts shall be deposited by the transfer agent
with the depository agent) and the Company hereby directs the depository agent
to comply with such request, (ii) when appropriate, requisition from the Company
the amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 14 of this Agreement, (iii) after receipt of such
certificates or depository receipts, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt thereof, deliver such cash to or upon the order of
the registered holder of such Rights Certificate. In the event that the Company
is obligated to issue other securities of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) of this Agreement, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate or to
such registered holder's duly authorized assigns, subject to the provisions of
Section 14 of this Agreement.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event or a Section 13 Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person becomes such (a "Post Transferee"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e) (a "Prior Transferee") or (iv) any subsequent transferee receiving
transferred Rights from a Post Transferee or a Prior Transferee, either directly
or through one or more intermediate transferees, shall become null and void
without any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights or any Rights Certificate which formerly
evidenced such Rights, and neither the Company nor the Rights Agent shall have
any obligations whatsoever with respect to such Rights or any Rights
Certificate, whether under any provision of
10
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) of this
Agreement are complied with, but neither the Company nor the Rights Agent shall
have any liability to any holder of Rights Certificates or to any other Person
as a result of the Company making or failing to make any determinations with
respect to an Acquiring Person or any of such Acquiring Person's Affiliates,
Associates or transferees hereunder or taking or failing to take any actions
with respect to any Rights or Rights Certificates of any such Person.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) properly completed and duly executed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of and to the extent of
its authorized and unissued shares of preferred stock not reserved for another
purpose (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Shares and/or other securities), the
number of Preferred Shares (and, following the occurrence of the Triggering
Event, Common Shares and/or other securities) that will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) If the Company shall hereafter list any of its Preferred Shares
on a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on a national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable (but only to
the extent that it is reasonably likely that the Rights will be exercised), all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
11
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Sections 11(a)(ii)
or 11(a)(iii) of this Agreement, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A) the date as of which the Rights are no
longer exercisable for such securities and (B) the Expiration Date. The Company
may temporarily suspend, for a period not to exceed ninety (90) days after the
date set forth in clause (i) of the first sentence of this Section 9(c), the
exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. Upon any such suspension, the
Company shall issue a public announcement stating, and notify the Rights Agent
in writing, that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement and written notification to the
Rights Agent at such time as the suspension is no longer in effect. 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. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable in any
jurisdiction, unless the requisite qualification in such jurisdiction shall have
been obtained, or an exemption therefrom shall be available, and until a
registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all taxes and governmental charges which may be payable
in respect of the issuance or delivery of the Rights Certificates or of any
Preferred Shares upon the exercise of Rights. The Company shall not, however, be
required to pay any tax or charge which may be payable in respect of any
transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of certificates or depository receipts for the Preferred
Shares in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or to deliver
any certificates or depository receipts for Preferred Shares upon the exercise
of any Rights until any such tax or charge shall have been paid (any such tax or
charge being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's or the Rights
Agent's satisfaction that no such tax or charge is due.
10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for a number of one-thousandths of a Preferred Share is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of Preferred Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
multiplied by the number
12
of one-thousandths of a Preferred Share with respect to which the Rights have
been exercised (and any applicable taxes or governmental charges) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the 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
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a holder of 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.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number and kind of shares or other property covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares (by reverse stock split or otherwise) into a smaller number of
Common Shares, or (D) issue any shares of its capital stock in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11(a) and Section 7(e) of this Agreement: (1) each of
the Rights outstanding at the time of the record date for such dividend or the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Ratio"), the numerator of which shall be the total number of Common Shares or
shares of capital stock issued in such dividend, subdivision, combination or
reclassification of the Common Shares outstanding immediately following such
dividend, subdivision, combination or reclassification and the denominator of
which shall be the total number of Common Shares outstanding immediately prior
to such time, and the number of Rights that shall thereafter be issued with
respect to each Common Share or share of such other capital stock that shall
become outstanding thereafter prior to the Distribution Date shall be equal to
the total number of outstanding Rights immediately after such event (as adjusted
pursuant to this clause (1)) divided by the total number of outstanding Common
Shares or shares of such other capital stock immediately after such event
(subject to further adjustment pursuant to the provisions of this Agreement);
(2) 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 shall be adjusted so that the Purchase Price thereafter shall
equal the result obtained by dividing the Purchase Price in effect immediately
prior to such time by the Exchange Ratio; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of Preferred Shares or shares of
such other capital stock issuable upon the exercise of each Right shall remain
unchanged immediately after such event, but, in the event of a reclassification,
the kind of shares issuable upon the exercise of each Right immediately after
13
such reclassification shall be adjusted to be the kind of shares of such other
capital stock issued in such reclassification, rather than Preferred Shares. If
an event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) of this Agreement, 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) of this Agreement.
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event, proper provision shall be made so that each holder of a Right, except as
provided in Section 7(e) of this Agreement, shall thereafter have the right to
receive for each Right, upon exercise thereof in accordance with the terms of
this Agreement and payment of the then-current Total Exercise Price, in lieu of
a number of one-thousandths of a Preferred Share, such number of Common Shares
of the Company as shall equal the result obtained by multiplying the
then-current Purchase Price by the then number of one-thousandths of a Preferred
Share for which a Right was exercisable (or would have been exercisable if the
Distribution Date had occurred) immediately prior to the first occurrence of a
Triggering Event, and dividing that product by 50% of the current per share
market price (determined pursuant to Section 11(d) of this Agreement) for Common
Shares on the date of occurrence of the Triggering Event (such number of shares
being hereinafter referred to as the "Adjustment Shares"). The Company shall
notify the Rights Agent when this Section 11(a)(ii) applies.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) of this Agreement, the Company may, if the Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights (and, in the event that the number of Common
Shares which are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not been obtained by
the Company, the Company shall): (A) determine the excess of (1) the value of
the Common Shares issuable upon the exercise of a Right (the "Current Value")
over (2) the Purchase Price (such excess, the "Spread") and (B) with respect to
each Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Purchase Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Board of Directors
has deemed to have the same value as Common Shares (such shares or units of
shares of Preferred Stock are herein called "common stock equivalents")), except
to the extent that the Company has not obtained any necessary shareholder or
regulatory approval for such issuance, (4) debt securities of the Company,
except to the extent that the Company has not obtained any necessary shareholder
or regulatory approval for such issuance, (5) other assets or (6) any
combination of the foregoing, having an aggregate value equal to the Current
Value, where such aggregate value has been determined by the Board of Directors
based upon the advice of a nationally recognized investment banking firm
selected by the Board of Directors (which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive and binding on the
Rights Agent, the holders of the Rights and all other Persons); provided,
however, if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the later of (x)
the first occurrence of a Triggering Event and (y) the date on which the
Company's right of redemption pursuant to Section 23(a) expires (the
14
later of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, Common
Shares (to the extent available), except to the extent that the Company has not
obtained any necessary shareholder or regulatory approval for such issuance, and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Board of Directors shall determine in good faith that it
is likely that sufficient additional Common Shares could be authorized for
issuance upon exercise in full of the Rights or that any necessary regulatory
approval for such issuance will be obtained, the thirty (30) day period set
forth above may be extended to the extent necessary (with prompt written notice
of such extension to the Rights Agent), but not more than ninety (90) days after
the Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the "Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) of
this Agreement, that such action shall apply uniformly to all outstanding Rights
and (y) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating, and notify the Rights Agent in
writing, that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement and written notification to the Rights Agent at
such time as the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the current per share market
price (as determined pursuant to Section 11(d) of this Agreement) of the Common
Shares on the Section 11(a)(ii) Trigger Date and the value of any "common stock
equivalent" shall be deemed to have the same value as the Common Shares on such
date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Common Shares or of any class or series of Equivalent Shares
entitling such holders (for a period expiring within forty-five (45) calendar
days after such record date) to subscribe for or purchase Common Shares or
Equivalent Shares or securities convertible into Common Shares or Equivalent
Shares at a price per share (or having a conversion price per share, if a
security convertible into Common Shares or Equivalent Shares) less than the then
current per share market price (as defined in Section 11(d) hereof) of the
Common Shares or Equivalent Shares on such record date, then, in each such case,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Common Shares and
Equivalent Shares (if any) outstanding on such record date, plus the number of
Common Shares or Equivalent Shares, as the case may be, which the aggregate
offering price of the total number of Common Shares or Equivalent Shares, as the
case may be, 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 Common
Shares and Equivalent Shares (if any) outstanding on such record date, plus the
number of additional Common Shares or Equivalent Shares, as the case may be, to
be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In
15
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, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive and
binding on the Rights Agent, the holders of the Rights and all other Persons.
Common Shares and Equivalent 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, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Common Shares or of any class or series of Equivalent Shares (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend, if any, or a dividend
payable in Common Shares) or subscription rights, options or warrants (excluding
those referred to in Section 11(b) hereof), then, in each such case, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the current per share market
price (as determined pursuant to Section 11(d) of this Agreement) of a Common
Share or an Equivalent Share on such record date, less the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive and
binding on the Rights Agent, the holders of the Rights and all other Persons) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a Common
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such current per share market price of a Common Share or Equivalent
Share on such record date. 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 be adjusted to be the Purchase Price which would
have been in effect if such record date had not been fixed.
(d) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) of this Agreement, the "current
per share market price" of any security (a "Security" for the purpose of this
Section 11(d)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to but not
including such date, and for purposes of computations made pursuant to Section
11(a)(iii) of this Agreement, the "current per share market price" of any
Security on any date shall be deemed to be the average of the daily closing
prices per share of such Security for the ten (10) consecutive Trading Days
immediately prior to but not including 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 (i)
a dividend or distribution on such Security payable in shares of such Security
or securities convertible into such shares or (ii) any subdivision, combination
or reclassification of such Security, and prior to the expiration of the
requisite thirty (30) Trading Day or ten (10) Trading Day period, 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
16
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 sale price or,
if such last sale price is not reported, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System ("Nasdaq"),
the Over-the-Counter Bulletin Board of the National Association of Securities
Dealers, Inc. or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors. If on any such date no market
maker is making a market in the Common Shares, the fair value of such shares on
such date as determined in good faith by the Board of Directors (which
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive and binding on the Rights Agent, the holders of the Rights
and all other Persons) shall be used. 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. If the Common Shares are not publicly held or so
listed or traded, "current per share market price" shall mean the fair value per
share as determined in good faith by the Board of Directors, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive and binding for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth of a Common Share or other share or one
hundred-thousandth of a Preferred Share, as the case may be. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction which requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Sections 11(a)
or 13(a) of this Agreement, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Shares, thereafter the number of such other shares so receivable upon exercise
of any Right and if required, the Purchase Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Shares contained in
Sections 11(a), (b), (c), (e), (h), (i), (j), (k), (1) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares
shall apply on like terms to any such other shares.
17
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b), 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 Preferred Shares (calculated to
the nearest one hundred-thousandth of a share) obtained by (i) multiplying (x)
the number of Preferred Shares 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 as a result of the calculations made in Section 11(b) to
adjust the number of Rights, in substitution for any adjustment in the number of
Preferred Shares 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-thousandths of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest 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, and shall promptly
give the Rights Agent a copy of such announcement. This record date may be the
date on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 of this Agreement, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-
18
thousandth of a Preferred Share and the number of one-thousandths of a Preferred
Share which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par or stated value, if any, of the number of
one-thousandths of a Preferred Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue as
fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer (with prompt written notice
thereof to the Rights Agent) until the occurrence of such event the issuing to
the holder of any Right exercised after such record date of the number of
one-thousandths of a Preferred Share and other capital stock or securities of
the Company, if any, issuable upon such exercise over and above the number of
one-thousandths of a Preferred Share and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due ββββ or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
prior to the Distribution Date, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred or Common Shares, (ii) issuance wholly for cash of
any Preferred or Common Shares at less than the current per share market price,
(iii) issuance wholly for cash of Preferred or Common Shares or securities which
by their terms are convertible into or exchangeable for Preferred or Common
Shares, (iv) stock dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company to holders of its
Preferred or Common Shares shall not be taxable to such shareholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Triggering Event or
Section 13 Event, if (i) at the time or immediately after such Triggering Event
or Section 13 Event there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (ii) prior to, simultaneously with or immediately after such Section
13 Event, the shareholders of the Person who constitutes, or would constitute,
the "Principal Party" for purposes of Section 13(b) of this Agreement shall have
received a distribution of Rights previously owned by such Person or any of its
Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 of this
Agreement, take (or permit to be taken) any action if at the time such action is
taken it is reasonably foreseeable that such action
19
will diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares (by reverse stock split or otherwise) into a smaller number of
Preferred Shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11 and Section 7(e) of this Agreement: (1) each of the
Rights outstanding at the time of the record date for such dividend or the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted to that number of Rights (calculated to the nearest one
ten-thousandth (1/10,000) of a Right) equal to a fraction (the "Exchange
Fraction"), the numerator of which shall be the total number of Preferred Shares
or shares of capital stock issued in such reclassification of the Preferred
Shares outstanding immediately following such time and the denominator of which
shall be the total number of Preferred Shares outstanding immediately prior to
such time, and the number of Rights that shall thereafter be issued with respect
to each Common Share or share of other capital stock that shall be issued in a
reclassification of the Common Shares prior to the Distribution Date shall be
equal to the total number of outstanding Rights immediately after such event (as
adjusted pursuant to this clause (1)) divided by the total number of outstanding
Common Shares or shares of such other capital stock immediately after such event
(subject to further adjustment pursuant to the provisions of this Agreement);
(2) 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 shall be adjusted so that the Purchase Price thereafter shall
equal the result obtained by dividing the Purchase Price in effect immediately
prior to such time by the Exchange Fraction; provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of such Right; and (3) the number of one-thousandths of a
Preferred Share or share of such other capital stock issuable upon the exercise
of each Right shall remain unchanged immediately after such event, but, in the
event of a reclassification, the kind of shares issuable upon the exercise of
each Right immediately after such reclassification shall be adjusted to be the
kind of shares of such other capital stock issued in such reclassification,
rather than Preferred Shares.
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES. Whenever
an adjustment is made as provided in Sections 11 and 13 of this Agreement, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the computations and facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 26 of this
Agreement. Notwithstanding the foregoing sentence, the failure of the Company to
make such certification or give such notice shall not affect the validity of
such adjustment or the force or effect of the requirement for such adjustment.
The Rights Agent shall be fully protected in relying on any such certificate and
on any adjustment or statement contained therein and shall
20
have no duty or liability with respect to, and shall not be deemed to have
knowledge of, any such adjustment unless and until it shall have received such
certificate.
13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Shares Acquisition Date,
directly or indirectly:
(i) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction the
principal purpose of which is to change the state of incorporation of the
Company or that does not violate Section 11(o) of this Agreement);
(ii) any Person (other than a Subsidiary of the Company in a
transaction that does not violate Section 11(o) of this Agreement) 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; or
(iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or 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 in one or more transactions, each of which does not violate
Section 11(o) of this Agreement),
then, and in each such case, proper provision shall be made so
that
(A) each holder of a Right (except as otherwise provided
herein) shall thereafter have the right to receive, upon the exercise thereof in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable Common Shares of the Principal Party
(as hereinafter defined), free of any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one-thousandths of
a Preferred Share for which a Right was exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Triggering Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such one-thousandths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Triggering Event by the Purchase
Price in effect immediately prior to such first occurrence) and (2) dividing
that product (which, following the first occurrence of a Section 13 Event, shall
be referred to as the "Total Exercise Price" for each Right and for all purposes
of this Agreement) by 50% of the current per share market price (determined
pursuant to Section 11(d) of this Agreement) of the Common Shares of such
Principal Party on the date of consummation of such Section 13 Event;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement;
21
(C) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 of this Agreement shall apply only to such Principal Party following
the first occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of its Common Shares)
in connection with the consummation of any such transaction as may be necessary
to assure that the provisions of this Agreement shall thereafter be applicable,
as nearly as reasonably may be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean, in the case of any transaction
described in clause (i), (ii) or (iii) of Section 13(a), the Person referred to
therein or such Person's successor, including, if applicable, the Company, if it
is the surviving corporation, provided, however, that in any such case, (i) if
such Person is a direct or indirect Subsidiary of another Person, "Principal
Party" shall refer to such other Person and (ii) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, "Principal Party"
shall refer to whichever of such Persons is the issuer of the Common Shares
having the greatest aggregate value, and provided, further, that for purposes of
transactions described in clause (iii) of this Section 13(b), "Principal Party"
shall refer to that Person receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or transactions.
(c) If, for any reason, the Rights cannot be exercised for Common
Shares of such Principal Party as provided in Section 13(a), then each holder of
Rights shall have the right to exchange its Rights for cash from such Principal
Party in an amount equal to the number of Common Shares that it would otherwise
be entitled to purchase times 50% of the current per share market price, as
determined pursuant to Section 11(d) of this Agreement, of such Common Shares of
such Principal Party. If, for any reason, the foregoing formulation cannot be
applied to determine the cash amount into which the Rights are exchangeable,
then the Board of Directors, based upon the advice of one or more nationally
recognized investment banking firms, and based upon the total value of the
Company, shall determine such amount reasonably and with good faith to the
holders of Rights (which determination shall be described in a statement filed
with the Rights Agent). Any such determination shall be conclusive and binding
on the Rights Agent.
(d) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 13 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement confirming that such Principal Party shall, upon
consummation of such Section 13 Event, assume this Agreement in accordance with
Sections 13(a) and (b) of this Agreement, that all rights of first refusal or
preemptive rights in respect of the issuance of Common Shares of such Principal
Party upon exercise of outstanding Rights have been waived, that there are no
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights and that such transaction shall not result in a default by such Principal
Party under this Agreement,
22
and further providing that, as soon as practicable after the date of such
Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and use its best efforts to cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)). 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, options, warrants, instruments or securities outstanding or any
agreements or arrangements which, as a result of the consummation of such
transaction, would eliminate or substantially diminish the benefits intended to
be afforded by the Rights.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates that evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable, as determined pursuant to the second sentence of
Section 11(d) of this Agreement.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-thousandth of a Preferred Share) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Shares (other than
fractions that are integral multiples of one one-thousandth of a Preferred
Share). In lieu of fractional Preferred Shares that are not integral multiples
of one one-thousandth of a Preferred Share, the Company shall pay to the
registered holders of Rights Certificates at the
23
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of a Common Share. For purposes of
this Section 14(b), the current market value of a Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d) of this Agreement) for the Trading Day immediately prior to the
date of such exercise.
(c) The holder of a Right by the acceptance of the Right expressly
waives such holder's right to receive any fractional Rights or any fractional
shares upon exercise of a Right.
(d) Whenever a payment for fractional Rights or fractional shares is
to be made by the Rights Agent, the Company shall (i) promptly prepare and
deliver to the Rights Agent a certificate setting forth in reasonable detail the
facts related to such payment and the prices and/or formulas utilized in
calculating such payments, and (ii) provide sufficient monies to the Rights
Agent in the form of fully collected funds to make such payments. The Rights
Agent shall be fully protected in relying upon such a certificate and shall have
no duty with respect to, and shall not be deemed to have knowledge of any
payment for fractional Rights or fractional shares under any Section of this
Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent shall have received such a certificate and
sufficient monies.
15. RIGHTS OF ACTION. (a) All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 of this Agreement, are vested in the respective registered holders of
the Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), without
the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, of the Common Shares), may, 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 Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach by the Company of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations by the Company of, the obligations of any Person subject
to this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, judgment, decree or ruling (whether interlocutory or
final) issued by a court or by a governmental, regulatory, self-regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, that the Company must use all reasonable efforts to have any such
injunction, order, judgment, decree or ruling lifted or otherwise overturned as
soon as possible.
24
16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right, by accepting
the same, consents and agrees with the Company and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) of this Agreement, the Company
and the Rights Agent may deem and treat the Person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No holder, as
such, of any Rights Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the 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 herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 of this Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions of this Agreement.
18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the preparation, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, damage, judgment,
fine, penalty, claim, demand, settlement, cost or expense (including, without
limitation, the reasonable fees and expenses of legal counsel), incurred without
gross negligence, bad faith or willful misconduct on the part of the Rights
Agent (which gross negligence or bad faith must be determined by a final,
non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction), for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance administration, exercise and performance of its
duties under this Agreement, including, without limitation, the costs and
expenses of defending against and appealing any claim of liability
25
arising therefrom, directly or indirectly. The provisions of this Section 18 and
Section 20 below shall survive the termination of this Agreement, the exercise
or expiration of the Rights and the resignation or removal of the Rights Agent.
The costs and expenses incurred in enforcing this right of indemnification shall
be paid by the Company.
(b) The Rights Agent shall be authorized and protected and shall
incur no liability for, or in respect of any action taken, suffered or omitted
by it in connection with its acceptance and administration of this Agreement and
the exercise and performance of its duties hereunder, in reliance upon any
Rights Certificate or certificate for the Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 of this Agreement. The Rights Agent shall not be deemed to have
knowledge of any event of which it was supposed to receive notice thereof
hereunder, and the Rights Agent shall be fully protected and shall incur no
liability for failing to take any action in connection therewith unless and
until it has received such notice in writing.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any Person into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any Person
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any Person succeeding to the
shareholder services 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 Person would be eligible
for appointment as a successor Rights Agent under the provisions of Section 21
of this Agreement. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes to perform only
the duties and obligations expressly imposed by this Agreement (and no implied
duties) upon the following
26
terms and conditions, by all of which the Company and the holders of Rights
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company or an employee of the Rights Agent), and the
opinion or advice of such counsel shall be full and complete authorization and
protection to the Rights Agent and the Rights Agent shall incur no liability for
or in respect of any action taken, suffered or omitted by it and in accordance
with such opinion or advice.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current per share market price") be proved or established by
the Company prior to taking, suffering or omitting to take any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate signed by any one of the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Secretary or any Assistant Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full and complete
authorization and protection to the Rights Agent and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted by
it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and
any other Person only for its own gross negligence, bad faith or willful
misconduct (as determined by a final, non-appealable order, judgment, decree or
ruling of a court of competent jurisdiction). Anything to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the likelihood of such loss or damage. Any liability of the
Rights Agent under this Rights Agreement will be limited to the amount of fees
paid by the Company to the Rights Agent.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (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 have any liability for or be under
any responsibility in respect of the validity of this Agreement or the execution
and delivery of this Agreement (except the due execution of this Agreement by
the Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor shall it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor shall it be responsible for any
change in the exercisability of the Rights (including the Rights becoming null
and void pursuant to this Agreement) or any change or adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in
Sections 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 Rights Certificates after receipt by the Rights Agent of
a
27
certificate furnished pursuant to Section 12 hereof describing such change or
adjustment, upon which the Rights Agent may rely); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Preferred Shares to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred 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 hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and such instructions shall be full
authorization and protection to the Rights Agent and the Rights Agent shall not
be liable for or in respect of any action taken, suffered or omitted by it in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. The Rights Agent shall be fully authorized
and protected in relying upon the most recent instructions received by any such
officer. Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken, suffered or omitted by the Rights Agent under this
Agreement and the date on and/or after which such action shall be taken or
suffered or such omission shall be effective. The Rights Agent shall not be
liable for any action taken or suffered by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five (5)
Business Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken,
suffered or omitted.
(h) The Rights Agent and any shareholder, affiliate, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent or any such stockholder, affiliate, director, officer or employee from
acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself (through
its directors, officers and employees) 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 or any other Person resulting from any such act, default, neglect
or misconduct, absent gross negligence, bad faith or willful misconduct in the
selection and
28
continued employment thereof (each as determined by a final, non-appealable
order, judgment, decree or ruling of a court of competent jurisdiction).
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has not been completed, the Rights Agent shall not take any
further action with respect to such requested exercise or transfer without first
consulting with the Company.
21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days' notice in writing mailed to the Company and to each transfer
agent of the Preferred Shares or the Common Shares known to the Rights Agent by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Preferred Shares or the Common Shares by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit such
holder's Rights Certificate for inspection by the Company), then the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall either be (a)
a Person organized and doing business under the laws of the United States or of
any state of the United States, in good standing, which is authorized under such
laws to exercise stock transfer powers and is subject to supervision or
examination by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at least $50
million or (b) an Affiliate of such a Person. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Preferred Shares or the Common Shares, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
29
22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of Common Shares following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued and this sentence shall be null and void ab initio
if, and to the extent that, such issuance or this sentence would create a
significant risk of or result in material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued or would
create a significant risk of or result in such options' or employee plans' or
arrangements' failing to qualify for otherwise available special tax treatment
and (ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
23. REDEMPTION.
(a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the earlier of (i) the tenth day
following the Shares Acquisition Date or such later date as may be determined by
action of a majority of the Board of Directors and publicly announced by the
Company (with prompt written notice thereof to the Rights Agent) or (ii) the
Close of Business on the Final Expiration Date, redeem all but not less than all
the then outstanding Rights at a redemption price of $0.001 per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement (such redemption price
being herein referred to as the "Redemption Price") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the current
per share market price thereof (as determined pursuant to Section 11(d) of this
Agreement) at the time of redemption) or cash. Such redemption by the Company
may be made effective at such time, on such basis and with such conditions as
the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors ordering
the redemption of the Rights, evidence of which shall have been filed with the
Rights Agent, and without any further action and without any notice, the right
to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption (with prompt written notice
thereof to the Rights Agent); provided, however, that the failure to give, or
any defect in, such notice shall not affect the legality or validity of such
redemption. Within ten (10) days after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to all such holders at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the
30
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 24 of this Agreement, and other than in connection with the
purchase of Common Shares prior to the Distribution Date.
24. EXCHANGE.
(a) Subject to applicable laws, rules and regulations, and subject
to subsection (c) below, the Company may, at its option, by majority vote of the
Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become null and void pursuant to the provisions of
Section 7(e) of this Agreement) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of this Agreement (such
exchange ratio being hereinafter referred to as the "Ratio of Exchange").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any Person holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection (a) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Common Shares equal to the number of such
Rights held by such holder multiplied by the Ratio of Exchange. The Company
shall promptly give public notice of any such exchange (with prompt written
notice thereof to the Rights Agent); provided, however, that the failure to
give, or any defect in, such notice shall not affect the legality or validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange will state the method by which the exchange
of the Common Shares for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become null and void pursuant to the provisions of Section
7(e) of this Agreement) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay cash
in an amount equal to the Current Value (as hereinafter defined), in lieu of
issuing Common Shares in
31
exchange therefor, (ii) issue debt or equity securities or a combination
thereof, having a value equal to the Current Value, in lieu of issuing Common
Shares in exchange for each such Right, where the value of such securities shall
be determined by a nationally recognized investment banking firm selected by the
Board of Directors by majority vote of the Board of Directors (which
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive and binding on the Rights Agent, the holders of the Rights
and all other Persons), or (iii) deliver any combination of cash, property,
Common Shares and/or other securities having a value equal to the Current Value
in exchange for each Right. For purposes of this Section 24(c) only, the
"Current Value" shall mean the product of the current per share market price of
Common Shares (determined pursuant to Section 11(d) on the date of the
occurrence of the event described above in subparagraph (a)) multiplied by the
number of Common Shares for which the Right otherwise would be exchangeable if
there were sufficient shares available. To the extent that the Company
determines that some action need be taken pursuant to clauses (i), (ii) or (iii)
of this Section 24(c), the Board of Directors may temporarily suspend the
exercisability of the Rights for a period of up to sixty (60) days following the
date on which the event described in Section 24(a) hereof shall have occurred,
in order to seek any authorization of additional Common Shares and/or to decide
the appropriate form of distribution to be made pursuant to the above provision
and to determine the value thereof. In the event of any such suspension, the
Company shall promptly notify the Rights Agent in writing of such suspension and
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement and written
notification to the Rights Agent at such time as the suspension is no longer in
effect.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates that evidence fractional Common Shares. In
lieu of such fractional Common Shares, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Common
Shares would otherwise be issuable, an amount in cash equal to the same fraction
of the current per share market value of a whole Common Share (as determined
pursuant to the second sentence of Section 11(d) of this Agreement).
(e) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized investment
banking firms.
(f) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to subsection (e) 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 rights in exchange therefor as has been
determined by the Board of Directors in accordance with subsection (e) above.
The Company shall promptly give public notice of any such exchange (with prompt
written notice thereof to the Rights Agent); provided, however, that the failure
to give, or any defect in, such notice shall not affect the legality or validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all of the holders of such Rights at their last addresses as they appear upon
the registry books of the transfer agent for the Common Shares of the Company.
Any notice which is mailed in the manner herein provided shall be deemed given,
32
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the Rights will be effected.
25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose to effect or permit to occur
any Section 13 Event, the Company shall give notice thereof to the Rights Agent
and to each holder of Rights, in accordance with Section 26 of this Agreement,
at least twenty (20) days prior to occurrence of such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to the Rights Agent and to each holder of a Rights Certificate, in accordance
with Section 26 of this Agreement, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Sections 11(a)(ii) and 13 of this Agreement.
26. NOTICES. Notices or demands authorized by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) or by facsimile transmission as follows:
N2H2, Inc.
βββ ββββββ ββββββ, βββββ ββββ
βββββββ, ββββββββββ βββββ
Attention: Chief Financial Officer
Facsimile No.: (βββ) βββ-ββββ
Subject to the provisions of Section 21 of this Agreement, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing by the Rights Agent with the Company) as follows:
Mellon Investor Services LLC
βββ ββββ ββββββ, βββββ ββββ
βββββββ, ββββββββββ βββββ
Attention: Relationship Manager
Facsimile No.: (βββ) βββ-ββββ
with a copy to:
Mellon Investor Services LLC
ββ ββββββββββ ββββ
ββββββββββ ββββ, βββ ββββββ βββββ
Attention: General Counsel
Facsimile No.: (βββ) βββ-ββββ
33
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date, the
Company may supplement or amend this Agreement in any respect without the
approval of any holders of Rights and the Rights Agent shall, if the Company so
directs, execute such supplement or amendment, except as otherwise provided
herein. From and after the Distribution Date, the Company and the Rights Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Rights in order to (i) cure any ambiguity, (ii) correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, (iii) shorten or lengthen any time period
hereunder or (iv) change or supplement the provisions hereunder in any manner
that the Company may deem necessary or desirable and that shall not adversely
affect the interests of the holders of Rights (other than an Acquiring Person or
an Affiliate or Associate of an Acquiring Person); provided, this Agreement may
not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights may be redeemed at such
time as the Rights are not then redeemable or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company and, if requested by the
Rights Agent, an opinion of counsel, that states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, the Rights Agent may, but shall not be
obligated to, enter into any supplement or amendment that affects the Rights
Agent's own rights, duties, obligations or immunities under this Agreement and
it shall not be bound by any such supplement or amendment not executed by it.
Prior to the Distribution Date, the interests of the holders of Rights shall be
deemed coincident with the interests of the holders of Common Shares.
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.
29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person is
the Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors, or the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which
34
are done or made by the Board of Directors in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights Certificates and all other Persons and (y) not subject the Board of
Directors to any liability to the holders of the Rights. The Rights Agent shall
always be entitled to assume that the Board of Directors acted in good faith and
shall be fully protected and incur no liability in reliance thereon.
30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the Common Shares) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the Common Shares).
31. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the contrary, if any
such term, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board of Directors determines in
its good faith judgment that severing the invalid language from this Agreement
would adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 of this Agreement shall be reinstated and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board of Directors.
32. GOVERNING LAW. This Agreement and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the state of
Washington and for all purposes shall be governed by and construed in accordance
with the laws of such state applicable to contracts to be made and performed
entirely within such state; provided, however, that all provisions regarding the
rights, duties and obligations of the Rights Agent shall be governed by and
construed in accordance with the laws of the state of New York applicable to
contracts made and to be performed entirely within such state.
33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
34. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions of this Agreement.
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
N2H2, INC.
By: /s/ ββββββ β. ββββ
Name: ββββββ ββββββ Welt
Title: President and Chief Executive Officer
MELLON INVESTOR SERVICES LLC,
AS RIGHTS AGENT
By: /s/ βββββ β. ββββββ
Name: βββββ β. ββββββ
Title: Client Service Manager
36
EXHIBIT A
DESIGNATION OF RIGHTS AND PREFERENCES
EXHIBIT A
3.5 DESIGNATION OF RIGHTS AND PREFERENCES OF SERIES A PARTICIPATING
CUMULATIVE PREFERRED STOCK
The Board of Directors of the Corporation hereby designates the
following series of Preferred Stock, which series shall have the rights,
preferences and privileges and limitations set forth below:
3.5.1 DESIGNATION OF SERIES A PARTICIPATING CUMULATIVE PREFERRED
STOCK
The shares of such series shall be designated the "Series A
Participating Cumulative Preferred Stock" (the "Series A Preferred Stock"), no
par value. The number of shares initially constituting the Series A Preferred
Stock shall be 250,000; provided, however, if more than a total of 250,000
shares of Series A Preferred Stock shall be issuable upon the exercise of Rights
(the "Rights") issued pursuant to the Rights Agreement dated as of May 24, 2002,
between the Corporation and Mellon Investor Services LLC, as Rights Agent (the
"Rights Agreement"), the Corporation's Board of Directors, pursuant to Section
23B.06.020 of the Revised Code of Washington, shall direct by resolution or
resolutions that Articles of Amendment be properly executed and filed with the
Washington Secretary of State providing for the total number of shares of Series
A Preferred Stock authorized for issuance to be increased (to the extent that
the Restated Articles of Incorporation then permit) to the largest number of
whole shares (rounded up to the nearest whole number) issuable upon exercise of
such Rights. In addition, such number of shares may be decreased by resolution
of the Board of Directors; provided, however, that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
3.5.2 DIVIDENDS AND DISTRIBUTIONS
(a) Subject to the prior and superior rights of the
holders of shares of any other series of Preferred Stock or other class of
capital stock of the Corporation ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as, and if declared
by the Board of Directors, out of the assets of the Corporation legally
available therefor, quarterly dividends payable in cash on the last day of each
fiscal quarter in each year, or such other dates as the Corporation's Board of
Directors shall approve (each such date being referred to in this Designation as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or a fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to, subject to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock of the Corporation since the
immediately preceding Quarterly Dividend Payment Date, or,
with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. In the
event the Corporation shall at any time after May 24, 2002 (the "Rights
Declaration Date") (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or
distribution on the Series A Preferred Stock as provided in Section 3.5.2(a)
immediately prior to or at the same time it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution solely in shares of
Common Stock).
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from and after the Quarterly
Dividend Payment Date next preceding the date of original issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock 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 at the time
outstanding.
(d) So long as any shares of Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 3.5.2 to be declared
on the Series A Preferred Stock shall have been declared.
(e) The holders of shares of Series A Preferred Stock
shall not be entitled to receive any dividends or other distributions except as
provided in this Designation.
3.5.3 VOTING RIGHTS
The holders of shares of Series A Preferred Stock shall have the
following voting rights:
(a) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Preferred Stock shall entitle the holder to
1,000 votes on each matter submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding
A-2
Common Stock into a smaller number of shares, then in each such case the number
of votes per share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) Except as otherwise provided in this Designation or by
applicable law, the holders of shares of Series A Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class for the election
of directors of the Corporation and on all other matters submitted to a vote of
shareholders of the Corporation.
(c) Except as provided in this Designation or by
applicable law, holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth in this Designation)
for authorizing or taking any corporate action.
3.5.4 CERTAIN RESTRICTIONS
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section
3.5.2 are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock;
provided, however, that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares of stock
ranking on a parity with the Series A Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined by the
Corporation's Board of Directors) to all holders of such shares upon such terms
as the Corporation's Board of Directors, after consideration of the respective
annual dividend rates
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and other relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 3.5.4, purchase or otherwise acquire such shares at such time and
in such manner.
3.5.5 LIQUIDATION RIGHTS
(a) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, plus an amount
equal to the greater of (1) $1,000 per share, provided that in the event the
Corporation does not have sufficient assets, after payment of its liabilities
and distribution to holders of Preferred Stock ranking prior to the Series A
Preferred Stock, available to permit payment in full of the $1,000 per share
amount, the amount required to be paid under this Section 3.5.5(a) shall,
subject to Section 3.5.5(b) hereof, equal the value of the amount of available
assets divided by the number of outstanding shares of Series A Preferred Stock
and (2) subject to the provisions for adjustment hereinafter set forth, 1,000
times the aggregate per share amount to be distributed to the holders of Common
Stock (the greater of (1) and (2), the "Series A Liquidation Preference"). In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event under clause 2 of the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock that were outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) In the event, however, that there are not
sufficient assets available to permit payment in full of the Series A
Liquidation Preference and the liquidation preferences of all other series of
Preferred Stock, if any, which rank on a parity with the Series A Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation preferences.
3.5.6 CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the then outstanding shares of Series A
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 1,000 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the
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event the Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event. In the event both this Section 3.5.6 and Section 3.5.2 appear to apply to
a transaction, this Section 3.5.6 will control.
3.5.7 NO REDEMPTION; NO SINKING FUND
(a) The shares of Series A Preferred Stock shall not be
subject to redemption by the Corporation or at the option of any holder of
Series A Preferred Stock; provided, however, that the Corporation may purchase
or otherwise acquire outstanding shares of Series A Preferred Stock in the open
market or by offer to any holder or holders of shares of Series A Preferred
Stock.
(b) The shares of Series A Preferred Stock shall not be
subject to or entitled to the operation of a retirement or sinking fund.
3.5.8 RANKING
The Series A Preferred Stock shall rank junior to all other series of
Preferred Stock of the Corporation, unless the Corporation's Board of Directors
shall specifically determine otherwise in fixing the powers, preferences and
relative, participating, optional and other special rights of the shares of such
series and the qualifications, limitations and restrictions thereof.
3.5.9 FRACTIONAL SHARES
The Series A Preferred Stock shall be issuable upon exercise of the
Rights issued pursuant to the Rights Agreement in whole shares or in any
fractional share that is one one-thousandth (1/1000th) of a share or any
integral multiple of such fraction, and shall entitle the holder, in proportion
to such holder's fractional shares, to receive dividends, exercise voting
rights, participate in distributions and have the benefit of all other rights of
holders of Series A Preferred Stock. In lieu of fractional shares, the
Corporation, prior to the first issuance of a share or a fractional share of
Series A Preferred Stock, may elect to (a) make a cash payment as provided in
the Rights Agreement for a fractional share other than one one-thousandth
(1/1000th) of a share or any integral multiple thereof or (b) issue depository
receipts evidencing such authorized fractional share of Series A Preferred Stock
pursuant to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided, however, that such agreement shall
provide that the holders of such depository receipts shall have all the rights,
privileges and preferences to which they are entitled as holders of the Series A
Preferred Stock.
3.5.10 REACQUIRED SHARES
Any shares of Series A Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and canceled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred Stock,
A-5
without designation as to series until such shares are once more designated as
part of a particular series by the Corporation's Board of Directors pursuant to
the provisions of Article 3 of the Restated Articles of Incorporation.
3.5.11 AMENDMENT
None of the powers, preferences and relative, participating, optional
and other special rights of the Series A Preferred Stock as provided in this
Designation or in the Restated Articles of Incorporation shall be amended in any
manner that would alter or change the powers, preferences, rights or privileges
of the holders of Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Series A Preferred Stock, voting as a separate class.
A-6
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R-____ ____________ Rights
NOT EXERCISABLE AFTER MAY 24, 2012 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE
COMPANY, AT $0.001 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN
THE RIGHTS AGREEMENT.
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON. ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN THE
RIGHTS AGREEMENT.]
RIGHTS CERTIFICATE
N2H2, INC.
This certificate certifies that ________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of May 24, 2002 (the "Rights
Agreement"), between N2H2, Inc., a Washington corporation (the "Company"), and
Mellon Investor Services LLC, a New Jersey limited liability company (the
"Rights Agent"), unless the Rights evidenced hereby have been previously
redeemed by the Company, to purchase from the Company at any time after the
Distribution Date (as such term is defined in the Rights Agreement) and before
5:00 p.m., Seattle, Washington time, on May 24, 2012 at the office of the Rights
Agent, or at the office of its successor as Rights Agent, one one-thousandth of
a fully paid, nonassessable share of Series A Participating Cumulative Preferred
Stock, no par value (the "Preferred Shares"), of the Company, at a purchase
price of $2.75 per one one-thousandth of a Preferred Share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase duly executed. The number of Rights evidenced by
this Rights Certificate (and the number of one-thousandths of a Preferred Share
that may be purchased upon exercise hereof) set forth above, and the Purchase
Price set forth above, are the number and Purchase Price as of May 24, 2002,
based on the Preferred Shares as constituted at such date. As provided in the
Rights Agreement, the Purchase Price and the number of one one-thousandths of a
Preferred Share that may be purchased upon the exercise of the Rights evidenced
by this Rights Certificate are subject to modification and adjustment upon the
happening of certain events.
This Rights Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and
B-1
made a part hereof and to which Rights Agreement reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Rights Agent, the Company and the holders of Rights,
which limitations include the temporary suspension of the exercisability of such
Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of Preferred Shares as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered shall have entitled such holder to purchase. If
this Rights Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (a) may be redeemed by the Company at a redemption price (in
cash or shares of the Company's common stock or other securities of the Company
deemed by the Company's Board of Directors to be at least equivalent in value)
of $0.001 per Right (subject to adjustment, as provided in the Rights Agreement)
or (b) may be exchanged in whole or in part for shares of the Company's common
stock or other consideration as determined by the Company.
The Company may, but shall not be required to, issue fractions of
Preferred Shares or distribute certificates that evidence fractions of Preferred
Shares upon the exercise of any Right or Rights evidenced hereby. In lieu of
issuing fractional shares, the Company may elect to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
one-thousandth (1/1000) of a share or any integral multiple thereof or to issue
certificates or utilize a depository arrangement as provided in the terms of the
Rights Agreement and the Preferred Shares.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company that 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 subscriptions
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
B-2
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ____________ ___, 20__.
N2H2, INC.
----------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
COUNTERSIGNED:
MELLON INVESTOR SERVICES LLC,
AS RIGHTS AGENT
-----------------------------------------
By:
-------------------------------------
Its:
-------------------------------------
B-3
--Form of Reverse Side of Rights Certificate--
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Rights Certificate)
FOR VALUE RECEIVED _____________________________________________ HEREBY SELLS,
ASSIGNS AND TRANSFERS UNTO
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT NAME AND ADDRESS OF TRANSFEREE)
THIS RIGHTS CERTIFICATE, TOGETHER WITH ALL RIGHT, TITLE AND INTEREST THEREIN,
AND DOES HEREBY IRREVOCABLY CONSTITUTE AND APPOINT _____________ AS
ATTORNEY-IN-FACT, TO TRANSFER THIS RIGHTS CERTIFICATE ON THE BOOKS OF THE
WITHIN-NAMED COMPANY, WITH FULL POWER OF SUBSTITUTION.
The undersigned hereby certifies that (1) the Rights evidenced by this
Rights Certificate are not being sold, assigned or transferred by or on behalf
of a Person who is or was an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), (2) this Rights
Certificate is not being sold, assigned or transferred to or on behalf of any
such Acquiring Person, Affiliate or Associate, and (3) after inquiry and to the
best knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate.
Dated:_________________________________________________________________
Signature:_____________________________________________________________
Signature Guarantee*
_______________________________________________________________________
* Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended. Guarantees by a notary public are not
acceptable.
B-4
--Form of Reverse Side of Rights Certificate--
(continued)
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the
Rights Certificate)
To: N2H2, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the number of
one-thousandths of a Preferred Share issuable upon the exercise of such
Rights and requests that certificates for such number of one-thousandths
of a Preferred Share 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
Rights Certificate, a new Rights 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)_________________________________________
________________________________________________________________________
The undersigned hereby certifies that (1) the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement) and (2) after inquiry and to the best knowledge of the undersigned,
the undersigned did not acquire the Rights evidenced by this Rights Certificate
from any Person who is or was an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement).
Dated___________________________________________________________________
Signature:______________________________________________________________
Signature Guarantee*____________________________________________________
*Signatures must be guaranteed by an "eligible guarantor
institution" as defined in Rule 17Ad-15 promulgated under the Securities
Exchange Act of 1934, as amended. Guarantees by a notary public are not
acceptable.
B-5
--Form of Reverse Side of Rights Certificate--
(continued)
NOTICE
THE SIGNATURE IN THE FORM OF ASSIGNMENT OR FORM OF ELECTION TO PURCHASE, AS THE
CASE MAY BE, MUST CONFORM TO THE NAME AS WRITTEN ON THE FACE OF THIS RIGHTS
CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
IN THE EVENT THE CERTIFICATION SET FORTH ABOVE IN THE FORM OF ASSIGNMENT OR THE
FORM OF ELECTION TO PURCHASE, AS THE CASE MAY BE, IS NOT COMPLETED, THE COMPANY
AND THE RIGHTS AGENT WILL DEEM THE BENEFICIAL OWNER OF THE RIGHTS EVIDENCED BY
THIS RIGHTS CERTIFICATE TO BE AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND SUCH ASSIGNMENT
OR ELECTION TO PURCHASE WILL NOT BE HONORED.
B-6
EXHIBIT C
SUMMARY OF RIGHTS
Exhibit C
N2H2, INC.
SHAREHOLDER RIGHTS PLAN
SUMMARY OF RIGHTS
Distribution and Transfer of Rights; Rights Certificates
On May 24, 2002, the board of directors of N2H2, Inc. declared a dividend of one
preferred share purchase right (a "Right") for each outstanding share of N2H2
common stock, no par value (the "Common Stock"). Before the Distribution Date
described below the Rights will be evidenced by and trade with the certificates
for Common Stock. After the Distribution Date, if any, N2H2 will mail Rights
certificates to the shareholders and the Rights will become transferable apart
from the Common Stock.
Distribution Date
The Rights will separate from the Common Stock and become exercisable following
the earlier of the close of business on the tenth day (or such later date as may
be determined by a majority of N2H2's board of directors) after a person or
group (i) acquires beneficial ownership of 15% or more of N2H2's outstanding
Common Stock or (ii) announces a tender or exchange offer for N2H2's outstanding
Common Stock that could result in the offeror becoming the beneficial owner of
15% or more of the outstanding Common Stock (the earlier of such dates being the
"Distribution Date").
Preferred Stock Purchasable Upon Exercise of Rights
After the Distribution Date, each Right will entitle the holder to purchase, for
$2.75 (the "exercise price"), one one-thousandth (1/1000) of a share of N2H2
preferred stock with economic terms similar to that of one share of N2H2 Common
Stock.
Flip-In
If an acquiror obtains 15% or more of N2H2's outstanding Common Stock (thus
becoming an "Acquiring Person"), then each Right (other than Rights owned by an
Acquiring Person or its affiliates) will entitle the holder to purchase, for the
exercise price, that number of shares of N2H2 Common Stock having a then-current
market value of two times the exercise price.
Flip-Over
If, after the Shares Acquisition Date (defined below), (a) N2H2 merges into
another entity, (b) an acquiring entity merges into N2H2 or (c) N2H2 sells more
than 50% of its assets or earning power, then each Right (other than Rights
owned by an Acquiring Person or its affiliates) will entitle the holder to
purchase, for the exercise price, a number of shares of N2H2 Common Stock of the
person engaging in the transaction having a then-current market value of twice
the exercise price.
Exchange Provisions
After any person or group becomes an Acquiring Person but before the acquisition
of N2H2 or 50% or more of its assets or earning power, the board of directors
may elect to exchange each Right (other than Rights that have become null and
void and nontransferable as described above) for consideration per Right
consisting of one-half of the number of shares of Common Stock that would be
issuable at such time upon the exercise of one Right and without payment of the
exercise price.
Redemption of Rights
The Rights will be redeemable at the Company's option for $0.001 per Right (the
"Redemption Price") at any time on or before the tenth day (or such later date
as may be determined by a majority of the Board of Directors) after public
announcement that a person has acquired beneficial ownership of 15% or more of
the Company's Common Stock (the "Shares Acquisition Date").
Expiration of Rights
The Rights are not exercisable until the Distribution Date and will expire on
May 24, 2012, unless earlier redeemed or exchanged by N2H2.
Amendment of Terms of Rights
The terms of the Rights and the Rights Agreement may be amended in any respect,
without the approval of any holder of the Rights, at any time before the
Distribution Date, subject to certain restrictions.
Voting Rights
Until a Right is exercised, the holder will have no rights as a shareholder of
N2H2, including, without limitation, the right to vote or receive dividends.
Antidilution Provisions
In order to preserve the actual or potential economic value of the Rights, the
number of shares of preferred stock or other securities issuable upon exercise
of a Right, the exercise price, the Redemption Price and the number of Rights
associated with each outstanding share of Common Stock are all subject to
adjustment by the board of directors, pursuant to customary antidilution
provisions.
Taxes
Distribution of the Rights should not be a taxable event for federal income tax
purposes. Following an event that renders the Rights exercisable or upon
redemption of the Rights, shareholders may recognize taxable income.
The foregoing is a summary of the principal terms of N2H2's shareholder
rights plan and is qualified in its entirety by reference to the detailed terms
of the Rights Agreement. A copy of the Rights Agreement, which is on file with
the Securities and Exchange Commission as an exhibit to N2H2's Registration
Statement on Form 8-A filed June 3, 2002, may be obtained from N2H2 free of
charge, upon request.