EXHIBIT 4.1
HARMONIC INC.
AND
MELLON INVESTOR SERVICES LLC
PREFERRED STOCK RIGHTS AGREEMENT
DATED AS OF JULY 24, 2002
TABLE OF CONTENTS
PAGE
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Section 1. Certain Definitions...............................................................1
Section 2. Appointment of Rights Agent.......................................................7
Section 3. Issuance of Rights Certificates...................................................7
Section 4. Form of Rights Certificates.......................................................9
Section 5. Countersignature and Registration.................................................9
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates.........................10
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights....................11
Section 8. Cancellation and Destruction of Rights Certificates..............................13
Section 9. Reservation and Availability of Preferred Shares.................................13
Section 10. Record Date......................................................................14
Section 11. Adjustment of Exercise Price, Number of Shares or Number of Rights...............15
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.......................21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.............22
Section 14. Fractional Rights and Fractional Shares..........................................25
Section 15. Rights of Action.................................................................27
Section 16. Agreement of Rights Holders......................................................27
Section 17. Rights Certificate Holder Not Deemed a Stockholder...............................28
Section 18. Concerning the Rights Agent......................................................28
Section 19. Merger or Consolidation or Change of Name of Rights Agent........................29
Section 20. Duties of Rights Agent...........................................................29
Section 21. Change of Rights Agent...........................................................32
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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Section 22. Issuance of New Rights Certificates..............................................32
Section 23. Redemption.......................................................................33
Section 24. Exchange.........................................................................33
Section 25. Notice of Certain Events.........................................................35
Section 26. Notices..........................................................................36
Section 27. Supplements and Amendments.......................................................37
Section 28. Successors.......................................................................37
Section 29. Determinations and Actions by the Board of Directors, etc........................37
Section 30. Benefits of this Agreement.......................................................38
Section 31. Severability.....................................................................38
Section 32. Governing Law....................................................................38
Section 33. Counterparts.....................................................................38
Section 34. Descriptive Headings.............................................................38
EXHIBITS
Exhibit A Form of Certificate of Designation
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
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PREFERRED STOCK RIGHTS AGREEMENT
This Preferred Stock Rights Agreement is dated as of July 24, 2002,
between Harmonic Inc., a Delaware corporation, (the "COMPANY"), and Mellon
Investor Services LLC, a New Jersey limited liability company (the "RIGHTS
AGENT").
On July 23, 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 August 7, 2002 (the "RECORD DATE"), each Right representing the right to
purchase one one-thousandth (0.001) of a share of Series A Participating
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 Certificate of Designations of Rights, Preferences and Privileges of
Series A Participating Preferred Stock attached hereto 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.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "ACQUIRING PERSON" shall mean any Person, who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares for or pursuant to the terms of any such plan. 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 Company's 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 paragraph (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 paragraph (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 paragraph (a), then such Person
shall not be deemed to be or to have become an "Acquiring Person" for any
purposes of this Agreement including, without limitation Section 1(gg) hereof;
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
paragraph (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) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereof.
(c) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.
(d) 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 (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
1(d)(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
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deemed to have the right to acquire pursuant to any merger or other acquisition
agreement 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 of
the Company prior to there being an Acquiring Person; 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 1(d)(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 1(d)(ii)(B)) or disposing of any securities of the Company; provided,
however, that in no case shall an officer or director of the Company be deemed
(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.
(e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in California and New Jersey 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.,
California time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., California 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, par value at $0.001 per share.
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) "COMMON STOCK EQUIVALENTS" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(i) "COMPANY" shall mean Harmonic Inc., a Delaware corporation,
subject to the terms of Section 13(a)(iii)(C) hereof.
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(j) "CURRENT PER SHARE MARKET PRICE" of any security (a
"Security" for purposes of this definition), for all computations other than
those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to but not including such date, and for purposes
of computations made pursuant to Section 11(a)(iii) hereof, 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 applicable 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 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 Nasdaq
or such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. If on any such date no market
maker is making a market in the Security, the fair value of such shares on such
date as determined in good faith by the Board of Directors of the Company shall
be used. If the Preferred Shares are not publicly traded, the Current Per Share
Market Price of the Preferred Shares shall be conclusively deemed to be (x) the
Current Per Share Market Price of the Common Shares as determined pursuant to
this Section 1(j), as appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof, multiplied by
(y) 1,000. If the Security is 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 of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.
(k) "CURRENT VALUE" shall have the meaning set forth in Section
11(a)(iii) hereof.
(l) "DISTRIBUTION DATE" shall mean the earlier of (i) the Close
of Business on the tenth (10th) day (or such later date as may be determined by
action of the Company's Board of Directors) after the Shares Acquisition Date
(or, if the tenth (10th) day after the Shares Acquisition Date occurs before the
Record Date, the Close of Business on the Record Date) or (ii) the Close of
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Business on the tenth (10th) Business Day (or such later date as may be
determined by action of the Company's 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 or entity 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 an Acquiring Person.
(m) "EQUIVALENT SHARES" shall mean Preferred Shares and any other
class or series of capital stock of the Company which is entitled to the same
rights, privileges and preferences as the Preferred Shares.
(n) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(o) "EXCHANGE RATIO" shall have the meaning set forth in Section
24(a) hereof.
(p) "EXERCISE PRICE" shall have the meaning set forth in Section
4(a) hereof.
(q) "EXPIRATION DATE" shall mean the earliest to occur of: (i)
the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the Rights
as provided in Section 24 hereof.
(r) "FINAL EXPIRATION DATE" shall mean August 7, 2012.
(s) "NASDAQ" shall mean The Nasdaq Stock Market, Inc.
(t) "PERSON" shall mean any individual, firm, corporation,
limited liability company, partnership, trust or other entity, and shall include
any successor (by merger or otherwise) of such entity.
(u) "POST-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(v) "PREFERRED SHARES" shall mean shares of Series A
Participating Preferred Stock, par value $0.001 per share, of the Company.
(w) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.
(x) "PRINCIPAL PARTY" shall have the meaning set forth in Section
13(b) hereof.
(y) "RECORD DATE" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(z) "REDEMPTION DATE" shall have the meaning set forth in Section
23(a) hereof.
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(aa) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.
(bb) "RIGHTS AGENT" shall mean (i) Mellon Investor Services LLC
(ii) its successor or replacement as provided in Sections 19 and 21 hereof or
(iii) any additional Person appointed pursuant to Section 2 hereof.
(cc) "RIGHTS CERTIFICATE" shall mean a certificate substantially
in the form attached hereto as Exhibit B.
(dd) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning
set forth in the recitals at the beginning of this Agreement.
(ee) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(ff) "SECTION 13 EVENT" shall mean any event described in clause
(i), (ii) or (iii) of Section 13(a) hereof.
(gg) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(hh) "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 1(a) hereof, then no Shares Acquisition
Date shall be deemed to have occurred by virtue of such event.
(ii) "SPREAD" shall have the meaning set forth in Section
11(a)(iii) hereof.
(jj) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or any corporation or other entity otherwise controlled by such
Person.
(kk) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ll) "SUMMARY OF RIGHTS" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
(mm) "TOTAL EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.
(nn) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which a referenced security is listed or
admitted to trading is open for the transaction of business or, if a referenced
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
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(oo) A "TRIGGERING EVENT" shall be deemed to have occurred upon
any Person becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any co-Rights Agent.
Section 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) hereof) 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 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 the Company will
send or cause to be sent (and the Rights Agent will, if requested by written
notice, and provided with a shareholder list and all other relevant information
which the Rights Agent may request, 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 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
hereof, 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) hereof) so that Rights Certificates representing only whole
numbers of Rights are distributed and cash is paid in lieu of any fractional
Rights (in accordance with Section 14(a) hereof). As of 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 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. 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 a copy of 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's transfer agent and registrar. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be
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evidenced by such certificates registered in the names of the holders thereof
together with the Summary of Rights.
(c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares 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 hereof, after the Distribution
Date) specifies to the contrary, Rights shall be issued in respect of all Common
Shares that are so issued, and Certificates representing such Common Shares
shall also be deemed to be certificates for Rights, and shall bear substantially
the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
CERTAIN RIGHTS AS SET FORTH IN A PREFERRED STOCK RIGHTS AGREEMENT
BETWEEN HARMONIC INC. AND MELLON INVESTOR SERVICES LLC (OR ANY SUCCESSOR
THERETO), AS THE RIGHTS AGENT, DATED AS OF JULY 24, 2002 (THE "RIGHTS
AGREEMENT"), AS MAY BE AMENDED OR SUPPLEMENTED, THE TERMS OF WHICH ARE
HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL EXECUTIVE OFFICES OF HARMONIC INC. 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. HARMONIC INC. 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.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date or 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.
(d) 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.
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Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse thereof)
shall be substantially in the form of Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate (but which do not affect the
rights, duties or obligations of the Rights Agent as set forth in this
Agreement) 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 or a national market system, on which the Rights may from time to time
be listed or included, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, 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) and on their face shall entitle the
holders thereof to purchase such number of one-thousandths (0.001) of a
Preferred Share as shall be set forth therein at the price set forth therein
(such exercise price per one one-thousandth (0.001) of a Preferred Share being
hereinafter referred to as the "EXERCISE 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 Exercise Price
shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a Post-Event
Transferee, (iii) a Pre-Event Transferee or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees, and
any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent the Rights Agent has
notice thereof and to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, its Chief
Financial 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
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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 on behalf of the
Company had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date and receipt by the Rights
Agent of (i) written notice of the Distribution Date pursuant to Section 3(a)
hereof, and (ii) all necessary information requested by the Rights Agent
pursuant to Section 3(a) hereof, 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.
Section 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 hereof,
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 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 (0.001) 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 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 until the registered holder shall have properly
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 hereof, countersign and deliver to the person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment from the registered holder of a sum sufficient
to cover any tax or governmental charge that may be imposed in connection with
any transfer, split up, combination or exchange of Rights Certificates. The
Rights Agent shall have no duty or obligation to take
-10-
any action under any Section of this Agreement which requires the payment by a
Rights holder of applicable taxes and/or governmental charges unless and until
it is satisfied that all such taxes or applicable governmental 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 reasonably satisfactory to them, and, at the Company's or the 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
delivery to the registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of
Rights.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, 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 and prior to the Close of Business on the Expiration
Date by surrender of the Rights Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office of the Rights Agent designated for such purpose, together with payment of
the Exercise Price for each one-thousandth (0.001) of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets as the case
may be) as to which the Rights are exercised.
(b) The Exercise Price for each one-thousandth (0.001) of a
Preferred Share issuable pursuant to the exercise of a Right shall initially be
Twenty-Five Dollars ($25.00), shall be subject to adjustment from time to time
as provided in Sections 11 and 13 hereof and shall be payable in lawful money of
the United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths (0.001) of a
Preferred Share (or, following a Triggering Event, other securities, cash or
other assets as the case may be) to be purchased and an amount equal to any
applicable tax or charge required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, the Rights Agent shall,
subject to Section 20(k) hereof, 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 (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) 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 (0.001) of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets as the case
may be) issuable upon exercise of the Rights hereunder with a depository agent,
requisition from the depository agent depository receipts representing such
number of one-thousandths (0.001) of a Preferred Share (or, following a
Triggering Event, other securities, cash or other assets as the case may be) as
are to be purchased (in
-11-
which case certificates for the Preferred Shares (or, following a Triggering
Event, other securities, cash or other assets as the case may be) 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 hereof, (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.
The payment of the Exercise Price (as such amount may be reduced (including to
zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any
applicable tax or charge required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue securities of the
Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when necessary to comply
with this Agreement.
(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
his or her duly authorized assigns, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Triggering 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-EVENT 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 Company's 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 "PRE-EVENT TRANSFEREE") or (iv) any subsequent
transferee receiving transferred Rights from a Post-Event Transferee or a
Pre-Event 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,
whether under any provision of this Agreement or otherwise. The Company shall
notify the Rights Agent when this Section 7(e) applies and shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof 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 its failure to make any determinations with respect
to an Acquiring Person or any of such Acquiring Person's Affiliates, Associates
or transferees hereunder.
-12-
(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, in
addition to having complied with the requirements of subsection 7(a), have (i)
duly and properly completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any 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 evidencing the destruction thereof to the Company.
Section 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 its authorized and
unissued Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued 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 such 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
the Board of Directors of the Company determines that it is reasonably likely
that the Rights will be exercised), all shares reserved for such issuance to be
listed on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act with respect to
the securities purchasable
-13-
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 date of expiration of the Rights. 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 (with prompt written notice thereof to the Rights Agent) stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement and 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 and remains
effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares (or other
securities of the Company) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such securities (subject to payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes and governmental
charges which may be payable in respect of the original issuance or delivery of
the Rights Certificates or of any Preferred Shares (or other securities of the
Company) 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 (or other securities of the Company) 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 (or other securities of the Company) 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 satisfaction that no such tax
or charge is due.
Section 10. Record Date. Each Person in whose name any certificate for a
number of one-thousandths (0.001) of a Preferred Share (or other securities of
the Company) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of Preferred Shares (or other
securities of the Company) 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 Total Exercise Price with respect to which
the Rights have been exercised (and any applicable taxes or charges) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the transfer books of the Company are closed, such Person shall be
-14-
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 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 (or other securities of the Company) for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number of Shares or Number of
Rights. The Exercise 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) Anything in this Agreement to the contrary
notwithstanding, in the event that 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) hereof: (1) the
Exercise 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 Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the "ADJUSTMENT 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; 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 (2) the number of one-thousandths (0.001) of a
Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths (0.001) of a
Preferred Share (or share of such other capital stock) as was issuable upon
exercise of a Right immediately prior to the occurrence of the event described
in clauses (A)-(D) of this Section 11(a)(i), multiplied by the Adjustment
Fraction; provided, however, that, no such adjustment shall be made pursuant to
this Section 11(a)(i) to the extent that there shall have simultaneously
occurred an event described in clause (A), (B), (C) or (D) of Section 11(n) with
a proportionate adjustment being made thereunder. Each Common Share that shall
become outstanding after an adjustment has been made pursuant to this Section
11(a)(i) shall have associated with it the number of Rights, exercisable at the
Exercise Price and for the number of one-thousandths (0.001) of a Preferred
Share (or shares of such other capital stock) as one Common Share has associated
with it immediately following the adjustment made pursuant to this Section
11(a)(i).
-15-
(ii) Subject to Section 24 of this Agreement, in the event
that a Triggering Event shall have occurred, then promptly following such
Triggering Event each holder of a Right, except as provided in Section 7(e)
hereof, 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
Exercise Price in effect immediately prior to the occurrence of the Triggering
Event, in lieu of a number of one-thousandths (0.001) of a Preferred Share, such
number of Common Shares of the Company as shall equal the quotient obtained by
dividing (A) the product obtained by multiplying (1) the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event by (2) the
number of one-thousandths (0.001) 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, by
(B) fifty percent (50%) of the Current Per Share Market Price for Common Shares
on the date of occurrence of the Triggering Event; provided, however, that the
Exercise Price and the number of Common Shares of the Company so receivable upon
exercise of a Right shall be subject to further adjustment as appropriate in
accordance with Section 11(e) hereof to reflect any events occurring in respect
of the Common Shares of the Company after the occurrence of the Triggering
Event.
(iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Company's 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 Certificate 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 Exercise 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 Exercise Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Company's 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 stockholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary stockholder 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 Company's Board of Directors based upon the advice of a nationally
recognized investment banking firm selected by the Company's Board of Directors;
provided, however, that 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
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 Exercise Price, Common
Shares (to the extent available), except to the extent that the Company has not
obtained any necessary stockholder or regulatory
-16-
approval for such issuance, and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Company's 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, but not more than ninety (90) days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek stockholder 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) hereof, 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
(with prompt written notice thereof to the Rights Agent) stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement (with prompt written notice thereof 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 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 Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for or
purchase Preferred Shares or Equivalent Shares or securities convertible into
Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record date,
plus the number of Preferred Shares or Equivalent Shares, as the case may be,
which the aggregate offering price of the total number of Preferred Shares or
Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred 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); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration
-17-
shall be as determined in good faith by the Company's Board of Directors, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
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
Exercise Price shall be adjusted to be the Exercise 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 Preferred 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 Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Current Per Share
Market Price of a Preferred Share or an Equivalent Share on such record date,
less the fair market value per Preferred Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) 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 Preferred
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current Per Share Market Price of a Preferred Share or Equivalent
Share on such record date; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. 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 Exercise Price shall be adjusted to be the Exercise Price which would have
been in effect if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) of the Exercise
Price; provided, however, that any adjustments which by reason of this Section
11(d) 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 (0.0001) of a
Common Share or other share or one hundred-thousandth (0.00001) of a Preferred
Share, as the case may be. Notwithstanding the first sentence of this Section
11(d), 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.
(e) If as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) hereof, 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
-18-
upon exercise of any Right and, if required, the Exercise 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 Preferred Shares
contained in Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j),
11(k) and 11(l), 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.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths (0.001)
of a Preferred Share purchasable from time to time hereunder upon exercise of
the Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Exercise Price as a
result of the calculations made in Section 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Preferred
Shares (calculated to the nearest one hundred-thousandth (0.00001) 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 Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (ii) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(h) The Company may elect on or after the date of any adjustment
of the Exercise Price as a result of the calculations made in Section 11(b) or
(c) 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 (0.001) 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 one hundred-thousandth
(0.00001)) obtained by dividing the Exercise Price in effect immediately prior
to adjustment of the Exercise Price by the Exercise Price in effect immediately
after adjustment of the Exercise Price. The Company shall make a public
announcement (with prompt written notice thereof to the Rights Agent) of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Exercise Price is adjusted or any
day thereafter, but, if any 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(h), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner
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provided for herein (and may bear, at the option of the Company, the adjusted
Exercise Price) and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Exercise
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 Exercise Price per one one-thousandth (0.001) of a Preferred
Share and the number of one-thousandths (0.001) of a Preferred Share which were
expressed in the initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Exercise Price below the par or stated value, if any, of the number
of one-thousandths (0.001) 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
(0.001) of a Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Exercise 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 (0.001) 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 (0.001) of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Exercise 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.
(l) 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 Exercise 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 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 stockholders.
(m) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the Rights.
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(n) In the event that 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) hereof: (1) each Common Share
(or shares of capital stock issued in such reclassification of the Common
Shares) outstanding immediately following such time shall have associated with
it the number of Rights as were associated with one Common Share immediately
prior to the occurrence of the event described in clauses (A)-(D) above; (2) the
Exercise 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 Exercise Price thereafter shall equal the result obtained
by multiplying the Exercise Price in effect immediately prior to such time by a
fraction, the numerator of which shall be the total number of Common Shares
outstanding immediately prior to the event described in clauses (A)-(D) above,
and the denominator of which shall be the total number of Common Shares
outstanding immediately after such event; 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 (0.001) of a
Preferred Share (or shares of such other capital stock) issuable upon the
exercise of each Right outstanding after such event shall equal the number of
one-thousandths (0.001) of a Preferred Share (or shares of such other capital
stock) as were issuable with respect to one Right immediately prior to such
event. Each Common Share that shall become outstanding after an adjustment has
been made pursuant to this Section 11(n) shall have associated with it the
number of Rights, exercisable at the Exercise Price and for the number of
one-thousandths (0.001) of a Preferred Share (or shares of such other capital
stock) as one Common Share has associated with it immediately following the
adjustment made pursuant to this Section 11(n). If an event occurs which would
require an adjustment under both this Section 11(n) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(n) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to Section
11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made or any event affecting the Rights or their
exercisability (including without limitation an event which causes Rights to
become null and void) occurs as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts and calculations 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 hereof.
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 contained therein and shall have no duty with respect to and
shall not be deemed to have knowledge of such adjustment or event unless and
until it shall have received such certificate.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);
(ii) any Person (other than a subsidiary of the Company)
shall consolidate with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such consolidation
or merger and, in connection with such merger, all or part of the Common Shares
shall be changed into or exchanged for stock or other securities of any other
Person (or the Company); 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 fifty percent (50%) or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any other Person or Persons (other than the Company or one or more of
its wholly owned Subsidiaries in one or more transactions, each of which
individually (and together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) each holder of a Right (except as provided in
Section 7(e) hereof) shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the Total Exercise Price applicable
immediately prior to the occurrence of the Section 13 Event in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable 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
dividing such Total Exercise Price by an amount equal to fifty percent (50%) of
the Current Per Share Market Price of the Common Shares of such Principal Party
on the date of consummation of such Section 13 Event, provided, however, that
the Exercise Price and the number of Common Shares of such Principal Party so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(e) hereof;
(B) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event;
-22-
(D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares to permit the exercise of Rights in full for such Common Shares)
in connection with the consummation of any such transaction as may be necessary
to ensure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its Common Shares thereafter deliverable
upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Total Exercise Price as provided in this Section 13(a), such cash, shares,
rights, warrants and other property which such holder would have been entitled
to receive had such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of such Right
pursuant to this Section 13(a), and such Principal Party shall take such steps
(including, but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.
(F) For purposes hereof, the "earning power" of the
Company and its Subsidiaries shall be determined in good faith by the Company's
Board of Directors on the basis of the operating income of each business
operated by the Company and its Subsidiaries during the three fiscal years
preceding the date of such determination (or, in the case of any business not
operated by the Company or any Subsidiary during three full fiscal years
preceding such date, during the period such business was operated by the Company
or any Subsidiary).
(b) For purposes of this Agreement, the term "PRINCIPAL PARTY"
shall mean:
(i) in the case of any transaction described in clause (i)
or (ii) of Section 13(a) hereof: (A) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (B) if no securities are so issued, (x) the Person that is the other party to
the merger, if such Person survives said merger, or, if there is more than one
such Person, the Person the Common Shares of which have the greatest aggregate
market value of shares outstanding or (y) if the Person that is the other party
to the merger does not survive the merger, the Person that does survive the
merger (including the Company if it survives) or (z) the Person resulting from
the consolidation; and
(ii) in the case of any transaction described in clause
(iii) of Section 13(a) hereof, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;
provided,
-23-
however, that in any such case described in the foregoing clause (b)(i) or
(b)(ii), if the Common Shares of such Person are not at such time or have not
been continuously over the preceding 12-month period registered under Section 12
of the Exchange Act, then (1) if such Person is a direct or indirect Subsidiary
of another Person the Common Shares of which are and have been so registered,
the term "Principal Party" shall refer to such other Person, or (2) if such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of which are and have been so registered, the term "Principal
Party" shall refer to whichever of such Persons is the issuer of Common Shares
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly by the same Person, the
rules set forth in clauses (1) and (2) above shall apply to each of the owners
having an interest in the venture as if the Person owned by the joint venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) 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 13(b) hereof, 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, 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 list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights 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.
-24-
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)).
(d) In case the "Principal Party" for purposes of Section 13(b)
hereof has provision in any of its authorized securities or in its certificate
of incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13 Event,
Common Shares or Equivalent Shares of such Principal Party at less than the then
Current Per Share Market Price thereof or securities exercisable for, or
convertible into, Common Shares or Equivalent Shares of such Principal Party at
less than such then Current Per Share Market Price, or (ii) providing for any
special payment, tax or similar provision in connection with the issuance of the
Common Shares of such Principal Party pursuant to the provisions of Section 13
hereof, then, in such event, the Company hereby agrees with each holder of
Rights that it shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with or as a consequence of, the consummation of
the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, effect or permit to occur any Section 13
Event, if (i) at the time or immediately after such 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, (ii) prior to,
simultaneously with or immediately after such Section 13 Event, the stockholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(b) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii)
the form or nature of organization of the Principal Party would preclude or
limit the exercisability of the Rights.
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on
-25-
which such fractional Rights would have been otherwise issuable, as determined
pursuant to the second sentence of Section 1(j) hereof.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than fractions that are integral multiples of one
one-thousandth (0.001) 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 (0.001) of a
Preferred Share). Interests in fractions of Preferred Shares in integral
multiples of one one-thousandth (0.001) of a Preferred Share may, at the
election of the Company, be evidenced by depository receipts, pursuant to an
appropriate agreement between the Company and a depository selected by it;
provided, 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 beneficial owners of the Preferred Shares represented by such
depository receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-thousandth (0.001) of a Preferred Share, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of a Preferred Share. For purposes of this
Section 14(b), the current market value of a Preferred Share shall be (x) one
thousand multiplied by (y) the closing price of a Common Share (as determined
pursuant to the second sentence of Section 1(j) hereof) for the Trading Day
immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares upon the exercise or exchange of Rights. In lieu of such fractional
Common Shares, the Company shall pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a Common
Share. For purposes of this Section 14(c), 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 1(j) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares (other than fractions that are integral multiples of one
one-thousandth (0.001) of a Preferred Share) upon exercise of a Right.
(e) 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 payments 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 authorized and 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.
-26-
Section 15. Rights of Action.
(a) All rights of action in respect of this Agreement, excepting
the rights of action given to the Rights Agent pursuant to Section 18 and
Section 20 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his or her own behalf and for
his or her own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company to enforce, or otherwise act in respect of,
his or her right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
(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.
Section 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 principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute 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
-27-
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be 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 stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as specifically provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(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, administration, delivery,
execution and amendment 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, bad faith or willful misconduct 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, exercise, performance or
administration of its duties under this Agreement, including, without
limitation, the costs and expenses of defending against any claim of liability
in the premises. The costs and expenses incurred by the Rights Agent in
enforcing this right of indemnification shall be paid by the Company. 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.
(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 administration of this Agreement or the exercise
or performance of its duties hereunder, in reliance upon any Rights Certificate
or certificate for the Preferred Shares or Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document reasonably believed by it to be genuine and
to be signed, executed and, where necessary, verified or acknowledged, by the
proper Person or Persons, or otherwise upon the advice of counsel as set forth
in Section 20 hereof. The Rights Agent shall not be deemed to have knowledge of
any event of which it was supposed to
-28-
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.
Section 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
business of the Rights Agent or any successor Rights Agent, shall be the
successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement, any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes to
perform only the duties and obligations expressly imposed by this Agreement (and
no implied duties) upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company or any employee of the Rights Agent), and the
advice or opinion 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 or omitted by it in accordance with such
advice or opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, 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 any action hereunder,
-29-
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 (which gross negligence, bad faith or willful misconduct must be
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 and all liability of the Rights Agent
under this Agreement will be limited to the amount of fees paid by the Company
to the Rights Agent pursuant to this Agreement.
(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 hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 7(e) hereunder), or any change or any 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 certificate furnished pursuant to Section 12 describing such
change or adjustment, upon which certificate 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
-30-
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 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. 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 Rights Agreement and the date on and/or after which such
action shall be taken 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 on which 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 stockholder, 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 from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself
(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 or bad faith in the selection and
continued employment thereof (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).
(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 it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
-31-
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the 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 his
or her Rights Certificate for inspection by the Company), then the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (a) 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 corporate trust or stockholder services powers, or (b) an
Affiliate of such 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.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Exercise 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 other securities of the Company outstanding at the
date hereof 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 of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued and this sentence shall be null
-32-
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.
Section 23. Redemption.
(a) The Company may, at its option and with the approval of the
Board of Directors, at any time prior to the Close of Business on the earlier of
(i) the fifth day following the Shares Acquisition Date (or such later date as
may be determined by action of the Company's Board of Directors and publicly
announced by the Company) and (ii) 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 hereof (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 at the time of redemption) or cash. Such
redemption of the Rights 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. The date on which the Board of Directors elects to
make the redemption effective shall be referred to as the "REDEMPTION DATE."
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after the action of
the Board of Directors ordering the redemption of the Rights, the Company shall
give written notice of such redemption to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice to all such holders at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. 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 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
(a) Subject to applicable laws, rules and regulations, and
subject to subsection 24(c) below, the Company may, at its option, by action 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
-33-
Rights (which shall not include Rights that have become null and void pursuant
to the provisions of Section 7(e) hereof) for Common Shares at an exchange ratio
of one Common Share per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "EXCHANGE RATIO").
Notwithstanding the foregoing, the 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 entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall 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 validity of such exchange. The
Company 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) hereof) 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 exchange therefor, or (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 majority vote of the Board of Directors, 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 on the date of
the occurrence of the event described above in subsection (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
-34-
for a period of up to sixty (60) days following the date on which the event
described in Section 24(a) 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 issue a
public announcement (with prompt written notice thereof to the Rights Agent)
stating that the exercisability of the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, 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 market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).
(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 24(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 24(e)
above. The Company shall 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 validity of such
exchange. The Company shall mail a notice of any such exchange to the Rights
Agent and 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, 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.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose to effect or permit to
occur any Triggering Event or Section 13 Event, the Company shall give written
notice thereof to (i) the Rights Agent, and (ii) each holder of Rights in
accordance with Section 26, hereof at least twenty (20) days prior to the
occurrence thereof.
(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 each holder of a Rights Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the occurrence
-35-
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 hereof.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) or by facsimile transmission as follows:
Harmonic Inc.
βββ ββββββ βββ
βββββββββ, ββββββββββ βββββ
Attention: Corporate Secretary
Facsimile No.: (βββ) βββ-ββββ
with a copy to:
ββββββ βββββββ ββββββββ & ββββββ
Professional Corporation
βββ ββββ ββββ ββββ
ββββ ββββ, ββββββββββ βββββ-ββββ
Attention: βββββββ β. βββββ, Esq.
βββββ β. ββββββ, Esq.
Facsimile No.: (βββ) βββ-ββββ
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) or by facsimile transmission as
follows:
Mellon Investor Services LLC
βββ ββββββββββ ββββββ, ββββ βββββ
βββ βββββββββ, 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-ββββ
Attention: General Counsel
Facsimile No.: (βββ) βββ-ββββ
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
-36-
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the occurrence of a
Distribution Date, the Company may supplement or amend this Agreement in any
respect without the approval of any holders of Rights, subject to the other
terms and conditions of this Agreement, and the Rights Agent shall, if the
Company so directs, execute such supplement or amendment. From and after the
occurrence of a 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) to 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 (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon the
delivery of a certificate from an appropriate officer of the Company that states
that the proposed supplement or amendment is in compliance with the terms of
this Section 27 and, provided that such supplement or amendment does not change
or increase the Rights Agent's rights, duties, liabilities or obligations, the
Rights Agent shall execute such supplement or amendment. 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.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power (i) to interpret the provisions of this
Agreement and (ii) to make all determinations and calculations 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 are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights
-37-
Agent, the holders of the Rights Certificates and all other parties and (y) with
respect to claims specifically arising from the Agreement, not subject the Board
to any liability to the holders of the Rights. The Rights Agent shall always be
entitled to assume that the Board of Directors of the Company acted in good
faith and shall be fully protected and incur no liability in reliance thereon.
Section 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 pursuant to this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the Common
Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement 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 of the Company 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 hereof
shall be reinstated (with prompt written notice thereof to the Rights Agent) and
shall not expire until the Close of Business on the tenth day following the date
of such determination by the Board of Directors.
Section 32. Governing Law. This Agreement and each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State; 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.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-38-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" HARMONIC INC.
By: /s/ βββββ β. βββββββ
---------------------------------
Name: βββββ β. βββββββ
-------------------------------
Title: Chief Executive Officer
and Assistant Secretary
------------------------------
"RIGHTS AGENT" MELLON INVESTOR SERVICES LLC
By: /s/ ββββββ β. ββββββββ, ββ.
---------------------------------
Name: ββββββ β. ββββββββ, ββ.
-------------------------------
Title: Vice President
------------------------------
-39-
EXHIBIT A
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK OF HARMONIC INC.
The undersigned, βββββ β. βββββββ does hereby certify:
1. That he/she is duly elected and acting Chief Financial Officer and
Assistant Secretary of Harmonic Inc., a Delaware corporation (the
"CORPORATION").
2. That pursuant to the authority conferred upon the Board of Directors
by the Amended and Restated Certificate of Incorporation of the said
Corporation, the said Board of Directors of the Corporation on July 23, 2002
adopted the following resolutions creating a series of Preferred Stock
designated as Series A Participating Preferred Stock:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Amended and Restated Certificate of
Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock of the Corporation and does hereby fix and herein
state and express the designations, powers, preferences and relative and other
special rights and the qualifications, limitations and restrictions of such
series of Preferred Stock as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "SERIES A PARTICIPATING PREFERRED STOCK." The Series A
Participating Preferred Stock shall have a par value of $0.001 per share, and
the number of shares constituting such series shall be 100,000.
Section 2. Proportional Adjustment. In the event that the Corporation
shall at any time after the issuance of any share or shares of Series A
Participating Preferred Stock (i) declare any dividend on Common Stock of the
Corporation ("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 Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any shares of any
series of Preferred Stock ranking prior and superior to the shares of Series A
Participating Preferred Stock with respect to dividends, the holders of shares
of Series A Participating Preferred Stock shall be entitled to receive when, as
and if declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the last day of January, April,
July, and October in each year (each such date being referred to herein as a
"QUARTERLY DIVIDEND PAYMENT DATE"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Participating Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to 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 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 Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on
the Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of
Series A Participating Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series A Participating
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
Participating 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 from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Participating 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. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 4. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(c) Except as required by law, the holders of Series A
Participating Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent that they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
-2-
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Participating Preferred Stock as provided
in Section 3 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of Series A
Participating 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 Participating 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 Participating
Preferred Stock, except dividends paid ratably on the Series A Participating
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 on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity 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 Participating Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any
shares of Series A Participating Preferred Stock, or any shares of stock ranking
on a parity with the Series A Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(c) 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 5, purchase or otherwise acquire such shares at such time and in
such manner.
-3-
Section 6. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein and in the Amended and Restated Certificate of Incorporation, as then
amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Participating Preferred Stock shall be entitled to receive an aggregate amount
per share equal to 1,000 times the aggregate amount to be distributed per share
to holders of shares of Common Stock plus an amount equal to any accrued and
unpaid dividends on such shares of Series A Participating Preferred Stock.
Section 8. 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 shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share 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.
Section 9. No Redemption. The shares of Series A Participating Preferred
Stock shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preference or special rights
of the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority of the outstanding
shares of Series A Participating Preferred Stock, voting separately as a series.
Section 12. Fractional Shares. Series A Participating Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Participating Preferred Stock.
-4-
RESOLVED FURTHER, that the President, Chief Executive Officer or any
Vice President and the Secretary or any Assistant Secretary of this corporation
be, and they hereby are, authorized and directed to prepare and file a
Certificate of Designation of Rights, Preferences and Privileges in accordance
with the foregoing resolution and the provisions of Delaware law and to take
such actions as they may deem necessary or appropriate to carry out the intent
of the foregoing resolution."
I further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Designation are true and correct of my own
knowledge.
Executed at Sunnyvale, California on July 24, 2002.
_______________________________________________
βββββ β. βββββββ
Chief Financial Officer and Assistant Secretary
Harmonic Inc.
-5-
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) AUGUST 7, 2012, (ii) THE DATE
TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE
RIGHTS PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT 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 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 (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID
IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH RIGHTS
AGREEMENT.]*
RIGHTS CERTIFICATE
HARMONIC INC.
This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of July 24, 2002, (the "RIGHTS
AGREEMENT"), between Harmonic Inc., a Delaware corporation (the "COMPANY"), and
Mellon Investor Services LLC (the "RIGHTS AGENT"), to purchase from the Company
at any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., California time, on August 7, 2012 at the
office of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-thousandth (0.001) of a fully paid and
------------
* The portion of the legend in bracket shall be inserted only if applicable and
shall replace the preceding sentence.
non-assessable share of Series A Participating Preferred Stock, par value $0.001
per share (the "PREFERRED SHARES"), of the Company, at an Exercise Price of
Twenty-Five Dollars ($25.00) per one-thousandth (0.001) of a Preferred Share
(the "EXERCISE PRICE"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one-thousandths (0.001) of a Preferred Share which may be purchased
upon exercise hereof) set forth above are the number and Exercise Price as of
August 7, 2002 based on the Preferred Shares as constituted at such date. As
provided in the Rights Agreement, the Exercise Price and the number and kind of
Preferred Shares or other securities which may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights 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 and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option, at
a redemption price of $0.001 per Right or (ii) may be exchanged by the Company
in whole or in part for Common Shares, substantially equivalent rights or other
consideration as determined by 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
amount of securities 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.
No fractional portion of less than one one-thousandth (0.001) of a
Preferred Share will be issued upon the exercise of any Right or Rights
evidenced hereby but in lieu thereof a cash payment will be made, as provided in
the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise 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 stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
-2-
provided in the Rights Agreement), or to receive dividends or subscription
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.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________, _____.
ATTEST: HARMONIC INC.
________________________________ By: _________________________________
Secretary
Its: ________________________________
Countersigned:
MELLON INVESTOR SERVICES LLC
as Rights Agent
By: ____________________________
Its: ___________________________
-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 __________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: _______________, ____
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person, or an Affiliate or Associate of any such Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of any such Person.
Dated: _______________, ____
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Rights Certificate)
To:___________________________
The undersigned hereby irrevocably elects to exercise ___________
Rights represented by this Rights Certificate to purchase the number of
one-thousandths (0.001) of a Preferred Share issuable upon the exercise of such
Rights and requests that certificates for such number of one-thousandths (0.001)
of a Preferred Share 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)
________________________________________________________________________________
Dated: _______________, ____
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: _______________, ____
_____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an "Eligible Guarantor Institution"
(with membership in an approved signature guarantee medallion program) pursuant
to Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended.
FORM OF REVERSE SIDE OF RIGHTS CERTIFICATE -- CONTINUED
NOTICE
The signature in the foregoing Forms of Assignment and Election
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
EXHIBIT C
STOCKHOLDER RIGHTS PLAN
HARMONIC INC.
SUMMARY OF RIGHTS
DISTRIBUTION AND The Board of Directors has declared a dividend of one
TRANSFER OF RIGHTS; Right for each share of Common Stock of Harmonic Inc.
RIGHTS CERTIFICATE: Right for each share of Common Stock of Harmonic Inc.
(the "COMPANY") outstanding. Prior to the Distribution
Date referred to below, the Rights will be evidenced by
and trade with the certificates for the Common Stock.
After the Distribution Date, the Company will mail
Rights certificates to the Company's stockholders and
the Rights will become transferable apart from the
Common Stock.
DISTRIBUTION DATE: Rights will separate from the Common Stock and become
exercisable following (a) the tenth day (or such later
date as may be determined by the Company's Board of
Directors) after a person or group acquires beneficial
ownership of 15% or more of the Company's Common Stock
or (b) the tenth business day (or such later date as
may be determined by the Company's Board of Directors)
after a person or group announces a tender or exchange
offer, the consummation of which would result in
ownership by a person or group of 15% or more of the
Company's Common Stock.
PREFERRED STOCK After the Distribution Date, each Right will entitle
PURCHASABLE UPON the holder to purchase for $25.00 (the "EXERCISE
EXERCISE OF RIGHTS: PRICE"), a fraction of a share of the Company's
Preferred Stock with economic terms similar to that of
one share of the Company's Common Stock.
FLIP-IN: If an acquirer (an "ACQUIRING PERSON") obtains 15% or
more of the Company's Common Stock, then each Right
(other than Rights owned by an Acquiring Person or its
affiliates) will entitle the holder thereof to
purchase, for the Exercise Price, a number of shares of
the Company's Common Stock having a then-current market
value of twice the Exercise Price.
FLIP-OVER: If, after an Acquiring Person obtains 15% or more of
the Company's Common Stock, (a) the Company merges into
another entity, (b) an acquiring entity merges into the
Company or (c) the Company sells more than 50% of the
Company's assets or earning power, then each Right
(other than Rights owned by an Acquiring Person or its
affiliates) will entitle the holder thereof to
purchase, for the Exercise Price, a number of shares of
Common Stock of the person engaging in the transaction
having a then current market value of twice the
Exercise Price.
EXCHANGE PROVISION: At any time after the date on which an Acquiring Person
obtains 15% or more of the Company's Common Stock and
prior to the acquisition by the Acquiring Person of 50%
of the outstanding Common Stock, the Board of Directors
of the Company may exchange the Rights (other than
Rights owned by the Acquiring Person or its
affiliates), in whole or in part, for shares of Common
Stock of the Company at an exchange ratio of one share
of Common Stock per Right (subject to adjustment).
REDEMPTION OF THE Rights will be redeemable at the Company's option for
RIGHTS: $0.001 per Right at any time on or prior to the fifth
day (or such later date as may be determined by the
Company's 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 THE The Rights expire on the earliest of (a) August 7, 2012
RIGHTS: or (b) exchange or redemption of the Rights as
described above.
AMENDMENT OF The terms of the Rights and the Rights Agreement may be
TERMS OF RIGHTS: amended in any respect without the consent of the
Rights holders on or prior to the Distribution Date;
thereafter, the terms of the Rights and the Rights
Agreement may be amended without the consent of the
Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the
interests of Rights holders (other than the Acquiring
Person).
VOTING RIGHTS: Rights will not have any voting rights.
ANTI-DILUTION Rights will have the benefit of certain customary
PROVISIONS: anti-dilution provisions.
TAXES: The Rights distribution should not be taxable for
federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, stockholders may recognize
taxable income.
The foregoing is a summary of certain principal terms of the Stockholder Rights
Plan only and is qualified in its entirety by reference to the Preferred Stock
Rights Agreement dated as of July 24, 2002 between the Company and Mellon
Investor Services LLC as Rights Agent (the "RIGHTS AGREEMENT"). The Rights
Agreement may be amended from time to time. A copy of the Rights Agreement was
filed with the Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A dated July 25, 2002. A copy of the Rights
Agreement is available free of charge from the Company.
-2-