EXHIBIT 1
RIGHTS AGREEMENT dated as of
September 15, 1997, between DATA RACE, Inc.,
a Texas corporation (the "Company"),
and ChaseMellon Shareholder Services, L.L.C.
as Rights Agent (the "Rights Agent")
The Board of Directors of the Company has authorized and declared a
dividend of one Right (as hereinafter defined) for each share of Common Stock,
no par value, of the Company (the "Common Stock") outstanding at the Close of
Business (as hereinafter defined) on September 29, 1997 (the "Record Date"), and
has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of this Rights Agreement) with respect to
each share of Common Stock that shall become outstanding between the Record Date
and the earliest of the Distribution Date, the Redemption Date or the Expiration
Date (as such terms are hereinafter defined); provided, however, that Rights may
also be issued with respect to shares of Common Stock that shall become
outstanding after the Distribution Date and prior to the earlier of the
Redemption Date or the Expiration Date in accordance with the provisions of
Section 23. Each Right shall initially represent the right to purchase one one-
thousandth (1/1,000th) of a share of Series B Participating Cumulative Preferred
Stock, no par value, of the Company (the "Preferred Shares"), having the powers,
rights and preferences set forth in the Certificate of Designation attached as
Exhibit A.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Rights Agreement, the following terms have the
meanings indicated:
"Acquiring Person" shall mean any Person which, alone or together with all
Affiliates and Associates of such Person, shall be the Beneficial Owner of more
than 20% of the Common Shares then outstanding, but shall not include any Exempt
Person; provided, however, that a Person shall not become an Acquiring Person if
such Person, together with its Affiliates and Associates, has become and is such
a Beneficial Owner solely because (i) of a reduction in the aggregate number of
Common Shares outstanding since the last date on which such Person acquired
Beneficial Ownership of any Common Shares, unless and until such time as such
Person or any Affiliate or Associate of such Person shall purchase or otherwise
become the Beneficial Owner of any additional shares of Common Stock or any
other Person (or Persons) who is (or collectively are) the Beneficial Owner of
any shares of Common Stock shall become an Affiliate or Associate of such
Person, (ii) it acquired such Beneficial Ownership in the good faith belief that
such acquisition would not cause such Beneficial Ownership to exceed 20% of the
Common Shares then outstanding and such Person relied in good faith in computing
the percentage of its Beneficial Ownership on publicly filed reports or
documents of the Company which are inaccurate, or (iii) of shares acquired
directly from the Company in connection with the Company's acquisition of a
business or pursuant to an agreement with the Company stating such Person is not
intended to become an Acquiring Person as a result of such acquisition.
Notwithstanding clause (ii) of the prior sentence, if any
Person that is not deemed an Acquiring Person due to such clause (ii) does not
reduce its percentage of Beneficial Ownership of Common Shares to 20% or less by
the Close of Business on the fifth Business Day after notice from the Company
(the date of notice being the first day) that such Person's Beneficial Ownership
of Common Shares so exceeds 20%, such Person shall, at the end of such five
Business Day period, become an Acquiring Person (and such clause (ii) shall no
longer apply to such Person). For purposes of this definition, the determination
whether any Person acted in "good faith" shall be conclusively determined by the
Board of Directors of the Company, acting by a vote of those directors of the
Company whose approval would be required to redeem the Rights under Section 24.
At any time prior to the Distribution Date, the Board of Directors may, with
respect to any specified Person or Persons, determine to increase to a specified
percentage greater than that set forth herein the level of Beneficial Ownership
of Common Stock at which such Person or Persons becomes an Acquiring Person.
"Affiliate" and "Associate," when used with reference to any Person, 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
Rights Agreement.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to
"beneficially own", and shall be deemed to have "Beneficial Ownership" of, any
securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time or the
occurrence of an event) pursuant to any agreement, arrangement or understanding
(written or oral), 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 the Beneficial Owner of, or to
beneficially own, or to have Beneficial Ownership of, 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 thereunder, or (B) the right to vote pursuant
to any agreement, arrangement or understanding (written or oral); provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if (1) the agreement, arrangement or
understanding (written or oral) to vote such security arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation (i.e., not including a solicitation exempted by Rule 14a-
2(b)(2) of the General Rules and Regulations under the Exchange Act) made
pursuant to, and in accordance with, the applicable rules and regulations under
the Exchange Act and (2) the beneficial ownership of such security 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 (written or oral) for
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the purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in clause (ii)(B) of this definition) or disposing of any
securities of the Company.
Notwithstanding the foregoing, nothing contained in this definition shall
cause a Person ordinarily engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "beneficially own," any securities acquired
in a bona fide firm commitment underwriting pursuant to an underwriting
agreement with the Company until the expiration of forty days after the date of
such acquisition.
"Book Value," when used with reference to Common Shares issued by any
Person, shall mean the amount of equity of such Person applicable to each Common
Share, determined (i) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (ii) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (iii) after giving
effect to (A) the exercise of all rights, options and warrants to purchase such
Common Shares (other than the Rights), and the conversion of all securities
convertible into such Common Shares, at an exercise or conversion price, per
Common Share, which is less than such Book Value before giving effect to such
exercise or conversion (whether or not exercisability or convertibility is
conditioned upon occurrence of a future event), (B) all dividends and other
distributions on the capital stock of such Person declared prior to the date as
of which such Book Value is to be determined and to be paid or made after such
date, and (C) any other agreement, arrangement or understanding (written or
oral), or transaction or other action prior to the date as of which such Book
Value is to be determined which would have the effect of thereafter reducing
such Book Value.
"Business Combination" shall have the meaning set forth in Section
11(c)(I).
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York or the state in which the
principal office of the Rights Agent is located, are authorized or obligated by
law or executive order to close.
"Certificate of Designation" shall mean the Statement of Resolution
Establishing Series B Participating Cumulative Preferred Stock, setting forth
the powers, preferences, rights, qualifications, limitations and restrictions of
such series of Preferred Stock of the Company, a copy of which is attached as
Exhibit A.
"Close of Business" on any given date shall mean 5:00 p.m., New York, New
York time, on such date; provided, however, that, if such date is not a Business
Day, "Close of Business" shall mean 5:00 p.m., New York, New York time, on the
next succeeding Business Day.
"Common Shares," when used with reference to the Company prior to a
Business Combination, shall mean the shares of Common Stock of the Company or
any other shares of capital stock of the Company into which the Common Stock
shall be reclassified or changed. "Common Shares," when used with reference to
any Person (other than the Company prior to a Business Combination), shall mean
shares of capital stock of such Person (if such Person is a
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corporation) of any class or series, or units of equity interests in such Person
(if such Person is not a corporation) of any class or series, the terms of which
do not limit (as a maximum amount and not merely in proportional terms) the
amount of dividends or income payable or distributable on such class or series
or the amount of assets distributable on such class or series upon any voluntary
or involuntary liquidation, dissolution or winding up of such Person and do not
provide that such class or series is subject to redemption at the option of such
Person, or any shares of capital stock or units of equity interests into which
the foregoing shall be reclassified or changed; provided, however, that if at
any time there shall be more than one such class or series of capital stock or
equity interests of such Person, "Common Shares" of such Person shall include
all such classes and series substantially in the proportion of the total number
of shares or other units of each such class or series outstanding at such time.
"Common Stock" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement.
"Company" shall have the meaning set forth in the heading of this Rights
Agreement; provided, however, that if there is a Business Combination, "Company"
shall have the meaning set forth in Section 11(c)(III).
"Continuing Director" shall mean (i) any member of the Board of Directors
of the Company, while such Person is a member of the Board, who is not an
Acquiring Person or an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any such Affiliate or
Associate and was a member of the Board prior to the date hereof, and (ii) any
Person who subsequently becomes a member of the Board of Directors who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person or a
representative of an Acquiring Person or of any such Affiliate or Associate, if
such Person's nomination for election to the Board of Directors is recommended
or approved by a majority of the members qualifying as Continuing Directors at
the time of such nomination.
The term "control" with respect to any Person shall mean the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"Distribution Date" shall have the meaning set forth in Section 3(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as in effect
on the date in question, unless otherwise specifically provided.
"Exchange Consideration" shall have the meaning set forth in Section
11(b)(I).
"Expiration Date" shall have the meaning set forth in Section 7(a).
"Exempt Person" shall mean the Company, any Subsidiary of the Company, any
employee benefit plan or employee stock plan of the Company or any Subsidiary of
the Company or any Person holding Common Shares for or pursuant to the terms of
any such plan
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or organized, appointed, or established by the Company for or pursuant to the
terms of any such plan.
"Major Part," when used with reference to the assets of the Company and its
Subsidiaries as of any date, shall mean assets (i) having a fair market value
aggregating 50% or more of the total fair market value of all the assets of the
Company and its Subsidiaries (taken as a whole) as of the date in question, (ii)
accounting for 50% or more of the total value (net of depreciation and
amortization) of all the assets of the Company and its Subsidiaries (taken as a
whole) as would be shown on a consolidated or combined balance sheet of the
Company and its Subsidiaries as of the date in question, prepared in accordance
with generally accepted accounting principles then in effect, or (iii)
accounting for 50% or more of the total amount of earnings before interest,
taxes, depreciation and amortization or for 50% or more of the revenues of the
Company and its Subsidiaries (taken as a whole) in either case as would be shown
on, or derived from, a consolidated or combined statement of income or
operations of the Company and its Subsidiaries for the period of 12 months
ending on the last day of the Company's monthly accounting period next preceding
the date in question, prepared in accordance with generally accepted accounting
principles then in effect.
"Market Value," when used with reference to Common Shares on any date,
shall be deemed to be the average of the daily closing prices, per share, of
such Common Shares for the period which is the shorter of (1) 10 consecutive
Trading Days immediately prior to the date in question or (2) the number of
consecutive Trading Days beginning on the Trading Day immediately after the date
of the first public announcement of the event requiring a determination of the
Market Value and ending on the Trading Day immediately prior to the record date
of such event; provided, however, that, in the event that the Market Value of
such Common Shares is to be determined in whole or in part during a period
following the announcement by the issuer of such Common Shares of any action of
the type described in Section 12(a) that would require an adjustment thereunder,
then, and in each such case, the Market Value of such Common Shares shall be
appropriately adjusted to reflect the effect of such action on the market price
of such Common Shares. The closing price for each Trading Day shall be the
closing price quoted on the principal United States securities exchange
registered under the Exchange Act (or any recognized foreign stock exchange) on
which such securities are listed, or, if such securities are not listed on any
such exchange, the closing price quoted on the Nasdaq National Market or, if
such securities are not so quoted, the average of the closing bid and asked
quotations with respect to a share of such securities on any National
Association of Securities Dealers, Inc. quotations system, or if no such
quotations are available, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such securities
selected by the Board of Directors of the Company. If on any such Trading Day
no market maker is making a market in such securities, the closing price of such
securities on such Trading Day shall be deemed to be the fair value of such
securities as determined in good faith by the Board of Directors of the Company
(whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent, the holders of Rights and all
other Persons); provided, however, that for the purpose of determining the
closing price of the Preferred Shares for any Trading Day on which there is no
such market maker for the Preferred Shares the closing price on such Trading Day
shall be deemed to be the Formula Number (as defined in the Certificate of
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Designation) times the closing price of the Common Shares of the Company on such
Trading Day.
"Person" shall mean an individual, corporation, partnership, firm, joint
venture, association, trust, unincorporated organization or other entity.
"Preferred Shares" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement. Any reference in this Rights Agreement to
Preferred Shares shall be deemed to include any authorized fraction of a
Preferred Share, unless the context otherwise requires.
"Principal Party" shall mean the Surviving Person in a Business
Combination; provided, however, that, if such Surviving Person is a direct or
indirect Subsidiary of any other Person, "Principal Party" shall mean the Person
which is the ultimate parent of such Surviving Person and which is not itself a
Subsidiary of another Person. In the event that ultimate control of such
Surviving Person is shared by two or more Persons, "Principal Party" shall mean
that Person that is immediately controlled by such two or more Persons.
"Purchase Price" with respect to each Right shall mean $75.00, as such
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Purchase Price shall mean the Purchase Price as in effect at the time in
question.
"Record Date" shall be September 29, 1997.
"Redemption Date" shall have the meaning set forth in Section 24(a).
"Redemption Price" with respect to each Right shall mean $.01, as such
amount may from time to time be adjusted in accordance with Section 12. All
references herein to the Redemption Price shall mean the Redemption Price as in
effect at the time in question.
"Registered Common Shares" shall mean Common Shares which are, as of the
date of consummation of a Business Combination, and continuously have been for
the 12 months immediately preceding such date, registered under Section 12 of
the Exchange Act.
"Rights Agent" shall mean the Person named as the "Rights Agent" in the
preamble of this Agreement until a successor Rights Agent shall have become such
pursuant to the applicable provisions of Sections 20 or 22 of this Agreement,
and thereafter "Rights Agent" shall mean such successor Rights Agent. If at any
time there is more than one Person appointed by the Company as Rights Agent
pursuant to the applicable provisions of Section 2 of this Agreement, "Rights
Agent" shall mean and include each such Person.
"Right Certificate" shall mean a certificate evidencing a Right
substantially in the form attached as Exhibit B.
"Rights" shall mean the rights to purchase Preferred Shares (or other
securities) as provided in this Rights Agreement.
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"Securities Act" shall mean the Securities Act of 1933, as in effect on the
date in question, unless otherwise specifically provided.
"Subsidiary" shall mean a Person, at least a majority of the total
outstanding voting power (being the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation)) of
which is owned, directly or indirectly, by another Person or by one or more
other Subsidiaries of such other Person or by such other Person and one or more
other Subsidiaries of such other Person.
"Surviving Person" shall mean (1) the Person which is the continuing or
surviving Person in a consolidation or merger specified in Section 11(c)(I)(i)
or Section 11(c)(I)(ii) or (2) the Person to which the Major Part of the assets
of the Company and its Subsidiaries is sold, leased, exchanged or otherwise
transferred or disposed of in a transaction specified in Section 11(c)(I)(iii);
provided, however, that, if the Major Part of the assets of the Company and its
Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of
in one or more related transactions specified in Section 11(c)(I)(iii) to more
than one Person, the "Surviving Person" in such case shall mean the Person that
acquired assets of the Company or its Subsidiaries with the greatest fair market
value in such transaction or transactions.
"Trading Day" shall mean a day on which the principal national securities
exchange (or principal recognized foreign stock exchange, as the case may be) on
which any Common Shares, other securities or Rights, as the case may be, are
listed or admitted to trading is open for the transaction of business, or if the
securities or Rights in question are not listed or admitted to trading on any
national securities exchange (or recognized foreign stock exchange, as the case
may be), a Business Day.
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 one
or more co-Rights Agents as it may deem necessary or desirable (the term "Rights
Agent" being used herein to refer, collectively, to the Rights Agent together
with any such co-Rights Agents). In the event the Company appoints one or more
co-Rights Agents, the respective duties of the Rights Agent and any co-Rights
Agents shall be as the Company shall determine.
SECTION 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES.
(a) One Right shall be associated with (i) each Common Share outstanding on
the Record Date, (ii) each additional Common Share that shall become outstanding
between the Record Date and the earliest of the Distribution Date, the
Redemption Date or the Expiration Date and (iii) each additional Common Share
with which Rights are issued after the Distribution Date but prior to the
earlier of the Redemption Date or the Expiration Date as provided in Section 23;
provided, however, that if the number of outstanding Rights are combined into a
smaller number of outstanding Rights pursuant to Section 12(a), the
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appropriate fractional Right determined pursuant to such Section shall
thereafter be associated with each such Common Share.
(b) The Rights will separate from the Common Stock (and a "Distribution
Date" will occur) upon the earlier of (i) ten days following a public
announcement that a Person has become an Acquiring Person, (ii) ten Business
Days following the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer by any Person (other than by an Exempt
Person) for outstanding Common Shares, if upon consummation of such tender or
exchange offer such Person could be the Beneficial Owner of more than 20% of the
outstanding Common Shares, or (iii) such later date, not later than the 30th day
after an event described in clause (i) or (ii), as the Board of Directors may
determine. Until the occurrence of such a Distribution Date, (x) the Rights
will be evidenced by the certificates for Common Shares registered in the names
of the holders thereof and not by separate Right Certificates and (y) the
Rights, including the right to receive Right Certificates, will be transferable
only in connection with the transfer of Common Shares. As soon as practicable
after the Distribution Date, the Rights Agent will send, by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the
Distribution Date, at the address of such holder shown on the records of the
Company, a Right Certificate evidencing one whole Right for each Common Share
(or for the number of Common Shares with which one whole Right is then
associated if the number of Rights per Common Share has been adjusted in
accordance with the provisions of Section 12(a)). If the number of Rights
associated with each Common Share has been adjusted in accordance with the
provisions of Section 12(a), at the time of distribution of the Right
Certificates the Company may make any necessary and appropriate rounding
adjustments so that Right Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Right in accordance
with Section 15(a). As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(c) As promptly as practicable following the Record Date, the Company will
send a copy of a Summary of the Rights to Purchase Preferred Stock, in
substantially the form attached hereto as Exhibit C, to each record holder of
the Common Stock as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company. With respect to any
certificate for Common Shares, until the earliest of the Distribution Date, the
Redemption Date or the Expiration Date, the Rights associated with the Common
Shares represented by any such certificate shall be evidenced by such
certificate alone, the registered holders of the Common Shares shall also be the
registered holders of the associated Rights and the surrender for transfer of
any such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(d) Certificates issued for Common Shares after the Record Date (including,
without limitation, upon transfer or exchange of outstanding Common Shares), but
prior to the earliest of the Distribution Date, the Redemption Date or the
Expiration Date, shall have printed on, written on or otherwise affixed to them
the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of September 15,
1997, as it may be amended from time to time (the "Rights Agreement"),
between DATA RACE, Inc. (the
8
"Company") and ChaseMellon Shareholder Services, L.L.C., as Rights Agent
(the "Rights Agent"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices
of the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. The Rights Agent 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
beneficially owned by any Person who is, was or becomes an Acquiring
Persons or any Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement) and by any subsequent holder may become null and void
and nontransferable.
Notwithstanding this paragraph (d), the omission of a legend shall not
affect the enforceability of any part of this Rights Agreement or the rights of
any holder of Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES.
The Right Certificates (and the form of election to purchase and form of
assignment to be printed on the reverse side thereof) shall be in substantially
the form set forth as Exhibit B and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Rights Agreement, or as may be required to comply with any applicable law
or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to usage. Subject to the provisions of Sections 7, 11 and
23, the Right Certificates, whenever issued, shall be dated as of the
Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of one one-thousandth (1/1,000th)of Preferred Shares as
shall be set forth therein for the Purchase Price set forth therein, but the
amount and type of securities purchasable upon the exercise of each Right and
the Purchase Price thereof shall be subject to adjustment from time to time as
herein provided.
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the Company by
its Chief Executive Officer, President, the Chief Financial Officer, or a Vice
President (whether preceded by any additional title) of the Company, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested to by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature
(the omissions of the corporate seal, however, shall not affect the validity of
the Right Certificates). The Right Certificates shall be countersigned by the
Rights Agent and shall not be valid or obligatory for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such an officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates may nevertheless be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such an
officer of the Company; and any Right Certificate may be signed on behalf of the
Company by any person
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who, at the actual date of execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at the
date of execution of this Rights Agreement any such person was not such an
officer of the Company.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at its principal office or offices designated as the appropriate place
for surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced by each of the Right Certificates,
the certificate number of each of the Right Certificates and the date of each of
the Right Certificates.
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES;
UNCERTIFICATED RIGHTS.
(a) Subject to the provisions of Sections 7(e) and 15, at any time after
the Distribution Date, and at or prior to the Close of Business on the earlier
of the Redemption Date or the Expiration Date, any Right Certificate or Right
Certificates may be transferred, split-up, combined or exchanged for another
Right Certificate or Right Certificates representing, in the aggregate, the same
number of Rights as the Right Certificate or Right Certificates surrendered then
represented. Any registered holder desiring to transfer, split-up, combine or
exchange any Right Certificate shall make such request in writing delivered to
the Rights Agent and shall surrender the Right Certificate or Right Certificates
to be transferred, split-up, combined or exchanged at the principal office of
the Rights Agent; provided, however, that neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any Right Certificate surrendered for transfer until the registered
holder shall have completed and signed the certification contained in the form
of assignment on the reverse side of such Right Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Sections
7(e) and 15, countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split-up,
combination or exchange of Right Certificates.
(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 valid
Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make a new Right
Certificate of like tenor and deliver such new Right Certificate to the Rights
Agent for delivery to the registered owner in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.
10
(c) Notwithstanding any other provision hereof, the Company and the Rights
Agent may amend this Rights Agreement to provide for uncertificated Rights in
addition to or in place of Rights evidenced by Right Certificates.
SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) and except as otherwise provided herein
(including Section 11), each Right shall entitle the registered holder thereof,
upon exercise thereof as provided herein, to purchase for the Purchase Price, at
any time after the Distribution Date and at or prior to the earlier of (i) the
Close of Business on the tenth anniversary of the date of this Rights Agreement
(the Close of Business on such date being the "Expiration Date"), or (ii) the
Redemption Date, one one-thousandth (1/1,000th) of a Preferred Share, subject to
adjustment from time to time as provided in Sections 11 and 12.
(b) The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date, upon surrender of the Right Certificate,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the Rights Agent's office or
offices designated as the appropriate place for surrender of Right Certificates
upon exercise or transfer, together with payment of the aggregate Purchase Price
with respect to the total number of one one-thousandth (1/1,000th) of a
Preferred Share (or other securities, cash or other assets, as the case may be)
as to which the Rights are exercised, at or prior to the earlier of (i) the
Expiration Date or (ii) the Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed, accompanied by payment of the Purchase Price for the
Preferred Shares to be purchased together with an amount equal to any applicable
transfer tax, in lawful money of the United States of America, in cash or by
certified check or money order payable to the order of the Company, the Rights
Agent shall thereupon (i) either (A) promptly requisition from any transfer
agent of the Preferred Shares (or make available, if the Rights Agent is the
transfer agent) certificates for the total number of one one-thousandth
(1/1,000th) of Preferred Shares to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests or
(B) if the Company shall have elected to deposit the Preferred Shares with a
depositary agent under a depositary arrangement, promptly requisition from the
depositary agent depositary receipts representing the total number of one one-
thousandth (1/1,000th)of Preferred Shares to be purchased (in which case
certificates for the Preferred Shares to be represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with all such requests, (ii) when
appropriate, promptly requisition from the Company the amount of cash to be paid
in lieu of the issuance of fractional Rights or shares in accordance with
Section 15, (iii) promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event that the Company is obligated to issue other
securities (including Common Stock) of the Company, pay cash and/or distribute
other property pursuant to Section 11 hereof, the
11
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
(d) In case the registered holder of any Right Certificate shall exercise
fewer than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and shall be delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 15.
(e) Notwithstanding anything in this Rights Agreement to the contrary, any
Rights that are at any time beneficially owned by: (i) an Acquiring Person or
any Affiliate or Associate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person (or its Associates or Affiliates) to
holders of equity interests in such Acquiring Person (or its Affiliates or
Associates) or to any Person with whom such Acquiring Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has a primary purpose or effect of
avoidance of this Section 7(e), shall in each such case be null and void and
nontransferable, and any holder of any such Right (including any purported
transferee or subsequent holder) shall not have any right to exercise or
transfer any such Right. No Right Certificate shall be issued pursuant to
Section 3 that represents Rights beneficially owned by an Acquiring Person whose
Rights would be void pursuant to this paragraph or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to this
paragraph or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate; and any Right certificate delivered to
the Rights Agent for transfer to an Acquiring Person whose Rights would be void
pursuant to this paragraph shall be canceled.
(f) Notwithstanding anything in this Rights Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Right Certificates upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) completed and signed the certificate contained
in the form of election to purchase set forth on the reverse side of the Right
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not to exceed
90 calendar days after the Distribution Date, the exercisability of the Rights
in order to prepare and file a registration statement under the Securities Act,
on an appropriate form, with respect to the Preferred Shares purchasable upon
exercise of the Rights and permit such registration statement to become
effective; provided, however, that no such suspension shall remain effective
after, and the Rights shall without any further action by the Company or any
other
12
Person become exercisable immediately upon, the effectiveness of such
registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect. Notwithstanding any provision herein
to the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification under the blue sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law. No such temporary suspension nor any
failure by the Company to effectuate such a registration under the Securities
Act or blue sky or securities laws of any such jurisdiction shall impair or
otherwise adversely affect the contractual rights represented by such Rights.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES.
All Right Certificates surrendered or presented for the purpose of
exercise, transfer, split-up, combination or exchange shall, and any Right
Certificate representing Rights that have become null and void and
nontransferable pursuant to Section 7(e) surrendered or presented for any
purpose shall, if surrendered or presented to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered or presented to the Rights Agent, shall be canceled by it,
and no Right Certificates shall be issued in lieu thereof except as expressly
permitted by this Rights Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Right Certificate purchased or acquired by the Company. The Rights
Agent shall deliver all canceled Right Certificates to the Company, or shall, at
the written request of the Company, destroy such canceled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Shares or any
authorized and issued Preferred Shares held in its treasury, free from
preemptive rights or any right of first refusal, a number of Preferred Shares
sufficient to permit the exercise in full of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred Shares
authorized but unissued, or issued but not outstanding, to permit the exercise
or exchange of Rights in accordance with Section 11, the Company covenants and
agrees that it will take all such action as may be necessary to authorize
additional Preferred Shares for issuance upon the exercise or exchange of Rights
pursuant to Section 11; provided, however, that if the Company is unable to
cause the authorization of additional Preferred Shares, then the Company shall,
or in lieu of seeking any such authorization, the Company may, to the extent
necessary and permitted by applicable law and any agreements or instruments in
effect prior to the Distribution Date to which it is a party: (A) upon
surrender of a Right, pay cash equal to the Purchase Price in lieu of issuing
Preferred Shares and requiring payment therefor, (B) upon due exercise of a
Right and payment of the Purchase Price for each one one-thousandth (1/1,000th)
of a Preferred Share as to which such Right is exercised, issue equity
securities having a value equal to the value of the Preferred Shares which
otherwise would have been issuable pursuant to Section 11, which value shall be
determined by a nationally recognized investment banking firm selected by the
13
Board of Directors of the Company or (C) upon due exercise of a Right and
payment of the Purchase Price for each one one-thousandth (1/1,000th) of a
Preferred Share as to which such Right is exercised, distribute a combination of
Preferred Shares, cash or other equity or debt securities having an aggregate
value equal to the value of the Preferred Shares which otherwise would have been
issuable pursuant to Section 11, which value shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company. To the extent that any legal or contractual restrictions (pursuant to
agreements or instruments in effect prior to the Distribution Date to which the
Company is party) prevent the Company from paying the full amount payable in
accordance with the foregoing sentence, the Company shall pay to holders of the
Rights as to which such payments are being made all amounts which are not then
restricted on a pro rata basis as such payments become permissible under such
legal or contractual restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares delivered upon exercise or
exchange of Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or exchange
of Rights are to be listed on any national securities exchange, the Company
covenants and agrees to use its best efforts to cause, from and after such time
as the Rights become exercisable or exchangeable, all Preferred Shares reserved
for such issuance to be listed on such securities exchange upon official notice
of issuance upon such exercise or exchange.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of Right Certificates or of any
Preferred Shares or Common Shares or other securities upon the exercise or
exchange of the Rights. The Company shall not, however, be required to pay for
any transfer or delivery of Right Certificates to a Person other than, or in
respect of the issuance or delivery of certificates for the Preferred Shares or
Common Shares or other securities, as the case may be, in a name other than that
of, the registered holder of the Right Certificate evidencing Rights surrendered
for exercise or exchange or to issue or deliver any certificates for Preferred
Shares or Common Shares or other securities, as the case may be, upon the
exercise or exchange of any Rights until any such tax shall have been paid (any
such tax being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
SECTION 10. PREFERRED SHARES RECORD DATE.
Each Person in whose name any certificate for Preferred Shares or Common
Shares or other securities is issued upon the exercise or exchange of Rights
shall for all purposes be deemed to have become the holder of record of the
Preferred Shares or Common Shares or other securities, as the case may be,
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
any Purchase Price (and any applicable transfer taxes) was made; provided,
14
however, that, if the date of such surrender and payment is a date upon which
the transfer books of the Company for the Preferred Shares or Common Shares or
other securities, as the case may be, are closed, such Person shall be deemed to
have become the record holder of such Preferred Shares or Common Shares or other
securities, as the case may be, on, and such certificate shall be dated, the
next succeeding Business Day on which the transfer books of the Company for the
Preferred Shares or Common Shares or other securities, as the case may be, are
open.
SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON;
EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS.
(a) Subject to Section 24 of this Rights Agreement, upon a Person becoming
an Acquiring Person, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e), shall thereafter have a right to
receive, upon exercise thereof for the Purchase Price in accordance with the
terms of Section 7 and other pertinent terms of this Rights Agreement, such
number of one one-thousandths (1/1,000ths) of a Preferred Share as shall equal
the result obtained by multiplying the Purchase Price by a fraction, the
numerator of which is the number of one one-thousandths (1/1,000ths) of a
Preferred Share for which a Right had then been exercisable (disregarding the
effect of this Section 11(a)) and the denominator of which is 50% of the Market
Value of the Common Shares of the Company on the date on which a Person becomes
an Acquiring Person. As soon as practicable after a Person becomes an Acquiring
Person (provided the Company shall not have elected to make the exchange
permitted by Section 11(b)(I) for all outstanding Rights) and the occurrence of
a Distribution Date in connection therewith, the Company covenants and agrees to
use its best efforts to:
(I) prepare and file a registration statement under the Securities
Act, on an appropriate form, with respect to the Preferred Shares purchasable
upon exercise of the Rights;
(II) cause such registration statement to become effective as soon
as practicable after such filing;
(III) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date; and
(IV) qualify or register the Preferred Shares purchasable upon
exercise of the Rights under the blue sky or securities laws of such
jurisdictions as may be necessary or appropriate.
(b) (I) The Board of Directors of the Company may, at its option, at
any time after a Person becomes an Acquiring Person, mandatorily exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e)) for consideration per Right consisting of either
one-half of the securities that would be issuable at such time upon the exercise
of one Right in accordance with Section 11(a) or, if applicable, Section 9(b)(B)
or (C) or, if applicable, the cash consideration specified in Section 9(b)(A)
(the consideration issuable per Right pursuant to this Section 11(b)(I) being
the "Exchange Consideration"). The
15
Board of Directors of the Company may, at its option, issue, in substitution for
Preferred Shares, Common Shares in an amount per Preferred Share equal to the
Formula Number (as defined in the Certificate of Designation) if there are
sufficient Common Shares of the Company authorized but unissued, or issued but
not outstanding. If the Board of Directors of the Company elects to exchange all
the Rights for Exchange Consideration pursuant to this Section 11(b)(I) prior to
the physical distribution of the Right Certificates (or, in the event that the
Board of Directors of the Company shall have elected to issue uncertificated
Rights pursuant to Section 6(c) hereof), the Company may distribute the Exchange
Consideration in lieu of distributing Right Certificates, in which case for
purposes of this Rights Agreement holders of Rights shall be deemed to have
simultaneously surrendered for exchange Right Certificates and the Rights
represented thereby on the date of such distribution.
(II) Any action of the Board of Directors of the Company ordering
the exchange of any Rights pursuant to Section 11(b)(I) shall be irrevocable
and, immediately upon the taking of such action and without any further action
and without any notice, the right to exercise any such Right pursuant to Section
11(a) shall terminate and the only right thereafter of a holder of such Right
shall be to receive the Exchange Consideration in exchange for each such Right
held by such holder or, if the Exchange Consideration shall not have been paid
or issued, to exercise any such Right pursuant to Section 11(c)(I). The Company
shall promptly give public notice of any such exchange; provided, however, that
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. The Company promptly shall mail a notice of any such exchange
to all 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 Rights for the Exchange Consideration 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 shall have become null and void and nontransferable pursuant
to the provisions of Section 7(e)) held by each holder of Rights.
(c) (I) In the event that, following a Distribution Date, directly or
indirectly, any transactions specified in the following clause (i), (ii) or
(iii) of this Section 11(c) (each such transaction being a "Business
Combination") shall be consummated:
(i) the Company shall consolidate with, or merge with and
into, any Acquiring Person or any Affiliate or Associate of an Acquiring Person;
(ii) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into the Company and, in connection with
such merger, all or part of the Common Shares of the Company shall be changed
into or exchanged for capital stock or other securities of the Company or of any
Acquiring Person or Affiliate or Associate of an Acquiring Person or cash or any
other property; or
(iii) the Company shall sell, lease, exchange or otherwise
transfer or dispose of (or one or more of its Subsidiaries shall sell, lease,
exchange or otherwise transfer
16
or dispose of), in one or more transactions, the Major Part of the assets of the
Company and its subsidiaries (taken as a whole) to any Acquiring Person;
then, in each such case, proper provision shall be made so that each holder of a
Right (other than Rights which shall have become null and void and
nontransferable pursuant to the provisions of Section 7(e)), shall thereafter
have the right to receive, upon the exercise thereof for the Purchase Price in
accordance with the terms of this Rights Agreement, the securities specified
below (or, at such holder's option, the securities specified in Section 11(a)):
(A) If the Principal Party in such Business Combination
has Registered Common Shares outstanding, each Right shall thereafter represent
the right to receive, upon the exercise thereof and payment of the Purchase
Price in accordance with the terms of this Rights Agreement, such number of
Registered Common Shares of such Principal Party, free and clear of all liens,
encumbrances or other adverse claims, as shall have an aggregate Market Value
equal to the result obtained by multiplying the Purchase Price by two;
(B) If the Principal Party involved in such Business
Combination does not have Registered Common Shares outstanding, each Right shall
thereafter represent the right to receive, upon the exercise thereof and payment
of the Purchase Price in accordance with the terms of this Rights Agreement, at
the election of the holder of such Right at the time of the exercise thereof,
any of:
(1) such number of Common Shares of the Surviving
Person in such Business Combination as shall have an aggregate Book Value
immediately after giving effect to such Business Combination equal to the result
obtained by multiplying the Purchase Price by two;
(2) such number of Common Shares of the Principal
Party in such Business Combination (if the Principal Party is not also the
Surviving Person in such Business Combination) as shall have an aggregate Book
Value immediately after giving effect to such Business Combination equal to the
result obtained by multiplying the Purchase Price by two; or
(3) if the Principal Party in such Business
Combination is an Affiliate of one or more Persons which has Registered Common
Shares outstanding, such number of Registered Common Shares of whichever of such
Affiliates of the Principal Party has Registered Common Shares with the greatest
aggregate Market Value on the date of consummation of such Business Combination
as shall have an aggregate Market Value on the date of such Business Combination
equal to the result obtained by multiplying the Purchase Price by two.
(II) The Company shall not consummate any Business Combination
unless each issuer of Common Shares for which Rights may be exercised, as set
forth in this Section 11(c), shall have sufficient authorized Common Shares that
have not been issued or reserved for issuance (and which shall, when issued upon
exercise thereof in accordance with this Rights Agreement, be validly issued,
fully paid and nonassessable and free of preemptive rights, rights of first
refusal or any other restrictions or limitations on the transfer or ownership
17
thereof) to permit the exercise in full of the Rights in accordance with this
Section 11(c) and unless prior thereto:
(i) a registration statement under the Securities Act on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, shall be effective under the
Securities Act; and
(ii) the Company and each such issuer shall have:
(A) executed and delivered to the Rights Agent a
supplemental agreement providing for the assumption by such issuer of the
obligations set forth in this Section 11(c) (including the obligation of such
issuer to issue Common Shares upon the exercise of Rights in accordance with the
terms set forth in Sections 11(c)(I) and 11(c)(III) and further providing that
such issuer, at its own expense, will use its best efforts to:
(1) cause a registration statement under the
Securities Act on an appropriate form, with respect to the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights, to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date;
(2) qualify or register the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights under the blue sky
or securities laws of such jurisdictions as may be necessary or appropriate; and
(3) list the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights on each national securities
exchange on which the Common Shares of such issuer were listed prior to the
consummation of the Business Combination or, if the Common Shares of such issuer
were not listed on a national securities exchange prior to the consummation of
the Business Combination, on a national securities exchange;
(B) furnished to the Rights Agent a written opinion of
independent counsel stating that such supplemental agreement is a valid, binding
and enforceable agreement of such issuer; and
(C) filed with the Rights Agent a certificate of a
nationally recognized firm of independent accountants setting forth the number
of Common Shares of such issuer which may be purchased upon the exercise of each
Right after the consummation of such Business Combination.
(III) After consummation of any Business Combination and subject to
the provisions of Section 11(c)(II), (i) each issuer of Common Shares for which
Rights may be exercised as set forth in this Section 11(c) shall be liable for,
and shall assume, by virtue of such Business Combination, all the obligations
and duties of the Company pursuant to this Rights Agreement, (ii) the term
"Company" shall thereafter be deemed to refer to such issuer, (iii) each such
issuer shall take such steps in connection with such consummation as may be
necessary to assure that the provisions hereof (including the provisions of
Sections 11(a) and 11(c)) shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common
18
Shares thereafter deliverable upon the exercise of the Rights, and (iv) the
number of Common Shares of each such issuer thereafter receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions of Sections 11 and
12, and the provisions of Sections 7, 9 and 10 with respect to the Preferred
Shares shall apply, as nearly as reasonably may be, on like terms to any such
Common Shares.
SECTION 12. CERTAIN ADJUSTMENTS.
(a) To preserve the actual or potential economic value of the Rights, if at
any time after the date of this Rights Agreement there shall be any change in
the Common Shares of the Company (including any entity regarded as such pursuant
to Section 11(c)(III) hereof) or the Preferred Shares, whether by reason of
stock dividends, stock splits, recapitalization, mergers, consolidations,
combinations or exchanges of securities, split-ups, split-offs, spin-offs,
liquidations, other similar changes in capitalization, any distribution or
issuance of cash, assets, evidences of indebtedness or subscription rights,
options or warrants to holders of Common Shares of the Company (including any
entity regarded as such pursuant to Section 11(c)(III) hereof) or Preferred
Shares, as the case may be (other than distribution of the Rights or any regular
periodic cash dividends established from time to time by the Board of Directors
of the Company) or otherwise, then, in each such event the Board of Directors of
the Company shall make such appropriate adjustments in the number of Preferred
Shares (or the number and kind of other securities) issuable upon exercise of
each Right, the Purchase Price and Redemption Price in effect at such time and
the number of Rights outstanding at such time (including the number of Rights or
fractional Rights associated with each Common Share) such that following such
adjustment such event shall not have had the effect of reducing or limiting the
benefits the holders of the Rights would have had absent such event.
(b) If, as a result of an adjustment made pursuant to Section 12(a), the
holder of any Right thereafter exercised shall become entitled to receive any
securities other than Preferred Shares, thereafter the number of such securities
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions of Sections 11 and 12 and the provisions of Sections 7, 9 and 10 with
respect to the Preferred Shares shall apply, as nearly as reasonably may be, on
like terms to any such other securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities relating
to a Right shall evidence the right to purchase, for the Purchase Price, the
adjusted number and kind of securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(d) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares or number or kind of other securities issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the terms which were expressed in the initial
Right Certificates issued hereunder.
19
(e) In any case in which action taken pursuant to Section 12(a) requires
that an adjustment be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date of the Preferred
Shares or other securities, if any, issuable before giving effect 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 securities upon the occurrence of the event requiring
such adjustment.
SECTION 13. CERTIFICATE OF ADJUSTMENT.
Whenever an adjustment is made as provided in Section 11 or 12, the Company
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Preferred Shares a
copy of such certificate and (c) mail a brief summary thereof to each holder of
a Right Certificate (or, prior to the Distribution Date, to each holder of the
Common Shares of the Company) in accordance with Section 25. Notwithstanding
the foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
SECTION 14. ADDITIONAL COVENANTS.
(a) Notwithstanding any other provision of this Rights Agreement, no
adjustment to the number of Preferred Shares (or fractions of a share) or other
securities for which a Right is exercisable or to the number of Rights
outstanding or associated with each Common Share or any similar or other
adjustment shall be made or be effective if such adjustment would have the
effect of reducing or limiting the benefits the holders of the Rights would have
had absent such adjustment, including, without limitation, the benefits under
Sections 11 and 12, unless the terms of this Rights Agreement are amended so as
to preserve such benefits.
(b) The Company covenants and agrees that, after the Distribution Date,
except as permitted by Section 26, it will not take (or permit any Subsidiary of
the Company to take) any action if at the time such action is taken it is
intended or reasonably foreseeable that such action will reduce or otherwise
limit the benefits the holders of the Rights would have had absent such action,
including, without limitation, the benefits under Sections 11 and 12. Any
action taken by the Company during any period after any Person becomes an
Acquiring Person but prior to the Distribution Date shall be null and void
unless such action could be taken under this Section 14(b) from and after the
Distribution Date. The Company shall not consummate any Business Combination if
any issuer of Common Shares for which Rights may be exercised after such
Business Combination in accordance with Section 11(c) shall have taken any
action that reduces or otherwise limits the benefits the holders of the Rights
would have had absent such action, including, without limitation, the benefits
under Sections 11 and 12.
20
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company may, but shall not be required to, issue fractions of
Rights or distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, the Company may pay to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 15(a), the
current market value of a whole Right shall be the closing price of the Rights
(as determined pursuant to the second and third sentences of the definition of
Market Value contained in Section 1) for the Trading Day immediately prior to
the date on which such fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue fractions of
Preferred Shares upon exercise of the Rights or distribute certificates which
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one one-thousandth (1/1,000th) of a Preferred Share or any
integral multiple thereof), pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Preferred Share, if any
are outstanding and publicly traded (or the Formula Number (as defined in the
Certificate of Designation) times the current market value of one Common Share
if the Preferred Shares are not outstanding and publicly traded). For purposes
of this Section 15(b), the current market value of a Preferred Share (or Common
Share) shall be the closing price of a Preferred Share (or Common Share) (as
determined pursuant to the second and third sentence of the definition of Market
Value contained in Section 1) for the Trading Day immediately prior to the date
of such exercise. If, as a result of an adjustment made pursuant to Section
12(a), the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Preferred Shares, the provisions of this
Section 15(b) shall apply, as nearly as reasonably may be, on like terms to such
other securities.
(c) The Company may, but shall not be required to, issue fractions of
Common Shares upon exchange of Rights pursuant to Section 11(b), or to
distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, the Company may pay to the registered holders of
the Right Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current Market Value of one Common Share as of the date on which a Person became
an Acquiring Person.
(d) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as permitted by this Section 15.
SECTION 16. RIGHTS OF ACTION.
(a) All rights of action in respect of this Rights Agreement are vested in
the respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the
21
registered holders of the Common Shares of the Company); and any registered
holder of any Right 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 Right Certificate (or, prior to the Distribution Date, of the Common
Shares of the Company) may, in his own behalf and for his own benefit, enforce,
and may institute and maintain any suit, action or proceeding against the
Company to enforce, or otherwise act in respect of, his right to exercise the
Rights evidenced by such Right Certificate in the manner provided in such Right
Certificate and in this Rights 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 Rights Agreement and shall be entitled to specific performance of
the obligations of any Person under, and injunctive relief against, actual or
threatened violations of the obligations of any Person subject to, this Rights
Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the reasonable
costs and expenses, including attorneys' fees, incurred in such action.
SECTION 17. TRANSFER AND OWNERSHIP OF RIGHTS AND RIGHT CERTIFICATES.
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 and the Rights associated with
the Common Shares shall be automatically transferred upon the transfer of the
Common Shares.
(b) After the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e), only on the registry books of the Rights
Agent if surrendered at the principal office of the Rights Agent, duly endorsed
or accompanied by a proper instrument of transfer.
(c) The Company and the Rights Agent may deem and treat the Person in whose
name a Right 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 Right Certificates or the associated certificate for Common
Shares made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
(d) Notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Rights Agent shall have any liability to any holder of a Right
or other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligation; provided, however, the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.
22
SECTION 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall be entitled to vote or receive
dividends or be deemed, for any purpose, the holder of the Preferred Shares or
of any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company,
including, without limitation, 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, or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right Certificate shall have been exercised in accordance with
the provisions hereof.
SECTION 19. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Rights Agreement in reliance upon any Right Certificate
or certificate for the Common Shares or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, certified, verified or acknowledged, by the proper Person or Persons.
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporation trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 22. In case at the time such successor Rights Agent shall succeed to
the agency created by this Rights Agreement, any of the Right Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successive Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
23
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and, in case at that time any
of the Right Certificates shall not have been countersigned, the Rights Agent
may countersign such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates shall have the full
force provided in the Right Certificates and in this Rights Agreement.
SECTION 21. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates (or, prior to the Distribution Date, of the Common Shares of the
Company), by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection of the Rights Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Rights Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person) be proved
or established by the Company prior to taking, refraining from taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the Chief
Executive Officer, the President, the Chief Financial Officer, a Vice President
(whether preceded by any additional title), the Treasurer or the Secretary of
the Company and delivered to the Rights Agent; and such certificate shall be
full authorization to the Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Rights Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Rights Agreement or in the
Right Certificates (except as to its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Rights 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 Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or 12 or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment);
24
nor shall the Rights Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any
Preferred Shares or Common Shares to be issued pursuant to this Rights Agreement
or any Right Certificate or as to whether any Preferred Shares or Common Shares
will, when so 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 Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chief Executive Officer, the President, the Chief Financial Officer, a Vice
President (whether preceded by any additional title), the Secretary or the
Treasurer of the Company, in connection with its duties and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company, become pecuniarily interested in any transaction in which the
Company may be interested, contract with or lend money to the Company or
otherwise act as fully and freely as though it were not the Rights Agent under
this Rights Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct provided reasonable care was exercised in the selection
and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent harmless
against any loss, liability, damage or expense (including reasonable fees and
expenses of legal counsel) which the Rights Agent may incur resulting from its
actions as Rights Agent pursuant to this Rights Agreement; provided, however,
that the Rights Agent shall not be indemnified or held harmless with respect to
any such loss, liability, damage or expense incurred by the Rights Agent as a
result of, or arising out of, its own negligence, bad faith or willful
misconduct. The Rights Agent shall notify the Company, by letter or by
facsimile confirmed by letter, of the assertion of any action, proceeding, suit
or claim against the Rights Agent, promptly after the Rights Agent shall have
notice of any such assertion of an action, proceeding, suit or claim or have
been served with the summons or other first legal process giving information as
to the nature and basis of the action, proceeding, suit or claim. The Company
shall be entitled to participate at its own expense in the defense of any such
action, proceeding, suit or claim, and, if the Company so elects, the Company
shall assume the defense of any such action, proceeding, suit or claim. In the
event that the Company assumes such defense, the Company shall not thereafter be
liable for the fees and expenses of any
25
additional counsel retained by the Rights Agent, so long as the Company shall
retain counsel satisfactory to the Rights Agent, in the exercise of its
reasonable judgment, to defend such action, proceeding, suit or claim. The
Rights Agent agrees not to settle any litigation in connection with any action,
proceeding, suit or claim with respect to which it may seek indemnification from
the Company without the prior written consent of the Company.
(k) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(l) If, with respect to any Right 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 not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
SECTION 22. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and the Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares) by first class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and the Preferred Shares by
registered or certified mail, and to the holders of the Right Certificates (or,
prior to the Distribution Date, of the Common Shares) by first class mail. If
the Rights Agent shall resign or be removed or shall otherwise become incapable
of acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of 30 days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by a
holder of a Right Certificate (or, prior to the Distribution Date, by a holder
of the Common Shares) (who shall, with such notice, submit his Right Certificate
or, prior to the Distribution Date, the certificate representing his Common
Shares, for inspection by the Company), then the registered holder of any Right
Certificate (or, prior to the Distribution Date, of the Common Shares) may apply
to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such
a court, shall be a corporation organized and doing business under the laws of
the United States or of any state of the United States so long as such
corporation is authorized to conduct a stock transfer or corporate trust
business in the States of New York and Texas), having an office in the State of
New York, and which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $100,000,000; provided that the
principal transfer agent for the Common Shares shall in any event be qualified
to be the Rights Agent. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally
26
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 Common Shares
and the Preferred Shares, and mail a notice thereof in writing to the registered
holders or the Right Certificates (or, prior to the Distribution Date, of the
Common Shares). Failure to give any notice provided for in this Section 22,
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 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Rights Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change made in accordance with the provisions of this
Rights Agreement. In addition, in connection with the issuance or sale of
Common Shares following the Distribution Date and prior to the earlier of the
Redemption Date and the Expiration Date, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures 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 Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Right Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Right Certificate would be issued, and (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
SECTION 24. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth day (or as late
as the 30th day, if the Board so desires) after such time as a Person becomes an
Acquiring Person and (ii) the Expiration Date order the redemption of all, but
not fewer than all, of the then outstanding Rights at the Redemption Price (the
date of such redemption being the "Redemption Date"), and the Company, at its
option, may pay the Redemption Price either in cash or Common Shares or other
securities of the Company deemed by the Board of Directors of the Company, in
the exercise of its sole discretion, to be at least equivalent in value to the
Redemption Price; provided, however, that, in addition to any other limitations
contained herein on the right to redeem outstanding Rights (including the
occurrence of any event or the expiration of any period after which the Rights
may no longer be redeemed), for the 120-day period after any date of a change
(resulting from a proxy or consent solicitation) in a majority of the Board of
Directors of the Company in office at the commencement of such solicitation, the
Rights may only be redeemed if (A) there are directors then in office who are
Continuing Directors and (B) the Board of Directors of the Company, with the
concurrence of a majority of such Continuing
27
Directors, determine that such redemption is, in their judgment, in the best
interests of the Company and its stockholders.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights shall terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within ten Business Days after the action of the Board of
Directors of the Company ordering the redemption of the Rights, the Company
shall give notice of such redemption to the 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. Each such notice of the Redemption Price shall state the method by
which payment of the Redemption Price will be made. The notice, if mailed in
the manner herein provided, shall be conclusively presumed to have been duly
given, whether or not the holder of Rights receives such notice. In any case,
failure to give such notice by mail, or any defect in the notice, to any
particular holder of Rights shall not affect the sufficiency of the notice to
other holders of Rights.
SECTION 25. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of a Right Certificate
(or, prior to the Distribution Date, of the Common Shares) to or on the Company
shall be sufficiently given or made if sent by registered or certified first
class mail (return receipt requested), postage prepaid, addressed (until another
address is filed in writing with the Rights Agent) as follows:
DATA RACE, Inc.
βββββ βββββββ βββββββββ
βββ βββββββ, βββββ βββββ
ATTENTION: Chief Financial Officer
Subject to the provisos of Section 22, any notice or demand authorized by
this Rights Agreement to be given or made by the Company or by a holder of a
Right Certificate (or, prior to the Distribution Date, by a holder of the Common
Shares) to or on the Rights Agent shall be sufficiently given or made if sent by
registered or certified first class mail (return receipt requested), postage
prepaid, addressed (until another address is filed in writing with the Company)
as follows:
ChaseMellon Shareholder Services, L.L.C.
ββββ βββββ ββββββ, βββββ ββββ
ββββββ, ββ βββββ
ATTENTION: ββ. ββββ βββββββ
Notices or demands authorized by this Rights Agreement to be given or made
by the Company or the Rights Agent to any holder of a Right Certificate (or,
prior to the Distribution Date, of the Common Shares) shall be sufficiently
given or made if sent by first class mail, postage prepaid, addressed to such
holder at the address of such holder as shown on the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares.
28
SECTION 26. SUPPLEMENTS AND AMENDMENTS. At any time prior to the
Distribution Date and subject to the last sentence of this Section 26, the
Company may, and the Rights Agent shall if the Company so directs, supplement or
amend any provision of this Rights Agreement (including, without limitation, the
date on which the Distribution Date shall occur, the time during which the
Rights may be redeemed pursuant to Section 24 or any provision of the
Certificate of Designation) without the approval of any holder of the Rights.
From and after the Distribution Date and subject to applicable law, the Company
may, and the Rights Agent shall if the Company so directs, amend this Rights
Agreement without the approval of any holders of Right Certificates (i) to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision of this Rights
Agreement or (ii) to make any other provisions in regard to matters or questions
arising hereunder which the Company may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person). Any supplement or amendment adopted during any period after any Person
has become an Acquiring Person but prior to the Distribution Date shall be null
and void unless such supplement or amendment could have been adopted under the
prior sentence from and after the Distribution Date. Any supplement or
amendment to this Rights Agreement duly approved by the Company that does not
amend Sections 19, 20, 21 or 22 in a manner adverse to the Rights Agent shall
become effective immediately upon execution by the Company, whether or not also
executed by the Rights Agent. Notwithstanding anything contained in the Rights
Agreement to the contrary, during the 120-day period after any date of a change
(resulting from a proxy or consent solicitation) in a majority of the Board of
Directors of the Company in office at the commencement of such solicitation,
this Rights Agreement may be supplemented or amended only if (A) there are
directors then in office who are Continuing Directors and, (B) the Board of
Directors of the Company, with the concurrence of a majority of such Continuing
Directors, determines that such supplement or amendment is, in their judgment,
in the best interests of the Company and its stockholders and, after the
Distribution Date, the holders of the Right Certificates. In addition,
notwithstanding anything to the contrary contained in this Rights Agreement, no
supplement or amendment to this Rights Agreement shall be made which (a) reduces
the Redemption Price (except as required by Section 12(a)) or (b) provides for
an earlier Expiration Date.
SECTION 27. SUCCESSORS. All the covenants and provisions of this Rights
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 28. BENEFITS OF RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY
THE BOARD OF DIRECTORS, ETC.
(a) Nothing in this Rights Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, of the Common
Shares) any legal or equitable right, remedy or claim under this Rights
Agreement; but this Rights Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, of the Common Shares of the
Company).
29
(b) Except as explicitly otherwise provided in this Rights Agreement
(including where concurrence of Continuing Directors is required), the Board of
Directors of the Company shall have the exclusive power and authority to
administer this Rights Agreement and to exercise all rights and powers
specifically granted to the Board of Directors of the Company or the Company, or
as may be necessary or advisable in the administration of this Rights Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Rights Agreement and (ii) make all determinations deemed
necessary or advisable for the administration of this Rights Agreement
(including, without limitation, a determination to redeem or not redeem the
Rights or to amend this Rights Agreement and a determination of whether there is
an Acquiring Person). 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 of Directors of
the Company (with, where specifically provided for herein, the concurrence of
the Continuing Directors) in good faith, shall (x) be final, conclusive and
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject any member of the Board of Directors or the
Continuing Directors to any liability to the holders of the Rights or to any
other Person.
(c) Nothing contained in this Rights Agreement shall be deemed to be in
derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to reject any tender offer, or to recommend that holders of
Common Shares reject any tender offer, or to take any other action (including,
without limitation, the commencement, prosecution, defense or settlement of any
litigation and the submission of additional or alternative offers or other
proposals) with respect to any tender offer that the Board of Directors believes
is necessary or appropriate in the exercise of such fiduciary duty.
SECTION 29. SEVERABILITY. If any term, provision, covenant or restriction
of this Rights 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 Rights Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
SECTION 30. GOVERNING LAW. This Rights Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the law
of the State of Texas and for all purposes shall be governed by and construed in
accordance with the law of such State applicable to contracts to be made and
performed entirely within such State.
SECTION 31. COUNTERPARTS; EFFECTIVENESS. This Rights 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. This Rights Agreement
shall be effective as of the Close of Business on the date hereof.
30
SECTION 32. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to
be duly executed as of the date and year first above written.
DATA RACE, Inc.
By: /s/ βββββββ β. ββββββ
---------------------------------------------
βββββββ β. ββββββ, Vice President--Finance and
Chief Financial Officer
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., as
Rights Agent
By: /s/ ββββ βββββββ
----------------------------------------------
ββββ βββββββ
Relationship Manager
31
EXHIBIT B
[FORM OF RIGHT CERTIFICATE]
Certificate No. [R] -
_______________________ Rights
NOT EXERCISABLE AFTER SEPTEMBER 15, 2007, OR EARLIER IF REDEEMED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF
THE COMPANY, AT $.01 PER RIGHT, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. RIGHTS BENEFICIALLY OWED BY AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND BY ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS ARE NULL AND VOID AND NONTRANSFERABLE.
RIGHT CERTIFICATE
DATA RACE, 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 September 15, 1997 (the "Rights
Agreement"), between DATA RACE, Inc., a Texas corporation (the "Company"), and
ChaseMellon Shareholders Services, L.L.C., as Rights Agent (the "Rights Agent"),
unless the Rights evidenced hereby shall have been previously redeemed by the
Company, to purchase from the Company at any time after the Distribution Date
(as defined in the Rights Agreement) and prior to 5:00 p.m., New York, New York
time, on the tenth anniversary of the date of the Rights Agreement (the
"Expiration Date"), at the principal office of the Rights Agent, or its
successors as Rights Agent, in Dallas, Texas, one one-thousandth (1/1,000th) of
a fully paid, nonassessable share of Series B Participating Cumulative Preferred
Stock, no par value, of the Company (the "Preferred Shares"), at a purchase
price per one one-thousandth (1/1,000th) of a share equal to $75.00 (the
"Purchase Price") payable in cash, upon presentation and surrender of this Right
Certificate with the Form of Election to Purchase and Certification set forth
upon the reverse hereof duly executed.
The Purchase Price and the number and kind of shares which may be purchased
upon exercise of each Right evidenced by this Right Certificate, as set forth
above, are the Purchase Price and the number and kind of shares which may be so
purchased as of September 15, 1997. As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares which may be purchased upon the
exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
1
If the Rights evidenced by this Right Certificate are at any time
beneficially owed by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement 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 Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal stock transfer or corporate trust office of the
Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number and kind of shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors to be at least equivalent in value) of
$.01 per Right (which amount shall be subject to adjustment as provided in the
Rights Agreement) at any time prior to the earlier of (i) the close of business
on the tenth day (or, if the Board of Directors so determines, the close of
business on the thirtieth day) after such time as a Person becomes an Acquiring
Person and (ii) the Expiration Date; provided, however, that, for the 120-day
period after any date of a change (resulting from a proxy or consent
solicitation) in a majority of the Board of Directors of the Company in office
at the commencement of such solicitation, the Rights may only be redeemed if (A)
there are directors then in office who are Continuing Directors (as such term is
defined in the Rights Agreement) and (B) the Board of Directors of the Company,
with the concurrence of a majority of such Continuing Directors, determines that
such redemption is, in their judgment, in the best interests of the Company and
its stockholders.
The Company may, but shall not be required to, issue fractions of Preferred
Shares or distribute certificates which evidence fractions of Preferred Shares
upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing
fractional shares, the Company may elect to make a cash payment as provided in
the Rights Agreement for fractions of a share other than one one-thousandth
(1/1,000th) of a share or any integral multiple thereof or to issue certificates
or utilize a depository arrangement as provided in the terms of the Rights
Agreement and the Preferred Shares.
2
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise 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, including, without limitation, any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or other
distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
accordance with the provisions of the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of:
DATA RACE, Inc.
By:
----------------------------------------------
Name:
--------------------------------------------
Title:
-------------------------------------------
Attest:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
Countersigned:
, as Rights Agent,
----------------------------------
By:
-------------------------------
Authorized Signature
3
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _______________
Rights represented by this Right Certificate to purchase the Preferred Shares
(or other shares) issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:
Please insert social security
or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate, a new Right Certificate for the balance remaining of such
Rights shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Dated: _________________ , 19__
---------------------------------------
Signature
Signature Guaranteed:
4
CERTIFICATION
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised, sold, assigned or transferred by or
on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), (2) this
Rights Certificate is not being exercised, sold, assigned or transferred to or
on behalf of any such Acquiring Person, Affiliate or Associate, and (3) after
inquiry and to the best knowledge of the undersigned, the undersigned did not
acquire the Rights evidenced by this Right Certificate from any Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
--------------------------------------------
Signature
5
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
--------------------------------------------------------
hereby sells, assigns and transfers unto
---------------------------------------
--------------------------------------------------------------------------------
(Please print name and address of transferee)
--------------------------------------------------------------------------------
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint _________________ Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: _______________, 19__
--------------------------------------------
Signature
Signature Guaranteed:
6
CERTIFICATION
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised, sold, assigned or transferred by or
on behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement), (2) this
Rights Certificate is not being exercised, sold, assigned or transferred to or
on behalf of any such Acquiring Person, Affiliate or Associate, and (3) after
inquiry and to the best knowledge of the undersigned, the undersigned did not
acquire the Rights evidenced by this Right Certificate from any Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement).
--------------------------------------------
Signature
7
NOTICE
The signature on the foregoing Form of Election to Purchase or Form of
Assignment and the Certification must correspond to the name as written upon the
face of this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever.
8