RIGHTS AGREEMENT
dated effective as of
May 12, 1997
between
FORELAND CORPORATION
and
ATLAS STOCK TRANSFER CORPORATION,
as Rights Agent
RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT (this "Agreement"), dated effective as of the 12th
day of May, 1997, is entered into by and between FORELAND CORPORATION, a Nevada
corporation (the "Company"), and ATLAS STOCK TRANSFER CORPORATION, a Utah
corporation authorized to conduct business in the state of Utah (the "Rights
Agent").
WHEREAS, in order to preserve stockholder value, the Board of Directors of
the Company has determined that it is advisable for the Company to adopt a
stockholder rights plan (the "Rights Plan") to protect the Company and its
stockholders from abusive acquisition tactics;
WHEREAS, in order to implement the Rights Plan, the Board of Directors of
the Company has authorized and declared a dividend distribution of one right
("Right") effective 5:00 p.m. (Mountain time) on July 1, 1997 (the "Record
Date") for each Common Share (as hereinafter defined) outstanding at the close
of business (as hereinafter defined) on the Record Date; and has authorized the
issuance of one Right in respect of each Common Share issued after the Record
Date and until the earliest to occur of the Separation Date, the Expiration Date
or the Redemption Date (as such terms are hereinafter defined);
WHEREAS, each Right entitles the holder thereof, after the Separation Date,
to purchase securities of the Company (or in certain cases, of certain other
entities) pursuant to the terms and subject to the conditions set forth herein;
and
WHEREAS, the Company desires to appoint the Rights Agent to act on behalf
of the Company, and the Rights Agent is willing to so act, in connection with
the issuance, transfer, exchange and replacement of Rights Certificates (as
hereinafter defined), the exercise of Rights and other matters referred to
herein.
NOW, THEREFORE, in consideration of the premises and respective agreements
set forth herein the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions.
For purposes of this Agreement, the following terms have the following
meanings:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of twenty percent (20%) or more of the Voting Shares of the Company
then outstanding, but shall not include the Company, any Subsidiary of the
Company or any employee benefit plan of the Company or any Subsidiary of
the Company, or any Person or entity organized, appointed, or established
by the Company or such Subsidiary of the Company for or pursuant to the
terms of any such employee benefit plan. Notwithstanding the foregoing, no
Person shall become an Acquiring Person solely as the result of a reduction
in the number of Voting Shares outstanding due to an acquisition of Voting
Shares by the Company which increases the proportionate number of such
Voting Shares Beneficially Owned by such Person to twenty percent (20%) or
more unless and until that Person shall purchase or otherwise become (as a
result of actions by such Person or its Affiliates or Associates) the
Beneficial Owner of any additional Voting Shares of the Company.
(b) "Affiliate" of, or a person "affiliated" with, a specified Person
shall mean a Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such specified Person.
(c) "Associate", used to indicate a relationship with a specified
Person, shall mean:
(i) any corporation, partnership or other organization of which
such specified Person is an officer or partner;
(ii) any trust or other estate in which such specified Person has
a substantial beneficial interest or as to which such specified Person
serves as trustee or in a similar fiduciary capacity;
(iii) any relative or spouse of such specified Person or any
person of the opposite sex to whom such specified Person is married or
with whom such specified Person is living in a conjugal relationship
outside marriage, or any relative of such spouse or other person, who
has the same home as such specified Person or who is a director or
officer of the Company or an Affiliate of the Company;
(iv) any Person who is a director, officer, partner or trustee of
such specified Person or of any corporation, partnership or other
organization (other than the Company or any wholly-owned Subsidiary of
the Company) which is an Affiliate or Associate of such specified
Person; and
(v) any corporation of which such specified Person beneficially
owns, directly or indirectly, voting securities carrying more than 10
percent of the rights attaching to all voting securities of such
corporation for the time being outstanding.
(d) A Person shall be deemed the "Beneficial Owner", and to have
"Beneficial Ownership", of and to "Beneficially Own" any securities:
(i) as to which such Person or any of such Person's Affiliates
or Associates is or may be deemed to be the beneficial owner pursuant
to Rule 13d-3 or 13d-5 under the Exchange Act (or pursuant to any
comparable or successor laws or regulations or, if such Rules shall be
rescinded and there shall be no comparable or successor laws or
regulations, pursuant to Rule 13d-3 or 13d-5 as in effect on the date
of this Agreement); and
(ii) as to which such Person or any of such Person's Affiliates
or Associates has the right to become Beneficial Owner (whether such
right is exercisable immediately or only after the passage of time or
only after the occurrence of changes in market prices) pursuant to any
contract, agreement, arrangement or understanding, or upon the
exercise of any rights (other than the Rights), whether conversion
rights, exchange rights, warrants or options, or otherwise;
Provided, however, that a Person shall not be deemed the "Beneficial
Owner", or to have "Beneficial Ownership", of or to "Beneficially Own", any
security:
(i) tendered pursuant to a tender or exchange offer or Takeover
Bid made by such Person or any of such Person's Affiliates or
Associates until the earliest of such tendered security being accepted
for payment or exchange or being taken up and paid for; or
(ii) as to which such Person's Affiliates or Associates have or
shares the voting power or has the power to direct the voting pursuant
to a revocable proxy given in response to a public proxy solicitation
made pursuant to and in accordance with, the applicable rules and
regulations under the Securities Exchange Act of 1934, as amended,
except if such power (or the arrangement relating thereto) is then
reportable under Item 6 of Schedule 13D under the Securities Exchange
Act of 1934, as amended (or any similar provision of a comparable or
successor report).
For purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares with respect to which a Person is the Beneficial
Owner, all Voting Shares as to which such Person is deemed the Beneficial
Owner shall be deemed outstanding.
(e) "Board of Directors" shall mean, as applicable, the Board of
Directors of the Company and/or any of its Subsidiaries.
(f) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the state of Utah are authorized
or obligated by law or executive order to close.
(g) "Close of Business" on any given date shall mean the time on such
date (or, if such date is not a Business Day, the time on the next
succeeding Business Day) at which the office of the transfer agent for the
Common Shares of the Company in Salt Lake City, Utah (or, after the
Separation Date, the offices of the Rights Agent, if different from such
transfer agent) is closed to the public.
(h) "Common Shares", when used with reference to the Company, shall
mean the shares of common stock, par value $0.001 per share (as such par
value may be changed from time to time), of the Company. "Common Shares",
when used with reference to any Person other than the Company, shall mean
the shares of capital stock (or equity interest) with the most significant
voting or decision-making power with respect to management or control of
such other Person or, if such other Person is a Subsidiary of another
Person, the Person or Persons which ultimately controls such first-
mentioned Person.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "Exercise Price" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one whole
Right. Until adjustment thereof in accordance with the terms hereof, the
Exercise Price shall equal One Hundred Dollars ($100.00), payable in lawful
money of the United States of America.
(k) "Expiration Date" shall mean the close of business on the tenth-
year anniversary of the date hereof.
(l) "Flip-in Event" shall mean a transaction in which any Person
shall become an Acquiring Person; provided, however, that the term "Flip-in
Event" shall not include any transaction or event that constitutes a "Flip-
over Transaction or Event."
(m) "Flip-over Entity" shall mean:
(i) in the case of any transaction described in clause (A) of
the first sentence of Section l.l(n) hereof: (A) the Person that is
the issuer of the securities into which Common Shares of the Company
are converted in such merger or consolidation, or, if there is more
than one such issuer, that issuer the Common Shares of which have the
greatest Market Price, or (B) if no securities are so issued, (x) the
Person that is the other party to the merger or consolidation and that
survives such merger or consolidation, or, if there is more than one
such Person, that Person the Common Shares of which have the greatest
Market Price, or (y) if the Person that is the other party to the
merger or consolidation does not survive the merger or consolidation,
the Person that does survive the merger or consolidation (including
the Company if it survives); and
(ii) in the case of any transaction described in clause (B) of
the first sentence of Section l.l(n) hereof, the Person that is the
party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives
the same portion of the assets or earning power so transferred or if
the Person receiving the greatest portion of the assets or earning
power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest Market Price of shares outstanding;
provided, however, that, in any such case, if the Common Shares of
such Person are not at such time and have not been continuously over
the preceding 12-month period registered under Section 12 of the
Exchange Act and such Person is a direct or indirect Subsidiary of
another Person the Common Shares of which are and have been so
registered, the term "Flip-over Entity" shall refer to such other
Person, or if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of all of which are and have
been so registered, the term "Flip-over Entity" shall refer to
whichever of such Persons is the issuer of the Common Shares having
the greatest Market Price of the shares outstanding.
(n) "Flip-over Transaction or Event" shall mean (A) a transaction in
which, directly or indirectly, the Company shall consolidate with, merge
with or into, or enter into an arrangement with, any other Person (other
than a wholly-owned Subsidiary of the Company), or any other Person (other
than a wholly-owned Subsidiary of the Company) shall consolidate with,
merge with or into, or enter into an arrangement with the Company, and, in
connection therewith, all or part of the outstanding Common Shares of the
Company shall be changed in any way, reclassified or converted into or
exchanged for shares or other securities or cash or any other property, or
(B) a transaction or series of transactions in which, directly or
indirectly, the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer) assets:
(i) aggregating more than fifty percent (50%) of the assets
(measured by either book value or Market Price, whichever results in
the greater percentage); or
(ii) which generated during the Company's last completed fiscal
year or is expected to generate in the Company's then current fiscal
year more than fifty percent (50%) of the operating income or cash
flow of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its
wholly-owned Subsidiaries) or to two or more such Persons which are
affiliated or otherwise acting jointly or in concert.
(o) "Market Price" of any securities (including the Rights) on any
date of determination shall mean the average of the daily closing prices
per share (or right) of such securities (determined as described below) on
each of the 20 consecutive Trading Days through and including the Trading
Day immediately preceding such date; provided, however, that if an event of
a type analogous to any of the events described in Section 2.3 hereof shall
have caused the closing prices used to determine the Market Price on any
Trading Days not to be fully comparable with the closing price on such date
of determination, each such closing price so used shall be appropriately
adjusted in a manner analogous to the applicable adjustment provided for in
Section 2.3 hereof in order to make it fully comparable with the closing
price on such date of determination. The closing price per share of any
securities on any date shall be (i) the last sale price, regular way, or,
in case no such sale takes place on such date, the average of the closing
bid and asked prices, regular way, for each share of such securities as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on any national
securities exchange, (ii) if the securities are not listed or admitted to
trading on any national securities exchange, the closing board lot sale
price, (iii) if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on any national
securities exchange, the average of the high bid and low asked prices for
each share of such securities in the over-the-counter market, as reported
by the Nasdaq Stock Market of the National Association of Securities
Dealers, Inc. ("Nasdaq"), or such other system then in use, or (iv) if on
any such date the securities are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the securities selected in good faith by
the Board of Directors of the Company; provided, however, that if on any
such date the securities are not traded in the over the-counter market, the
closing price per share of such securities on such date shall mean the fair
value per share of securities on such date as determined in good faith by
the Board of Directors of the Company, after consultation with a nationally
recognized investment banking firm with respect to the fair value per share
of such securities.
(p) "Offer" shall mean a written proposal delivered to the Company by
any Person or Persons who (x) Beneficially Own in the aggregate one percent
(1%) or less of the outstanding Common Shares of the Company and have not
within the twelve month period preceding the delivery of such written
proposal Beneficially Owned in the aggregate in excess of one percent (1%)
of the outstanding Common Shares of the Company and (y) within said 12
month period have not disclosed, or caused the disclosure of, any intention
which would result in the acquisition or influence of control of the
Company (any such persons meeting the conditions specified in clauses x and
y, an "Offeror"), and which proposal:
(i) provides for acquisition of all of the outstanding Voting
Shares held by any Person other than the Offeror and its Affiliates
for cash at the same specified price;
(ii) is, in the opinion of a nationally recognized investment
banking firm retained by the Offeror, fair to the holders of Voting
Shares other than the Offeror and its Affiliates and is at a price
which is not less than the book value;
(iii) states that such offer shall remain open for at least
90 days and shall include all Voting Shares outstanding as of the date
of the proposal or issued thereafter pursuant to contracts in effect
at the date of the proposal and that the Offeror has obtained written
financing commitments from recognized financing sources, and/or has on
hand, cash or cash equivalents, for the full amount of all financing
necessary to consummate the offer; and
(iv) requests the Company to call a special meeting of the
holders of Voting Shares for the purpose of voting on a resolution
requesting the Board of Directors to accept such offer and contains a
written agreement of the Offeror to pay (or share with any other
Offeror) at least one-half of the Company's costs of preparing and
mailing proxy material for its own solicitation.
(q) "Offer to Acquire" shall include:
(i) an offer to purchase, or a solicitation of an offer to sell
Voting Shares; and
(ii) an acceptance of an offer to sell Voting Shares, whether or
not such offer to sell has been solicited; or
any combination thereof, and the Person accepting an offer to sell shall be
deemed to be making an offer to acquire to the Person that made the offer
to sell.
(r) "Offeror's Securities" means Voting Shares Beneficially Owned on
the date of an Offer to Acquire by any Person who makes a Takeover Bid or
by any Person acting jointly or in concert with such Person.
(s) "Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5 under the Exchange
Act as in effect on the date of this Agreement), corporation, trust,
business trust or other entity and shall include any successor (by merger
or otherwise) of such entity.
(t) "Preferred Shares" shall mean the currently authorized but
unissued shares of Series A Preferred Stock, par value $0.001 per share, of
the Company, having the rights and preferences set forth in the form of
Designation of Rights, Privileges, and Preferences attached hereto as
Exhibit A.
(u) "Redemption Date" means the date of the action of the Board of
Directors of the Company ordering the redemption of the Rights Pursuant to
Section 5.2 hereof.
(v) "Redemption Price" means a price of $0.01 per Right, subject to
adjustment as set forth in Article 5 hereof.
(w) "Right" means the right to purchase one one-thousandth of a
Preferred Share at the Exercise Price, subject to adjustment, or the right
to purchase, exchange or receive other securities or assets of the Company
or another issuer as set forth herein.
(x) "Right Certificate" means a certificate evidencing a Right or
Rights, substantially in the form of Exhibit B hereto.
(y) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(z) "Separation Date" shall mean the close of business on the
earliest of (i) the tenth day (or such later day as is determined by
unanimous vote of the Board of Directors and publicly announced) after the
Stock Acquisition Date (provided, however, that if prior to the date which
would otherwise be the Separation Date, the Acquiring Person whose becoming
such shall have caused the Stock Acquisition Date to occur, shall cease to
be an Acquiring Person and shall be the Beneficial Owner of not more than
5% of the Common Stock of the Company, as indicated in a public
announcement or public filing by such Person, then for purposes of this
Section l.l(z), the Stock Acquisition Date shall be deemed not to have
occurred), or (ii) the tenth day after the date of the commencement of, or
first public announcement of the intent of any Person (other than the
Company or any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company or such Subsidiary of
the Company for or pursuant to any tender or exchange offer plan) to
commence, a tender or exchange offer or Takeover Bid to acquire (when added
to any Voting Shares as to which such Person is the Beneficial Owner
immediately prior to such tender or exchange offer or Takeover Bid)
Beneficial Ownership of twenty percent (20%) or more of the outstanding
Voting Shares (provided that, if the foregoing results in the Separation
Date being prior to the Record Date, the Separation Date shall be the
Record Date and provided further that, if any tender or exchange offer or
Takeover Bid referred to in clause (ii) of this Section l.l(z) expires, is
canceled, terminated or otherwise withdrawn prior to the date which would
otherwise be the Separation Date, such offer shall be deemed, for purposes
of this Section l.l(z), never to have been made), or (iii) such later date
as may be fixed by the Board of Directors from time to time by notice to
the Rights Agent and publicly announced by the Company.
(aa) "Stock Acquisition Date" shall mean the first date of public
announcement or filing by the Company or an Acquiring Person that an
Acquiring Person has become such, whether or not the term "Acquiring
Person" is used in fact in such announcement.
(bb) "Subsidiary" of any specified Person shall mean any corporation
or other entity of which a majority of the voting power of the voting
equity securities or a majority of the equity interest is Beneficially
Owned, directly or indirectly, by such Person.
(cc) "Takeover Bid" means an Offer to Acquire Voting Shares, where the
Voting Shares subject to the Offer to Acquire together with the Offeror's
Securities, constitute in the aggregate twenty percent (20%) or more of the
outstanding Voting Shares at the date of the Offer to Acquire.
(dd) "Trading Day", when used with respect to any securities, shall
mean a day on which the principal securities exchange on which such
securities are listed or admitted to trading is open for the transaction of
business or, if the securities are not listed or admitted to trading on any
securities exchange, a Business Day.
(ee) "Voting Shares" shall mean (i) for purposes of determining the
number of outstanding Voting Shares of the Company, only the Common Shares
of the Company and any other shares of capital stock of the Company
entitled to vote generally in the election of directors; and (ii) for
purposes of determining the number or percentage of Voting Shares
Beneficially Owned by any Person, all of the following shares Beneficially
Owned by such Person: (x) Common Shares of the Company and (y) shares of
the capital stock of the Company entitled to vote generally in the election
of directors.
1.2 Determinations.
Any determination required to be made by the Board of Directors of the
Company for purposes of applying the definitions contained in this Article 1
shall be made by the Board of Directors in its good faith judgment, which
determination shall be conclusive and binding on the Rights Agent and the
holders of the Rights.
ARTICLE II
THE RIGHTS
2.1 Legend on Common Share Certificates.
Certificates for the Common Shares issued after the Record Date but prior
to the close of business on the Separation Date shall evidence one Right for
each Common Share represented thereby and shall have impressed on, printed on,
written on or otherwise affixed to them, the following legend:
Until the Separation Date (as defined in the Rights Agreement referred to
below), this certificate also evidences and entitles the holder thereof to
certain Rights as set forth in a Rights Agreement, dated effective as of
the 20th day of May, 1997 (the "Rights Agreement"), between Foreland
Corporation (the "Company"), and Atlas Stock Transfer Corporation, as
Rights Agent, the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive office
of the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed by the Company, may expire, may
become void (if, in certain cases, they are "Beneficially Owned" by an
"Acquiring Person", as such terms are defined in the Rights Agreement, or a
transferee thereof) or may be evidenced by separate certificates and may no
longer be evidenced by this certificate. The Company will mail or arrange
for the mailing of a copy of the Rights Agreement to the holder of this
certificate without charge within five days after the receipt of a written
request therefor.
Certificates representing Common Shares of the Company that are issued and
outstanding at the Record Date shall evidence one Right for each Common Share
evidenced thereby notwithstanding the absence of the foregoing legend.
2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights.
(a) Subject to adjustment as herein set forth, each Right will
entitle the holder thereof, after the Separation Date, to purchase, subject
to adjustment from time to time as provided herein, one one-thousandth
(1/1000) of a Preferred Share at the Exercise Price.
(b) Until the Separation Date:
(i) no Right may be exercised; and
(ii) each Right will be evidenced by the certificate for the
associated Common Share and will be transferable only together with,
and will be transferred by a transfer of, such associated Common
Share. Notwithstanding any other provision of this Agreement, any
Rights held by the Company or any of its Subsidiaries shall be void.
(c) After the Separation Date and prior to the Expiration Date, the
Rights, unless earlier redeemed in accordance with the provisions of
Article 5 hereof, (i) may be exercised and (ii) will be transferable
independent of Common Shares. Promptly following the Separation Date, the
Rights Agent will mail to each holder of record of Common Shares as of
the Separation Date, at such holder's address as shown by the records of
the Transfer Agent and Registrar of the Company's Common Stock (the Company
hereby agreeing to cause such Transfer Agent and Registrar, if different
from the Rights Agent, to furnish copies of such records to the Rights
Agent for this purpose) (x) a Rights Certificate appropriately completed,
representing the number of Rights held by such holder at the Separation
Date and having such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any
stock exchange or quotation system on which the Rights may from time to
time be listed or traded, or to conform to usage, and (y) a disclosure
statement describing the Rights.
(d) Rights may be exercised on any Business Day after the Separation
Date and prior to the Expiration Date by submitting to the Rights Agent the
Rights Certificate evidencing such Rights with an Election to Exercise (an
"Election to Exercise") substantially in the form attached to the Rights
Certificate duly completed, accompanied by payment in cash or by certified
check or money order payable to the order of the Company, of a sum equal to
the Exercise Price multiplied by the number of Rights being exercised and a
sum sufficient to cover any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for whole or
fractional Preferred Shares in a name other than that of the holder of the
Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an Election to
Exercise accompanied by payment as set forth in Section 2.2(d) above, the
Rights Agent will thereupon promptly:
(i) requisition from any transfer agent of the capital stock of
the Company certificates for the number of whole or fractional
Preferred Shares to be purchased (the Company hereby irrevocably
authorizing and directing such transfer agent to comply with all such
requisitions);
(ii) as provided in Section 6.5(b) hereof, at the election of the
Company, cause depository receipts to be issued in lieu of fractional
shares;
(iii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in
accordance with Section 6.5(b) hereof;
(iv) when appropriate, requisition from the Company the amount of
cash or other consideration to be paid in lieu of capital stock as
determined pursuant to the terms hereof; and
(v) after receipt of such certificates, depository receipts
and/or cash or other consideration, deliver the same to or upon the
order of the registered holder of such Rights Certificate, registered
(in the case of certificates or depository receipts) in such name or
names as may be designated by such holder.
(f) In case the holder of any Rights shall exercise less than all the
Rights evidenced by such holder's Rights Certificate, a new Rights
Certificate evidencing the Rights remaining unexercised will be issued by
the Rights Agent to such holder or to such holder's duly authorized
assigns.
(g) The Company covenants and agrees that it will:
(i) cause to be reserved and kept available out of its
authorized and unissued shares of Preferred Stock and shares of Common
Stock, respectively, or out of authorized and issued Preferred Shares
and shares of Common Stock, respectively, held in its treasury, such
number of Preferred Shares and shares of Common Stock, respectively,
as will from time to time be sufficient to permit the exercise in full
of all outstanding Rights;
(ii) not effect any amendment to the Designation of Rights,
Privileges, and Preferences for the Preferred Shares or any amendment
to the articles of incorporation of the Company, which would
materially and adversely affect the rights, privileges or powers of
the Preferred Shares (regardless of whether there are then any holders
of Preferred Shares), without the prior approval of the holders of
two-thirds or more of the then outstanding Preferred Shares and the
prior written consent of the holders of two-thirds or more of the then
outstanding Rights that are not Beneficially Owned by any Acquiring
Person. (For purposes of the taking of any action by the holders of
Rights, the Board of Directors of the Company may establish a record
date and may call and hold a meeting of such holders or seek their
consent to action by the requisite number thereof in writing
substantially in accordance with the procedure applicable to action to
be taken by the holders of Preferred Shares and in accordance with
applicable law);
(iii) take all such action as may be necessary and within its
power to ensure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such
Preferred Shares (subject to payment of the Exercise Price), be duly
and validly authorized, executed, issued and delivered, and fully paid
and nonassessable;
(iv) take all such action as may be necessary and within its
power to comply with any applicable requirements of the Securities Act
or the Exchange Act or the rules and regulations thereunder and any
other applicable law, rule or regulation, in connection with the
issuance and delivery of the Rights Certificates and the issuance of
any Preferred Shares upon exercise of Rights;
(v) use its best efforts to cause all Preferred Shares issued
upon exercise of Rights to be listed on a national securities exchange
upon issuance; and
(vi) pay when due and payable any and all federal and state
transfer taxes (but not any income taxes of the holder or exercising
holder or any liability of the Company to withhold tax) and charges
which may be payable in respect of the original issuance or delivery
of the Rights Certificates; provided that, the Company shall not be
required to pay any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for shares in
a name other than that of the holder of the Rights being transferred
or exercised.
2.3 Adjustments to Exercise Price; Number of Rights.
(a) In the event the Company shall at any time after the Record Date
and prior to the Expiration Date:
(i) declare or pay a dividend on the Common Shares payable in
Common Shares (or other capital stock or securities exchangeable for
or convertible into or giving a right to acquire Common Shares or
other capital stock) other than pursuant to any optional stock
dividend program:
(ii) subdivide or split the then outstanding Common Shares into a
greater number of Common Shares;
(iii) combine or consolidate the then outstanding Common
Shares into a smaller number of Common Shares or effect a reverse
split of the outstanding Common Shares; or
(iv) issue any Common Shares (or other capital stock or
securities exchangeable for or convertible into or giving a right to
acquire Common Shares or other capital stock) in respect of, in lieu
of or in exchange for, existing Common Shares in a
reclassification or recapitalization;
then, and in each such event, the Exercise Price and the number of Rights
outstanding, or, if the payment or effective date therefor shall occur
after the Separation Date, the Preferred Shares purchasable upon exercise
of Rights, shall be adjusted in the manner set forth below. If the
Exercise Price and number of Rights outstanding are to be adjusted, (x) the
Exercise Price in effect after such adjustment will be equal to the
Exercise Price in effect immediately prior to such adjustment divided by
the number of Common Shares (or other capital stock) (the "Expansion
Factor") that a holder of one Common Share immediately prior to such
dividend, subdivision, combination or issuance would hold thereafter as a
result thereof, and (y) each Right held prior to such adjustment will
become that number of Rights equal to the Expansion Factor, and the
adjusted number of Rights will be deemed to be distributed among the Common
Shares with respect to which the original Rights were associated (if they
remain outstanding) and the shares issued in respect of such dividend,
subdivision, combination or issuance, so that each such Common Share (or
other capital stock) will have exactly one Right associated with it. If
the Preferred Shares purchasable upon exercise of Rights are split,
subdivided, or combined, or if any dividend (whether of cash or securities)
is declared with respect thereto, the Preferred Shares purchasable upon
exercise of each Right after such event will be automatically adjusted to
be that number of the Preferred Shares that a holder of the Preferred
Shares purchasable upon exercise of one Right (regardless of whether a
Right shall then be exercisable) immediately prior to such split,
subdivision, combination, or dividend would hold thereafter as a result
thereof. If after the Record Date and prior to the Expiration Date, the
Company shall issue any shares of capital stock other than Common Shares in
a transaction of a type described in the first sentence of this Section
2.3(a), shares of such capital stock shall be treated herein as nearly
equivalent to Common Shares as may be practicable and appropriate under the
circumstances, and the Company and the Rights Agent agree to amend this
Agreement in order to effect such treatment, and the Company will not
consolidate with, merge with or into, or enter into an arrangement with,
any other Person unless such Person agrees to be bound by the terms of an
amendment effecting such treatment
In the event the Company shall at any time after the Record Date and
prior to the Separation Date issue any Common Shares otherwise than in a
transaction referred to in the preceding paragraph, each such Common Share
so issued shall automatically have one new Right associated with it, which
Right shall be evidenced by the certificate representing such Share.
(b) In the event the Company shall at any time after the Record Date
and prior to the Separation Date fix a record date for the making of a
distribution to all holders of Common Shares of rights or warrants
entitling them to subscribe for or purchase Common Shares (or securities
convertible into or exchangeable for or carrying a right to purchase or
subscribe for Common Shares) at a price per Common Share (or, if a security
convertible into or exchangeable for or carrying a right to purchase or
subscribe for Common Shares), having a conversion, exchange or exercise
price (including the price required to be paid to purchase such convertible
or exchangeable security or right per share) less than the Market Price per
Common Share on such record date, the Exercise Price shall be adjusted.
The Exercise Price in effect after such record date will equal the Exercise
Price in effect immediately prior to such record date multiplied by a
fraction, of which the numerator shall be the number of Common Shares
outstanding on such record date plus the number of Common Shares which the
aggregate offering price of the total number of Common Shares so to be
offered (and/or the aggregate initial conversion, exchange or exercise
price of the convertible or exchangeable securities or rights so to be
offered (including the price required to be paid to purchase such
convertible or exchangeable securities or rights)) would purchase at such
Market Price and of which the denominator shall be the number of Common
Shares outstanding on such record date plus the number of additional Common
Shares to be offered for subscription or purchase (or into which the
convertible or exchangeable securities or rights so to be offered are
initially convertible, exchangeable or exercisable). In case such
subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors of the Company.
For purposes of this Agreement, the granting of the right to purchase
Common Shares (whether from treasury shares or otherwise) pursuant to any
dividend or interest reinvestment plan and/or any Common Share purchase
plan providing for the reinvestment of dividends or interest payable on
securities of the Company and/or the investment of periodic optional
payments and/or employee benefit or similar plans (so long as such right to
purchase is in no case evidenced by the delivery of rights or warrants)
shall not be deemed to constitute an issue of rights or warrants by the
Company; provided, however, that, in the case of any dividend or interest
reinvestment plan, the right to purchase Common Shares is at a price per
share of not less than 90 percent of the current market price per share
(determined as provided in such plans) of the Common Shares.
(c) In the event the Company shall at any time after the Record Date
and prior to the Separation Date fix a record date for the making of a
distribution to all holders of Common Shares of evidences of indebtedness
or assets (other than a regular periodic cash dividend or a dividend paid
in Common Shares) or rights or warrants (excluding those referred to in
Section 2.3(b)), the Exercise Price shall be adjusted. The Exercise Price
in effect after such record date will equal the Exercise Price in effect
immediately prior to such record date less the fair market value (as
determined in good faith by the Board of Directors of the Company) of the
portion of the assets, evidences of indebtedness, rights or warrants so to
be distributed applicable to the securities purchasable upon exercise of
one Right.
(d) Each adjustment made pursuant to this Section 2.3 shall be made
as of:
(i) the record date for the applicable dividend or distribution,
in the case of an adjustment made pursuant to subsection (b) or (c)
above; and
(ii) the payment or effective date for the applicable dividend,
subdivision, change, combination or issuance, in the case of an
adjustment made pursuant to subsection (a) above.
(e) In the event the Company shall at any time after the Record Date
and prior to the Separation Date issue any shares of capital stock (other
than Common Shares), or rights or warrants to subscribe for or purchase any
such capital stock, or securities convertible into or exchangeable for any
such capital stock, in a transaction referred to in clause (a)(i) or
(a)(iv) above, if the Board of Directors acting in good faith determines
that the adjustments contemplated by clauses (a), (b) and (c) above in
connection with such transaction will not appropriately protect the
interests of the holders of Rights, the Company may determine what other
adjustments to the Exercise Price, number of Rights and/or Preferred Shares
purchasable upon exercise of Rights would be appropriate and,
notwithstanding clauses (a), (b) and (c) above, such adjustments, rather
than the adjustments contemplated by clauses (a), (b) and (c) above, shall
be made. The Company and the Rights Agent shall amend this Agreement as
appropriate to provide for such adjustments.
(f) Each adjustment to the Exercise Price made pursuant to this
Section 2.3 shall be calculated to the nearest cent. Whenever an
adjustment to the Exercise Price is made pursuant to this Section 2.3, the
Company shall
(i) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment; and
(ii) promptly file with the Rights Agent and with each transfer
agent for the Common Shares a copy of such certificate; and
(iii) mail a brief summary thereof to each holder of Rights.
(g) Irrespective of any adjustment or change in the securities
purchasable upon exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the securities so
purchasable which were expressed in the initial Rights Certificates issued
hereunder.
2.4 Date on Which Exercise is Effective.
Each person in whose name any certificate for Preferred Shares is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such Preferred Shares represented thereby on,and
such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered for exercise and payment of the
Exercise Price for such Rights (and any applicable transfer taxes and other
governmental charges payable by the exercising holder hereunder) was made;
provided, however, that if the date of such surrender and payment is a date upon
which the Preferred Share transfer books of the Company are closed, such person
shall be deemed to have become the record holder of such Preferred Shares on,
and such certificate shall be dated, the next succeeding Business Day on which
the Preferred Share transfer books of the Company are open.
2.5 Execution, Authentication, Delivery and Dating of Rights Certificates.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or one of its Executive
Vice Presidents, attested by its Secretary or one of its Assistant
Secretaries. The signature of any of these officers on the Rights
Certificate may be manual or facsimile. Rights Certificates bearing the
manual or facsimile signatures of individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that
such individuals or any of them have ceased to hold such offices prior to
the countersignature and delivery of such Rights Certificates.
Promptly after the Company learns of the Separation Date, the Company
will notify the Rights Agent of such Separation Date and will deliver
Rights Certificates executed by the Company to the Rights Agent for
countersignature and the Rights Agent shall countersign (manually or by
facsimile signature in a manner satisfactory to the Company) and deliver
such Rights Certificates to the holders of the Rights pursuant to Section
2.2(c) hereof. No Rights Certificate shall be valid for any purpose until
countersigned by the Rights Agent as aforesaid.
(b) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 Registration, Registration of Transfer and Exchange.
(a) The Company will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may
prescribe, the Company will provide for the registration and transfer of
Rights. The Rights Agent is hereby appointed "Rights Registrar" for the
purpose of maintaining the Rights Register for the Company and registering
Rights and transfers of Rights as herein provided. In the event that the
Rights Agent shall cease to be the Rights Registrar, the Rights Agent will
have the right to examine the Rights Register at all reasonable times.
After the Separation Date and prior to the Expiration Date, upon surrender
for registration of transfer or exchange of any Rights Certificate, and
subject to the provisions of Section 2.6(c) below, the Company will
execute, and the Rights Agent will countersign and deliver, in the name of
the holder or the designated transferee or transferees, as required
pursuant to the holder's instructions, one or more new Rights Certificates
evidencing the same aggregate number of Rights as did the Rights
Certificates so surrendered.
(b) All Rights issued upon any registration of transfer or exchange
of Rights Certificates shall be the valid obligations of the Company, and
such Rights shall be entitled to the same benefits under this Agreement as
the Rights surrendered upon such registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the
Rights Agent, as the case may be, duly executed by the holder thereof or
such holder's attorney duly authorized in writing. As a condition to the
issuance of any new Rights Certificate under this Section 2.6, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto.
2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates.
(a) If any mutilated Rights Certificates is surrendered to the Rights
Agent prior to the Expiration Date, the Company shall execute and the
Rights Agent shall countersign and deliver in exchange therefor a new
Rights Certificate evidencing the same number of Rights as did the Rights
Certificate so surrendered.
(b) If there shall be delivered to the Company and the Rights Agent
prior to the Expiration Date (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such security
or indemnity as may be required by them to save each of them and any of
their agents harmless, then, in the absence of notice to the Company or the
Rights Agent that such Rights Certificate has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Rights Agent
shall countersign and deliver, in lieu of any such destroyed, lost or
stolen Rights Certificate, a new Rights Certificate evidencing the same
number of Rights as did the Rights Certificate so destroyed, lost or stolen
(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.7
in lieu of any destroyed, lost or stolen Rights Certificates shall evidence
an original additional contractual obligation of the Company, whether or
not the destroyed, lost or stolen Rights certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all other Rights duly
issued hereunder.
2.8 Persons Deemed Owners.
Prior to due presentment of a Rights Certificate (or, prior to the
Separation Date, the associated Common Share certificate) for registration of
transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name such Rights Certificate
(or, prior to the Separation Date, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever. As used in this Agreement, unless the context
otherwise requires, the term "holder" of any Rights shall mean the registered
holder of such Rights (or, prior to the Separation Date, the associated Common
Shares).
2.9 Delivery and Cancellation of Certificates.
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly canceled by the Rights Agent. The Company may at any time deliver
to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Rights Certificates so delivered shall be promptly
canceled by the Rights Agent. No Rights Certificate shall be countersigned in
lieu of or in exchange for any Rights Certificates canceled as provided in this
Section 2.9, except as expressly permitted by this Agreement. The Rights Agent
shall destroy all canceled Rights Certificates and deliver a certificate of
destruction to the Company.
2.10 Agreement of Rights Holders.
Every holder of Rights by accepting the same consents and agrees with the
Company and the Rights Agent and with every other holder of Rights that:
(a) prior to the Separation Date, each Right will be transferable
only together with, and will be transferred by a transfer of, the
associated Common Share;
(b) after the Separation Date, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
(c) prior to due presentment of a Rights Certificate (or, prior to
the Separation Date, the associated Common Share certificate) for
registration of transfer, the Company, the Rights Agent and any agent of
the Company or the Rights Agent may deem and treat the person in whose name
the Rights Certificate (or, prior to the Separation Date, the associated
Common Share certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on such Rights Certificate or the associated Common Share
certificate made by anyone other than the Company or the Rights Agent) for
all purposes whatsoever, and neither the Company nor the Rights Agent shall
be affected by any notice to the contrary; and
(d) without the approval of any holder of Rights and upon the sole
authority of the Board of Directors of the Company acting in good faith,
this Agreement may be supplemented or amended from time to time pursuant
to Section 6.3, Section 2.3 (e), or the last sentence of the first
paragraph of Section 2.3(a) hereof.
ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN THE EVENT
OF CERTAIN TRANSACTIONS
3.1 Flip-over Transaction or Event.
(a) Subject to Section 3.3 hereof, in the event that prior to the
Expiration Date the Company enters into, consummates or permits to occur
any Flip-over Transaction or Event, the Company shall take such action as
shall be necessary to ensure, and shall not enter into, consummate or
permit to occur such Flip-over Transaction or Event until it shall have
entered into a supplemental agreement with the principal Person engaging in
such Flip-over Transaction or Event (the "Flip-over Entity", as such term
is more specifically defined in Section 1.1(m) hereof) for the benefit of
the holders of the Rights, providing, that upon consummation of the Flip-
over Transaction or Event:
(i) each Right shall thereafter constitute the right to purchase
from the Flip-over Entity, upon exercise thereof in accordance with
the terms hereof, that number of Common Shares of such Flip-over
Entity having an aggregate Market Price on the date of consummation or
occurrence of such Flip-over Transaction or Event equal to twice the
Exercise Price for an amount in cash equal to the Exercise Price (such
right to be appropriately adjusted in a manner analogous to the
applicable adjustment to the Rights provided for in Section 2.3 in the
event that after such date of consummation or occurrence an event of a
type analogous to any of the events described in Section 2.3 shall
have occurred with respect to such Common Shares);
(ii) the Flip-over Entity shall thereafter be liable for, and
shall assume, by virtue of such Flip-over Transaction or Event and
such supplemental agreement, all the obligations and duties of the
Company pursuant to this Agreement;
(iii) the term "Company" for all purposes of this Rights
Agreement shall thereafter be deemed to refer to such Flip-over
Entity;
(iv) such Flip-over Entity shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common
Shares, in the same manner applicable to the reservation of Preferred
Shares provided by Section 2.2(g)(i) hereof) in connection with the
consummation of such Flip-over Transaction or Event as may be
necessary to assure that the provisions hereof shall thereafter be
applicable;
(v) confirming that all rights of first refusal or preemptive
rights in respect of the issuance of Common Shares of the Flip-over
Entity upon exercise of outstanding Rights have been waived and that
such transaction shall not result in a default by the Flip-over Entity
under this Rights Agreement; and
(vi) providing that, as soon as practicable after the date of
such Flip-over Transaction or Event, the Flip-over Entity will:
(A) prepare and file, as required by law, a registration
statement under the Securities Act with respect to the Rights and
the securities purchasable upon exercise of the Rights on an
appropriate form, use its best efforts to cause such registration
statement to become effective as soon as practicable after such
filing, and use its best efforts to cause such registration
statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act), until the date
of expiration of the Rights, and similarly comply with applicable
state securities laws:
(B) use its best efforts to list (or continue the listing
of) the Rights and the securities purchasable upon exercise of
the Rights on a national securities exchange or to meet the
eligibility requirements for quotation on the Nasdaq Stock
Market; and
(C) deliver to holders of the Rights historical financial
statements for the Flip-over Entity which comply in all
respects with the requirements for registration on Form 10 (or
any successor form) under the Exchange Act.
3.2 Flip-in Event.
(a) Subject to Section 3.3, in the event that prior to the Expiration
Date a Flip-in Event shall occur, the Company shall take such action as
shall be necessary to ensure and provide, within five (5) Business Days or
such longer period as may be required to satisfy the requirements of the
Securities Act and the Exchange Act that, except as provided below, such
Right shall thereafter constitute the right to purchase from the Company,
upon exercise thereof in accordance with the terms hereof, that number of
Common Shares of the Company having an aggregate Market Price on the date
of consummation or occurrence of such Flip-in Event equal to the Exercise
Price for an amount in cash equal to one-half (1/2) the Exercise Price
(such right to be appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 in the event that after
such date of consummation or occurrence an event of a type analogous
to any of the events described in Section 2.3 shall have occurred with
respect to such Common Shares).
(b) Notwithstanding the foregoing, upon the occurrence of any Flip-in
Event, any Rights that are or were Beneficially Owned on or after the
earlier of the Separation Date or the Stock Acquisition Date by (i) an
Acquiring Person or (ii) a transferee, direct or indirect, of an Acquiring
Person (or any Affiliate or Associate of an Acquiring Person) in a
transfer, whether or not for consideration, that the Board of Directors of
the Company acting in good faith has determined is part of a plan,
arrangement or scheme of an Acquiring Person (or any Affiliate or Associate
of an Acquiring Person) that has the purpose or effect of avoiding clause
(i) of this Section 3.2(b), shall become void and any holder of such Rights
(including transferees) shall thereafter have no right to exercise such
Rights under any provision of this Agreement;
(c) Any Rights Certificate issued pursuant to Section 2.2 that
represents Rights Beneficially Owned by an Acquiring Person and any Rights
Certificate issued at any time upon the transfer of any Rights to an
Acquiring Person or any Affiliate or Associate thereof or to any nominee of
any such Acquiring Person, Affiliate or Associate, and any Rights
Certificate issued upon transfer, exchange, replacement or adjustment of
any other Rights Certificate referred to in this sentence, shall contain
the following legend:
The Rights represented by this Rights Certificate were issued to a
person who was an Acquiring Person or an Affiliate or an Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement). This
Rights Certificate and the Rights represented hereby may become void in the
circumstances specified in Section 3.2(b) of the Rights Agreement.
Provided that, the Rights Agent shall not be under any responsibility
to ascertain the existence of facts that would require the imposition of
such legend but shall be required to impose such legend only if instructed
to do so by the Company, or if a holder fails to certify upon transfer or
exchange in the space provided on the Rights Certificate that such holder
is not an Acquiring Person or an Affiliate or Associate thereof; provided
further, however, that the absence of such legend on any Rights Certificate
shall not be deemed dispositive of whether the holder thereof is an
Acquiring Person.
3.3 Obligations of the Company.
(a) The Company shall not enter into or engage in any transaction of
the kind referred to in this Article III if at the time of such transaction
there are any rights, warrants or securities outstanding or any other
arrangements, agreements or instruments which would eliminate or otherwise
diminish in any respect the benefits intended to be afforded by this Rights
Agreement to the holders of Rights upon consummation of such transaction.
The provisions of this Article III shall apply to successive mergers or
consolidations or sales or other transfers.
(b) In the event that there shall not be sufficient Common Shares
authorized to permit the exercise in full of the Rights in accordance with
Section 3.2(a), holders of Rights will receive upon exercise Common Shares
of the Company to the extent available and then cash, property or other
securities of the Company (which may be accompanied by a reduction in the
Exercise Price), in proportions determined by the Company, so that the
aggregate value received is equal to the Exercise Price.
ARTICLE IV
THE RIGHTS AGENT
4.1 General.
(a) The Company hereby appoints the Rights Agent to act as agent for
the Company and the holders of Rights in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment.
The Company may from time to time appoint such Co-Rights Agents as it may
deem necessary or desirable. In the event the Company appoints such
Co-Rights Agents, the respective duties of the Rights Agents and Co-Rights
Agents shall be as the Company may determine. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of
defending against any claim of liability, which right to indemnification
will survive the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
certificate for Common Shares, Rights Certificate, certificate for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper person or persons.
4.2 Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or amalgamated 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 is a party, or any
corporation succeeding to the stockholder services business of the Rights
Agent or any successor Rights Agent, will be the successor to the Rights
Agent under this Agreement without the execution or filing of any paper or
any further act on the part of any of the parties hereto; provided that,
such corporation would be eligible for appointment as a successor Rights
Agent under the provisions of Section 4.4 hereof. In case at the time such
successor Rights Agent succeeds to the agency created by this Agreement,
any of the Rights Certificates have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates have
not been countersigned, any successor Rights Agent may countersign such
Rights Certificate either in the name of the predecessor Rights Agent or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificate will have full force provided in the Rights Certificates and in
this Agreement.
(b) In case at any time the name of the Rights Agent is changed and
at such time any of the Rights Certificate shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under
its prior name and deliver Rights Certificate so countersigned; and in case
at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates
either in its prior name or in its changed name; and in all such cases such
Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
4.3 Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Rights certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel will be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent deems it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a person believed by the
Rights Agent to be the Chairman of the Board, the President or any
Executive Vice President or Vice President and by the Treasurer or any
Assistant Treasurer or the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate will be
full authorization to the Rights Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon
such certificate.
(c) The Rights Agent will be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
certificates for Common Shares or the Rights Certificates (except its
countersignature thereof) or be required to verify the same, but all such
statements and recitals are and will be deemed to have been made by the
Company only.
(e) The Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof
(except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Common
Share certificate, Preferred Share certificate or Rights Certificate
(except its countersignature thereof); nor will it be responsible for any
breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights (including the Rights becoming
void pursuant to Section 3.2(b) hereof or any adjustment required under the
provisions of Section 2.3 hereof) 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 adjustments (except with respect to the
exercise of Rights after receipt of the certificate contemplated by Section
2.3 describing any such adjustment); nor will it by any act hereunder be
deemed to make any representation or warranty as to the authorization of
any Preferred Shares or Common Shares to be issued pursuant to this
Agreement or any Rights or as to whether any Preferred Shares or Common
Shares will, when issued, be duly and validly authorized, executed, issued
and delivered and fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably
be required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
any person believed by the Rights Agent to be the Chairman of the Board,
the President, any Executive Vice President or Vice President or the
Secretary or any Assistant Secretary or the Treasurer or any Assistant
Treasurer of the Company, and to apply to such persons for advice or
instructions in connection with its duties and it shall not be liable for
any action taken or suffered by it in good faith in accordance with
instructions of any such person.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in Preferred Shares,
Common Shares, Rights or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act
as fully and freely as though it were not Rights Agent under this
Agreement, subject to the terms, covenants, conditions, and restrictions of
this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent will 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.
4.4 Change of Rights Agent.
The Rights Agent may resign and be discharged from its duties under this
Agreement upon 90 days' notice (or such lesser notice as is acceptable to the
Company) in writing mailed to the Company and to each transfer agent of Common
Shares by registered or certified mail, and to the holders of the Rights in
accordance with Section 6.9. The Company may remove the Rights Agent upon 30
days' notice in writing, mailed to the Rights Agent and to each transfer agent
of the Common Shares by registered or certified mail and to the holders of the
Rights in accordance with Section 6.9. If the Rights Agent should resign or be
removed or otherwise become incapable of acting, the Company will appoint a
successor to the Rights Agent. If the Company fails to make such appointment
within a period of 30 days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of any Rights (which holder shall, with such
notice, submit such holder's Rights Certificate for inspection by the Company),
then the holder of any Rights 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 incorporated
under the laws of any state or the United States that is authorized to carry on
in the state of Utah the business of a transfer agent registered in accordance
with the requirements of section 17A of the Securities Exchange Act or 1934 and,
if the duties hereunder are deemed to so require, a trust company. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed but the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and mail a
notice thereof in writing to the holders of the Rights. Failure to give any
notice provided for in this Section 4.4 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.
ARTICLE: V
REDEMPTION
5.1 Redemption.
The Rights may be redeemed solely by action of the Board of Directors
pursuant to Section 5.2 hereof and in no other manner.
5.2 By the Board of Directors.
Subject to any limitations contained in the Company's articles of
incorporation, the Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Expiration Date or (ii) the close of
business on the tenth day after the Stock Acquisition Date (or such later date
as may be determined by the majority vote of the Board of Directors from time to
time) by notice to the Rights Agent and public announcement by the Company,
redeem all, but not less than all, the then-outstanding Rights at the Redemption
Price, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof, and the Company may, at its
option, pay the Redemption Price in Common Shares (based on the current Market
Price of the Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors.
5.3 Rights Termination.
Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to Section 5.2 hereof, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give
public notice of any such redemption; provided, however, that the failure to
give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights pursuant to Section 5.2 hereof, the Company shall
mail a notice of redemption to all the holders of the then outstanding Rights at
their last addresses as they appear upon the registry books of the Rights Agent
or, prior to the Separation Date, on the registry books of the transfer agent
for the Common Stock of the Company, if different. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made. Neither the Company nor
any of its Affiliates or Associates may redeem any Rights at any time in any
manner other than that specifically set forth in this Article 5, and other than
in connection with the purchase of Common Shares of the Company prior to the
Separation Date.
ARTICLE VI
MISCELLANEOUS
6.1 Expiration.
No Person shall have any right pursuant to this Agreement or in respect of
any Right after the Expiration Date, except the Rights Agent as specified in
Section 4.1(a) of this Agreement.
6.2 Issuance of New Rights Certificate.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the number or kind or class of shares
purchasable upon exercise of Rights made in accordance with the provisions of
this Agreement.
6.3 Supplements and Amendments.
The Board of Directors of the Company may from time to time supplement or
amend this Agreement without the approval of any holders of Rights:
(a) to make any changes, except for a supplement or amendment which
would change the Expiration Date or the Exercise Price, which the Board of
Directors acting in good faith may deem necessary or desirable; provided
that, no such supplement or amendment made on or after the Stock
Acquisition Date shall materially adversely affect the interests of the
holders of Rights generally; and provided further that, no such supplement
or amendment shall be made to the provisions of Article IV except with the
written concurrence of the Rights Agent to such supplement or amendment; or
(b) in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be inconsistent with any other
provisions herein or otherwise defective.
6.4 Fractional Rights.
(a) The Company shall not be required to issue fractions of Rights or
Right Certificates evidencing fractional Rights.
(b) In lieu of fractional Rights, the registered holders of the
Rights Certificates with regard to which such fractional Rights would
otherwise be issuable shall be paid in cash an amount equal to the same
fraction of the current market price of a whole Right. For the purposes of
this Section 6.4, the current market price of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the
date on which such fractional Rights would have been otherwise issuable.
The closing price of the Rights for any day shall be determined in the same
manner set forth in Section 1.1 (o).
6.5 Fractional Shares.
(a) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one
one-thousandth of a share) or fractions of a share of Common Stock upon
exercise of the Rights or to distribute certificates which evidence
fractional shares of Preferred Stock (other than fractions which are
integral multiples of one one-thousandth of a share) or fractional shares
of Common Stock. Nothing contained herein, however, shall be deemed to
prevent any holder of Rights from aggregating the number of Rights
exercised in any single transaction in such a manner that the aggregate
number of Rights exercised in a single transaction may be convertible into
an integral number of shares (or, in the case of Preferred Stock, an
integral multiple of one one-thousandth of a share). A holder of
fractional share certificates of Preferred Stock shall have all such
rights, privileges and preferences as he, she or it may be entitled to
pursuant to the Nevada Revised Statutes.
(b) In lieu of issuing fractions (other than fractions which are
integral multiples of one one-thousandth of a share) of Preferred Shares,
the Company may, at its election, issue depository receipts evidencing
fractions of Preferred Shares pursuant to an appropriate agreement between
the Company and a depository selected by it; provided that, such agreement
shall provide that the holders of such depository receipts shall have all
of the rights, privileges and preferences to which they would be entitled
as owners of Preferred Shares pursuant to the Nevada Revised
Statutes. With respect to fractional Preferred Shares that are not
integral multiples of one one-thousandth of a Preferred Share, if the
Company does not issue such fractional Preferred Shares or depository
receipts in lieu thereof, there shall be paid to the holders of record of
Right Certificates at the time such Right Certificates are exercised as
herein provided an amount in cash equal to the same fraction of the Market
Price of a Preferred Share.
(c) The holder of a Right by the acceptance of a Right expressly
waives his right to receive any fractional Preferred Shares (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share) upon exercise of a Right.
6.6 Rights of Action.
Subject to the terms of this Agreement, rights of action in respect of this
Agreement, other than rights of action vested solely in the Rights Agent are
vested in the respective holders of the Rights and any holder of any Rights,
without the consent of the Rights Agent or of the holder of any other Rights,
may, on such holder's own behalf and for such holder's own benefit and the
benefit of other holders of Rights, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise such holder's Rights in the manner
provided in such holder's Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
6.7 Holder of Rights Not Deemed a Stockholder.
No holder, as such, of any Rights shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of Preferred Shares or any
other securities which may at any time be issuable on the exercise of such
Rights, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 6.8
hereof), or to receive dividends or subscription rights or otherwise, until such
Rights shall have been exercised in accordance with the provisions hereof.
6.8 Notice of Proposed Actions.
In case the Company shall propose after the Separation Date and prior to
the Expiration Date
(a) to effect or permit (in cases where the Company's permission is
required) any Flip-in Event or Flip-over Transaction or Event; or
(b) to effect the liquidation, dissolution or winding up of the
Company or the sale of all or substantially all of the Company's assets;
then in each such case, the Company shall give to each holder of a Right, in
accordance with Section 6.9 hereof, a notice of such proposed action, which
shall specify the date on which such Flip-in Event or Flip-over Transaction or
Event, liquidation, dissolution, or winding up is to take place, and such notice
shall be so given at least 20 Business Days prior to the date of the taking of
such proposed action.
6.9 Notices.
Notices or demands authorized or required by this Agreement to be given or
made by the Rights Agent or by the holder of any Rights to or on the Company
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
Foreland Corporation
Union Terrace Office Building
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Any notice or demand authorized or required by this Agreement to be given
or made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
Atlas Stock Transfer Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Notices or demands authorized or required by this Agreement to be given or
made by the Company or the Rights Agent to or on the holder of any Rights shall
be sufficiently given or made if delivered or sent by first-class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the registry books of the Rights Agent or prior to the Separation Date, on
the registry books of the Transfer Agent and Registrar of the Company's capital
stock, if different from 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.
6.10 Costs of Enforcement.
The Company agrees that if the Company or any other Person the securities
of which are purchasable upon exercise of Rights fails to fulfill any of its
obligations pursuant to this Agreement, then the Company or such Person will
reimburse the holder of any Rights for the costs and expenses (including legal
fees) incurred by such holder in actions to enforce his rights pursuant to any
Rights or this Agreement.
6.11 Successors.
All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
6.12 Benefits of this Agreement.
Nothing in this Agreement shall be construed to give any Person other than
the Company, the Rights Agent and the holders of the Rights any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
holders of the Rights.
6.13 Descriptive Heading.
Descriptive headings appear herein for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
6.14 Governing Law.
This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the internal laws of the state of Nevada and for all
purposes shall be governed by and construed in accordance with the internal
laws, including the corporate laws, of such state applicable to contracts to be
made and performed entirely within such state without giving effect to conflicts
of laws principles thereof.
6.15 Counterparts.
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
6.16 Severability.
If any term or provision hereof or the application thereof to any
circumstance shall, in any jurisdiction and to any extent, be invalid or
enforceable, such term or provision shall be ineffective as to such jurisdiction
to the extent of such invalidity or unenforceability without invalidating or
rendering unenforceable the remaining terms and provisions hereof or the
application of such term or provision to circumstances other than those as to
which it is held invalid or unenforceable.
6.17 Effective Date.
This Agreement shall be effective as of May 12, 1997.
6.18 Determinations and Actions by the Board of Directors.
Subject to any limitations contained in the Company's articles of
incorporation, the Board shall have the exclusive power and authority to
administer and amend this Agreement and to exercise all rights and powers
specifically granted to the Board or the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not to
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including for purposes of clause (ii) below,
all omissions with respect to the foregoing) which are done or made by the
Board, in good faith, shall (i) be final, conclusive and binding on the Company,
the Rights Agent, the holders of the Rights Certificates and all other parties,
and (ii) not subject the Board to any liability to the holders of the Rights
Certificates.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
FORELAND CORPORATION
By: /s/ N. ▇▇▇▇▇▇ ▇▇▇▇▇▇, President
ATLAS STOCK TRANSFER CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, President