EXHIBIT 1.1
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AKSYS, LTD.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
Rights Agent
RIGHTS AGREEMENT
Dated as of October 28, 1996
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Table of Contents
Page
Recitals ................................................................................. 1
Section 1. Certain Definitions.............................................................. 1
Section 2. Appointment of Rights Agent...................................................... 8
Section 3. Issuance of Rights Certificates.................................................. 8
Section 4. Form of Rights Certificates...................................................... 9
Section 5. Execution, Countersignature and Registration..................................... 10
Section 6. Mutilated, Destroyed, Lost or Stolen Rights Certificates
Transfer, Division, Combination and Exchange of Rights Certificates;............. 11
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.................... 12
Section 8. Cancellation and Destruction of Rights Certificates.............................. 14
Section 9. Reservation and Availability of Preferred Stock.................................. 14
Section 10. Preferred Stock Record Date...................................................... 15
Section 11. Adjustments to Purchase Price, Number of Shares or Number of Rights.............. 16
Section 12. Certification of Adjustments..................................................... 23
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............. 23
Section 14. Fractional Rights and Fractional Shares.......................................... 26
Section 15. Rights of Action................................................................. 27
Section 16. Agreement of Rights Holders Concerning Transfer and Ownership of Rights.......... 28
Section 17. Rights Holder Not Deemed a Stockholder........................................... 28
Section 18. Concerning the Rights Agent...................................................... ▇▇
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▇▇▇▇▇▇▇ ▇▇. Merger or Consolidation or Change of Name of Rights Agent........................ 29
Section 20. Duties of Rights Agent........................................................... 29
Section 21. Change of Rights Agent........................................................... 31
Section 22. Issuance of New Rights Certificates.............................................. 32
Section 23. Redemption and Termination....................................................... 32
Section 24. Notice of Certain Events......................................................... 33
Section 25. Notices.......................................................................... 34
Section 26. Supplements and Amendments....................................................... 34
Section 27. Successors....................................................................... 35
Section 28. Benefits of this Agreement; Determinations and Actions by the
Board of Directors............................................................... 35
Section 29. Severability..................................................................... 36
Section 30. Governing Law.................................................................... 36
Section 31. Counterparts..................................................................... 36
Section 32. Descriptive Headings............................................................. 36
Section 33. Grammatical Construction......................................................... 36
Exhibit A -- Certificate of Designation, Preferences and Rights of Junior
Participating Preferred Stock, Series A
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
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RIGHTS AGREEMENT
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Rights Agreement, dated as of October 28, 1996, between Aksys, Ltd., a
Delaware corporation (the "Company") and First Chicago Trust Company of New
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York, a New York corporation (the "Rights Agent").
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RECITALS
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The Board of Directors of the Company has authorized and declared the
payment of a dividend of one preferred share purchase right (the "Right") for
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each share of Common Stock (as defined in Section 1) outstanding on the Record
Date (as defined in Section 1) and has authorized the issuance of one Right for
each share of Common Stock issued between the Record Date and the Distribution
Date (as defined in Section 1) and in certain cases following the Distribution
Date. Each Right represents, as of the Record Date, the right to purchase one
one-thousandth of a share of Preferred Stock (as defined in Section 1) upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth in this Agreement, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
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following terms have the meanings indicated:
(a) "Acquiring Person" means any Person who or which, together
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with all Affiliates and Associates of such Person, is (or has previously been,
at any time after the date of this Agreement, whether or not such Person(s)
continues to be) the Beneficial Owner of 15% or more of the Common Stock then
outstanding (determined without taking into account any securities exercisable
or exchangeable for, or convertible into, Common Stock, other than any such
securities beneficially owned by the Acquiring Person and Affiliates and
Associates of such Person). However, "Acquiring Person" shall not include any
Exempt Person.
A Person does not become an "Acquiring Person" solely as the result of
(i) an acquisition of Common Stock by the Company which, by reducing the number
of shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% more of the Common Stock then outstanding as
determined above, or (ii) such Person becoming the Beneficial Owner of 15% or
more of the Common Stock then outstanding as determined above solely as a result
of an Exempt Event; provided, however, that if a Person becomes the Beneficial
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Owner of 15% or more of the Common Stock then outstanding as determined above
solely by reason of such a share acquisition by the Company or the occurrence of
such an Exempt Event and such Person shall, after becoming the Beneficial Owner
of such Common Stock, become the Beneficial Owner of any additional shares of
Common Stock by any means whatsoever (other than as a result of the subsequent
occurrence of an Exempt Event, a stock dividend or a subdivision of the Common
Stock into a larger number of shares or a similar transaction), then such Person
shall be deemed to be an "Acquiring Person."
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No Person (including any Exempt Person) that would have become an
"Acquiring Person" solely on account of becoming the Beneficial Owner of
additional shares of Common Stock but would have become such inadvertently shall
become an Acquiring Person on such account if such Person divests sufficient
shares as soon as practicable so that the proportionate number of shares of
Common Stock beneficially owned by such Person is less than the level at which
such Person would otherwise have become an Acquiring Person. The determination
of whether such Person's becoming an Acquiring Person would have been
inadvertent and the determination of whether the divestment of sufficient shares
has been made as soon as practicable shall be made by a majority of the Board of
Directors of the Company.
(b) "Affiliate" of a Person has the meaning given to such term in
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Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date of this Agreement; provided that, for purposes of this
Agreement, the term "Affiliate" shall not include any Person that is an Exempt
Person.
(c) "Associate" of a Person has the meaning given to such term in
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Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in
effect on the date of this Agreement; provided that, for purposes of this
Agreement, the term "Associate" shall not include any Person that is an Exempt
Person.
(d) Except as provided below, a Person is the "Beneficial Owner"
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of, and "beneficially owns," any securities:
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(i) which such Person or any Affiliate or Associate of such
Person beneficially owns, directly or indirectly;
(ii) which such Person or any Affiliate or Associate of such
Person has, directly or indirectly, the right or obligation (whether
or not then exercisable or effective) to acquire pursuant to any
agreement, arrangement or understanding (whether or not in writing),
or upon the exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options, or otherwise;
provided, however, that a Person will not be deemed the Beneficial
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Owner of, or to beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any
Affiliate or Associate of such Person until such tendered securities
are accepted for purchase or exchange; and provided further, that
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prior to the occurrence of a Triggering Event, a Person will not be
deemed the Beneficial Owner of, or to beneficially own, securities
obtainable upon exercise of the Rights;
(iii) which such Person or any Affiliate or Associate of such
Person has, directly or indirectly, the right (whether or not then
exercisable) to vote, or to direct the voting of, pursuant to any
agreement, arrangement or understanding (whether or not in writing);
provided, however, that a Person shall not be deemed the Beneficial
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Owner of, or to beneficially own, any security pursuant to this clause
(iii) if the agreement, arrangement or understanding to vote, or to
direct the voting of, such
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security (A) arises solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the Exchange Act and applicable rules and
regulations thereunder and (B) is not also then reportable under Item
6 (or any comparable or successor item) of Schedule 13D under the
Exchange Act (or any comparable or successor schedule or report);
(iv) which such Person or any Affiliate or Associate of such
Person has "beneficial ownership" of as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act or
any successor provision; or
(v) which are beneficially owned, directly or indirectly, by
any other Person or any Affiliate or Associate of such other Person
with whom such Person or any Affiliate or Associate of such Person has
any agreement, arrangement or understanding (whether or not in
writing) for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in subparagraph (iii) of
this Section 1(d)) or disposing of any securities of the Company.
Nothing in this Section 1(d) causes a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner" of, or to "beneficially
own," any securities acquired through such Person's participation in good faith
in a firm commitment underwriting until the expiration of 40 days after the date
of such acquisition.
Notwithstanding anything in this Agreement to the contrary, for
purposes of this Agreement, no Person is to be treated as the "Beneficial Owner"
of, or to "beneficially own," any securities owned by any other Person that is
an Exempt Person.
(e) "Business Combination" has the meaning set forth in Section 13
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of this Agreement.
(f) "Business Day" means any day other than a Saturday, Sunday or
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a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
(g) "Close of Business" on any given date means 5:00 p.m., New
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York, New York time, on such date; provided, however, that if such date is not a
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Business Day it shall mean 5:00 p.m. New York, New York time, on the next
succeeding Business Day.
(h) "Common Stock" when used in any context applicable prior to a
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Business Combination means the Common Stock, par value $0.01 per share, of the
Company (as the same may be changed by reason of any combination, subdivision or
reclassification of the Common Stock). "Common Stock" when used with reference
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to any Person (other than the Company prior to a Business Combination) means
shares of capital stock of such Person (if such Person is a 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 shares or units do
not limit (as a fixed
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amount and not merely in proportional terms) the amount of dividends or income
payable or distributable on such shares or units or the amount of assets
distributable on such shares or units upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person and do not provide that
such shares or units are 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
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time there are more than one such class or series of capital stock of or equity
interests in such Person, "Common Stock" of such Person will 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.
(i) "Coral Group" shall mean, collectively, Coral Partners II,
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L.P., Coral Partners IV, L.P. and any Affiliate or Associate of any such entity.
(j) "Coral Group Base Percentage" shall mean the percentage
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determined by dividing (i) the number of shares of Common Stock of which the
Coral Group is the Beneficial Owner as of the Record Date by (ii) the number of
shares of Common Stock outstanding as of the Record Date; provided that, if
after the Record Date, (x) there is an acquisition of Common Stock by the
Company or any of its Subsidiaries or (y) the Coral Group becomes the beneficial
owner of additional securities or more of the Common Stock then outstanding
solely as a result of an Exempt Event, then appropriate and proportionate
adjustment shall be made in the Coral Group Base Percentage.
(k) "Current Market Price" per share of Common Stock, Preferred
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Stock or Equivalent Shares on any date is the average of the daily closing
prices per share of such Common Stock, Preferred Stock or Equivalent Shares for
the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date for the purpose of any computation under this
Agreement except computations made pursuant to Section 11(a)(iv), and for the
Trading Day immediately prior to such date for the purpose of any computation
under Section 11(a)(iv); provided, however, that in the event that the Current
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Market Price per share of Common Stock, Preferred Stock or Equivalent Shares is
determined during a period following the announcement by the issuer of such
Common Stock, Preferred Stock or Equivalent Shares of (i) a dividend or
distribution on such Common Stock, Preferred Stock or Equivalent Shares other
than a regular quarterly cash dividend, or (ii) any subdivision, combination or
reclassification of such Common Stock, Preferred Stock or Equivalent Shares, and
prior to the expiration of 30 Trading Days after the "ex-dividend" date for such
dividend or distribution or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "Current Market Price" must
be appropriately adjusted to take into account such dividend, distribution,
subdivision, combination or reclassification. The closing price for each Trading
Day shall be the last sale price, regular way, on such day, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange ("NYSE") or, if the Common
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Stock, Preferred Stock or Equivalent Shares are not listed or admitted to
trading on the NYSE, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal United
States national securities exchange on which the Common
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Stock, Preferred Stock or Equivalent Shares are listed or admitted to trading
or, if the Common Stock, Preferred Stock or Equivalent Shares are not listed or
admitted to trading on any United States national securities exchange, the last
quoted sale price on such day or, if not so quoted, the average of the high bid
and low asked prices in the over-the-counter market on such day, as reported in
any publication or by any service which so reports over-the-counter market
prices. If on such day the Common Stock, Preferred Stock or Equivalent Shares
are not quoted by any such organization, the average of the closing bid and
asked prices on such day as furnished by a professional market maker making a
market in the Common Stock, Preferred Stock or Equivalent Shares selected by a
majority of the Board of Directors of the Company shall be used. If no such
market maker is making a market, the fair market value of such shares on such
day as determined in good faith by a majority of the Board of Directors of the
Company or the Board of Directors of the issuer of such Common Stock, Preferred
Stock or Equivalent Shares must be used, which determination must be described
in a statement filed with the Rights Agent and is binding and conclusive for all
purposes. The term "Trading Day" means a day on which the principal United
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States national securities exchange on which the Common Stock, Preferred Stock
or Equivalent Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Stock, Preferred Stock or Equivalent
Shares are not listed or admitted to trading on any United States national
securities exchange, but are traded in the over-the-counter market, then any day
for which the high bid and low asked prices in the over-the-counter market are
reported, or if the Common Stock, Preferred Stock or Equivalent Shares are not
traded in the over-the-counter market, then a Business Day. If the Common
Stock, Preferred Stock or Equivalent Shares have not been so listed or admitted
to trading for 30 or more Trading Days or traded in the over-the-counter market
for 30 or more Trading Days, "Current Market Price" per share means the fair
market value per share as determined in good faith by a majority of the Board of
Directors of the Company, whose determination must be described in a statement
filed with the Rights Agent and will be final, binding and conclusive for all
purposes.
(l) "Distribution Date" means the earlier of (i) the day after the
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Company's right to redeem the Rights pursuant to Section 23(a)(i) expires and
(ii) the tenth Business Day after commencement or public disclosure of an
intention to commence (including, without limitation, any such commencement or
public disclosure which occurs on or after the date of this Agreement and prior
to the issuance of the Rights) a tender offer or exchange offer by a Person if,
after acquiring the maximum number of securities sought pursuant to such offer,
such Person, or any Affiliate or Associate of such Person, would be an Acquiring
Person. A majority of the Board of Directors of the Company may defer the date
set forth in clause (ii) of the preceding sentence to a specified later date or
to an unspecified later date to be determined by a subsequent action or event.
(m) "Equivalent Shares" means any class or series of capital stock
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of the Company, other than the Preferred Stock, which is entitled to participate
on a proportional basis with the Preferred Stock in dividends and other
distributions, including distributions upon the liquidation, dissolution or
winding up of the Company. In calculating the number of any class or series of
Equivalent Shares for purposes of Section 11, the number of shares, or fractions
of a share, of such class or series of capital stock that is entitled to the
same dividend or distribution as a whole share of Preferred Stock shall be
deemed to be one share.
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(n) "Exchange Act" means the Securities Exchange Act of 1934, as
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amended, and any successor statute.
(o) "Exchange Date" means the time at which the Rights are
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exchanged pursuant to Section 11(a)(iv).
(p) "Exempt Event" means with respect to any Person, the
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acquisition by such Person of Beneficial Ownership of Common Stock solely as a
result of the occurrence of a Triggering Event and the effect of such Triggering
Event on the last proviso of clause (ii) of the definition of Beneficial Owner,
other than a Triggering Event in which such Person becomes an Acquiring Person.
(q) "Exempt Person" means (i) the Company, (ii) any Subsidiary of
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the Company, (iii) any employee benefit plan of the Company or of any Subsidiary
of the Company, (iv) any Person holding Common Stock for any such employee
benefit plan or for employees of the Company or of any Subsidiary of the Company
pursuant to the terms of any such employee benefit plan, (v) any Person who,
prior to the Stock Acquisition Date with respect to such Person, is determined
in good faith by the Board of Directors of the Company to be an Exempt Person
and (vi) the Coral Group and each member thereof, provided that neither the
Coral Group nor any member thereof shall continue to be an "Exempt Person" by
virtue of this (vi) subsequent to the date on which the Coral Group and the
members thereof are the Beneficial Owners (whether or not indicated on any
report on Schedule 13D or 13G filed by any of them) in the aggregate of less
than 5% of the outstanding Common Stock (determined without taking into account
any securities exercisable or exchangeable for, or convertible into, Common
Stock other than any such securities beneficially owned by the Coral Group and
the members thereof), and provided further that neither the Coral Group nor any
member thereof shall continue to be an Exempt Person by virtue of this (vi)
after the Coral Group being, as indicated on any report on Schedule 13D or
Schedule 13G filed by the Coral Group or any member thereof, the Beneficial
Owner of a percentage of the outstanding Common Stock (determined without taking
into account any securities exercisable or exchangeable for, or convertible
into, Common Stock other than any such securities beneficially owned by any
member of the Coral Group) in excess of the sum of the Coral Group Base
Percentage plus 5%.
(s) "Expiration Date" means the Close of Business on
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October 28, 2006.
(t) "Person" means any individual, firm, corporation, partnership,
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joint venture, association, trust, unincorporated organization or other entity,
and shall include any "group" as that term is used in Rule 13d-5(b) under the
Exchange Act (or any successor provision).
(u) "Preferred Stock" means the Company's Junior Participating
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Preferred Stock, Series A, par value $1.00 per share, having the rights and
preferences set forth in the Certificate of Designation, Preferences and Rights
of Junior Participating Preferred Stock, Series A, attached hereto as Exhibit A.
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(v) "Principal Party" means (i) in the case of any Business
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Combination described in clause (i), (ii) or (iii) of the first sentence of
Section 13(a), (A) the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted or for which they are
exchanged in such Business Combination or, if there is more than one such
issuer, the issuer of the Common Stock which has the greatest aggregate market
value or (B) if no securities are so issued, the Person that survives or results
from the Business Combination or, if there is more than one such Person, the
Person the Common Stock of which has the greatest aggregate market value, and
(ii) in the case of any Business Combination described in clause (iv) of the
first sentence in Section 13(a), the Person that receives the greatest portion
of the assets or earning power transferred pursuant to such Business Combination
or, if each Person that is a party to such Business Combination 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 reasonably
be determined, whichever of such Persons is the issuer of the Common Stock which
has the greatest aggregate market value; provided, however, that in any such
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case, if the Common Stock of such Person is not at such time and has 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 one or
more other Persons, then (x) "Principal Party" refers to whichever of such other
Persons has Common Stock that is and has been continuously over the preceding
12-month period registered under Section 12 of the Exchange Act; (y) if the
Common Stocks of two or more of such other Persons are and have been so
registered, "Principal Party" refers to whichever of such other Persons is the
issuer of the Common Stock which has the greatest aggregate market value; or (z)
if the Common Stock of none of such other Persons has been so registered,
"Principal Party" refers to whichever of such other Persons (other than an
individual) is the Person which has the equity securities with the greatest
aggregate market value. In case such Person is owned, directly or indirectly, by
a joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth above apply to each of the
chains of ownership having an interest in such joint venture as if such Person
were a Subsidiary of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in Section 13 in
the same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(w) "Purchase Price" with respect to each Right is initially
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$85.00 per one one-thousandth of a share of Preferred Stock, shall be subject to
adjustment from time to time as provided in Sections 11 and 13, and shall be
payable in lawful money of the United States of America in cash or by certified
check or bank draft payable to the order of the Company.
(x) "Record Date" means the Close of Business on November 8, 1996.
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(y) "Redemption Date" means the time at which the Rights are
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scheduled to be redeemed as provided in Section 23.
(z) "Redemption Price" has the meaning given to such term in
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Section 23.
(aa) "Securities Act" means the Securities Act of 1933, as amended,
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and any successor statute.
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(bb) "Stock Acquisition Date" means the first date (including,
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without limitation, any such date which is on or after the date of this
Agreement and prior to the issuance of the Rights) of public disclosure by the
Company, an Acquiring Person or otherwise that an Acquiring Person has become
such.
(cc) "Subsidiary" has the meaning given to such term in Rule 12b-2
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of the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Agreement.
(ee) "Triggering Event" shall mean a Person becoming an Acquiring
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Person.
Section 2. Appointment of Rights Agent. The Company hereby
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appoints the Rights Agent to act as agent for the Company in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issuance of Rights Certificates.
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(a) Until the Distribution Date: (i) the Rights shall be issued in
respect of and shall be evidenced by the certificates representing the shares of
Common Stock issued and outstanding on the Record Date and shares of Common
Stock issued after the Record Date and prior to the earliest of the Distribution
Date, the Redemption Date, the Exchange Date or the Expiration Date (which
certificates for Common Stock shall be deemed to also be certificates evidencing
the Rights), and not by separate certificates; (ii) the registered holders of
such shares of Common Stock shall also be the registered holders of the Rights
associated with such shares; and (iii) the Rights shall be transferable only in
connection with the transfer of shares of Common Stock, and the surrender for
transfer of any certificate for such shares of Common Stock shall also
constitute the surrender for transfer of the Rights associated with such shares.
As soon as practicable after the Company has notified the Rights Agent of the
occurrence of the Distribution Date, the Rights Agent shall mail, by first-
class, insured, postage prepaid mail, to each record holder of the Common Stock
as of the Close of Business on the Distribution Date, as shown by the records of
the Company, at the address of such holder shown on such records, one or more
certificates evidencing the Rights ("Rights Certificates"), in substantially the
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form of Exhibit B hereto, evidencing one Right (as adjusted from time to time
pursuant to this Agreement) for each share of Common Stock so held. From and
after the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates. In the event that an adjustment in the number of Rights per share
of Common Stock has been made pursuant to Section 11(o) of this Agreement, at
the time of distribution of the Rights Certificates, the Company may make the
necessary and appropriate adjustments (in accordance with Section 14(a) of this
Agreement) so that Rights Certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights.
(b) Rights shall be issued in respect of all shares of Common
Stock which are issued or sold by the Company after the Record Date but prior to
the earliest of the Distribution Date, the Redemption Date, the Exchange Date
and the Expiration Date. In addition, in connection with the issuance or sale of
Common Stock by the Company following the Distribution Date and
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prior to the earliest of the Redemption Date, the Exchange Date and the
Expiration Date, the Company shall, with respect to Common Stock so issued or
sold pursuant to (i) the exercise of stock options issued prior to the
Distribution Date or under any employee plan or arrangement created prior to the
Distribution Date, or (ii) upon the exercise, conversion or exchange of
securities issued by the Company prior to the Distribution Date, issue Rights
and Rights Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (x) no such
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Rights and Rights 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 Rights Certificate would be issued and (y) no such Rights
and Rights Certificates shall be issued, if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
Certificates issued after the Record Date representing shares of Common Stock
outstanding on the Record Date or shares of Common Stock issued after the Record
Date but prior to the earliest of the Distribution Date, the Redemption Date,
the Exchange Date and the Expiration Date shall have impressed, printed, or
written on, or otherwise affixed to them a legend substantially in the following
form:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Aksys, Ltd.
and First Chicago Trust Company of New York, as Rights Agent, dated as
of October 28, 1996 (the "Rights Agreement"), the terms of which are
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hereby incorporated herein by reference and a copy of which is on file
at the principal executive offices of Aksys, Ltd. 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. Aksys, Ltd. 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,
Rights that were, are or become beneficially owned by Acquiring
Persons or their Associates or Affiliates (as such terms are defined
in the Rights Agreement) may become null and void and the holder of
any of such Rights (including any subsequent holder) shall not have
any right to exercise such Rights.
Section 4. Form of Rights Certificates.
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(a) The Rights Certificates (and the form of election to purchase
shares and form of assignment to be printed on the reverse thereof) shall be in
substantially the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
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 this Agreement,
the Rights 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 shares of Preferred Stock
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as shall be set forth therein at the Purchase Price set forth therein, but the
number of such securities and the Purchase Price shall be subject to adjustment
as provided in this Agreement.
(b) Notwithstanding any other provision of this Agreement, (i) any
Rights Certificate issued pursuant to this Agreement that represents Rights
beneficially owned or formerly beneficially owned, on or after the earlier of
the Distribution Date and the Stock Acquisition Date, by a Person known by the
Company to be: (A) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person; (B) a direct or indirect transferee of an Acquiring Person (or
of an Associate or Affiliate of such Acquiring Person) who becomes or becomes
entitled to be a transferee after the Acquiring Person becomes such; or (C) a
direct or indirect transferee of an Acquiring Person (or of an Associate or
Affiliate of such Acquiring Person) who becomes or becomes entitled to be a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (x) a direct or indirect transfer
(whether or not for consideration) from the Acquiring Person (or from an
Associate or Affiliate of such Acquiring Person) to holders of equity interests
in such Acquiring Person (or to holders of equity interests in an Associate or
Affiliate of such Acquiring Person) or to any Person with whom such Acquiring
Person (or an Associate or Affiliate of such Acquiring Person) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (y) a direct or indirect transfer which a majority of the Board of
Directors of the Company has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of Section
7(e) of this Agreement, or (ii) any Rights Certificate issued pursuant to this
Agreement upon transfer, exchange, replacement or adjustment of any other Rights
Certificate beneficially owned by a Person referred to in this Section 4(b),
shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby may become null and void
in the circumstances specified in Section 7(e) of the Rights
Agreement.
Section 5. Execution, Countersignature and Registration.
--------------------------------------------
(a) Each Rights Certificate shall be executed on behalf of the
Company by the Company's Chairman of the Board, Chief Executive Officer,
President, Chief Financial Officer or any Vice President, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Company's Secretary or an
Assistant Secretary, either manually or by facsimile signature. Each Rights
Certificate shall be countersigned by the Rights Agent either manually or, if
permitted by the Company, by facsimile signature and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed a Rights Certificate shall cease to be such officer of the Company
before countersignature by the Rights Agent and issuance and delivery by the
Company, such Rights Certificate nevertheless may be countersigned by the Rights
Agent and issued and delivered with
-10-
the same force and effect as though the Person who signed such Rights
Certificate had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any Person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent shall keep
or cause to be kept, at its principal corporate trust office, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced by each Rights Certificate, and the
certificate number and the date of issuance of each Rights Certificate.
Section 6. Transfer, Division, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
----------------------------------------------------------------------
(a) Subject to the provisions of Section 14, at any time after the
Close of Business on the Distribution Date and at or prior to the Close of
Business on the earliest of the Redemption Date, the Exchange Date and the
Expiration Date, any Rights Certificate or Rights Certificates may be
transferred, divided, combined or exchanged for another Rights Certificate or
Rights Certificates, entitling the registered holder to purchase a like number
of shares of Preferred Stock (or other securities, cash or other property,
following a Triggering Event or a Business Combination, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, divide, combine
or exchange any Rights Certificate shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, divided, combined or exchanged at the principal
corporate office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. As a condition to
such transfer, division, combination or exchange, the Company may require
payment by the surrendering holder of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection therewith. Neither the
Rights Agent nor the Company shall be obligated to take any action whatsoever
with respect to the transfer of any such surrendered Rights Certificate until
the registered holder shall have duly completed and executed the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
such former or proposed Beneficial Owner) thereof or such Beneficial Owner's
Affiliates or Associates as the Company shall reasonably request.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will make and deliver a new Rights Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Rights Certificate so lost, stolen, destroyed or mutilated.
-11-
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights.
------
(a) Each Right shall entitle (except as otherwise provided in this
Agreement) the registered holder thereof, upon the exercise thereof as provided
in this Agreement, to purchase, for the Purchase Price, at any time after the
Distribution Date and prior to the earliest of the Expiration Date, the Exchange
Date and the Redemption Date, one one-thousandth (1/1000) of a share of
Preferred Stock, subject to adjustment from time to time as provided in Sections
11 and 13.
(b) The registered holder of any Rights Certificate may exercise
the Rights evidenced thereby (except as otherwise provided in this Agreement) in
whole or in part (except that no fraction of a Right may be exercised) at any
time after the Distribution Date and prior to the earliest of the Expiration
Date, the Exchange Date and the Redemption Date, by surrendering the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal corporate trust office of
the Rights Agent, together with payment of the Purchase Price for each one one-
thousandth of a share of Preferred Stock (or other securities, cash or other
assets, as the case may be) as to which the Rights are exercised.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Purchase Price for each one one-thousandth of a share of
Preferred Stock (or, following a Triggering Event or a Business Combination,
other securities, cash or other assets, as the case may be) to be purchased and
an amount in cash, certified bank check or bank draft payable to the order of
the Company equal to any applicable transfer tax required to be paid by the
surrendering holder pursuant to Section 9(d), the Rights Agent shall, subject to
the provisions of this Agreement, thereupon promptly (i)(A) requisition from any
transfer agent for the Preferred Stock (or make available, if the Rights Agent
is the transfer agent for such shares) certificates for the total number of one
one-thousandths of a share of Preferred Stock (or other securities, as the case
may be) to be purchased (and the Company hereby irrevocably authorizes its
transfer agent to comply with all such requests), or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock (or other
securities, as the case may be) issuable upon exercise of the Rights with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-thousandths of a share of Preferred Stock
(or other securities, as the case may be) as are to be purchased (in which case
certificates for the Preferred Stock (or other securities, as the case may be)
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company shall direct the depositary agent to comply
with such request; (ii) 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 Rights Certificate, registered in such name or names as may be
designated by such holder; and (iii) if appropriate, requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14 of this Agreement and, promptly after receipt
thereof, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate. In the event that the Company is obligated
to issue other securities (including shares of Common Stock) of the Company, pay
cash and/or distribute other property pursuant to this Agreement, the Company
will make all arrangements necessary so that such other
-12-
securities, cash and/or other property are available for distribution by the
Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Rights
Certificate or to his duly authorized assigns, subject to the provisions of
Section 6 and Section 14.
(e) Notwithstanding anything in this Agreement to the contrary,
any Rights that are or were formerly beneficially owned on or after the earlier
of the Distribution Date or the Stock Acquisition Date by (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a direct or
indirect transferee of an Acquiring Person (or of an Associate or Affiliate of
such Acquiring Person) who becomes or becomes entitled to be a transferee after
the Acquiring Person becomes such, or (iii) a direct or indirect transferee of
an Acquiring Person (or of an Associate or Affiliate of such Acquiring Person)
who becomes or becomes entitled to be a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a direct or indirect transfer (whether or not for consideration) from the
Acquiring Person (or from an Associate or Affiliate of such Acquiring Person) to
holders of equity interests in such Acquiring Person (or to holders of equity
interests in any Associate or Affiliate of such Acquiring Person) or to any
Person with whom the Acquiring Person (or an Associate or Affiliate of such
Acquiring Person) has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a direct or indirect transfer which a
majority of the Board of Directors of the Company determines is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall, immediately upon the occurrence of a
Triggering Event and without any further action, be null and void and no holder
of such Rights shall have any rights whatsoever with respect to such Rights
whether under this Agreement or otherwise, provided, however, that, in the case
of transferees under clause (ii) or clause (iii) above, any Rights beneficially
owned by such transferee shall be null and void only if and to the extent such
Rights were formerly beneficially owned by a Person who was, at the time such
Person beneficially owned such Rights, or who later became, an Acquiring Person
or an Affiliate or Associate of such Acquiring Person. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) are complied with, but shall have no liability to any holder of a
Rights Certificate or to any other Person as a result of the Company's failure
to make, or any delay in making (including any such failure or delay by the
Board of Directors of the Company) any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to the registered holder of a Rights Certificate 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 Rights
Certificate surrendered for such exercise and (ii) provided such additional
evidence of the identity of the Beneficial Owner
-13-
(or former or proposed Beneficial Owner) thereof or the Affiliates or Associates
of such Beneficial Owner (or former or proposed Beneficial Owner) as the Company
shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates.
---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer,
division, combination or exchange shall, if surrendered to the Company or to any
of its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by the provisions of this Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Rights Certificates to the Company, or shall, at the written
request of the Company, destroy such canceled Rights Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Stock.
-----------------------------------------------
(a) The Company covenants and agrees that it will cause to be
reserved and kept available at all times out of its authorized and unissued
shares of Preferred Stock or its authorized and issued shares of Preferred Stock
held in its treasury (and, following the occurrence of a Triggering Event, out
of its authorized and unissued shares of Common Stock and/or other securities or
out of its authorized and issued shares of Common Stock and/or other securities
held in its treasury) free from preemptive rights or any right of first refusal,
a sufficient number of shares of Preferred Stock (and, following the occurrence
of a Triggering Event, shares of Common Stock and/or other securities) to permit
the exercise in full of all Rights from time to time outstanding.
(b) The Company further covenants and agrees, so long as the
Preferred Stock (and, following the occurrence of a Triggering Event, shares of
Common Stock and/or other securities) issuable upon the exercise of Rights may
be listed on any United States national securities exchange, to use its best
efforts to cause, from and after the time that the Rights become exercisable,
all such shares and/or other securities reserved for such issuance to be listed
on such exchange upon official notice of issuance upon such exercise.
(c) The Company further covenants and agrees that it will take all
such action as may be necessary to ensure that all shares of Preferred Stock
(and, following the occurrence of a Triggering Event or a Business Combination,
shares of Common Stock and/or other securities) delivered upon the exercise of
Rights shall, at the time of delivery of the certificates for such shares and/or
such other securities (subject to payment of the Purchase Price), be duly and
validly authorized and issued, fully paid, nonassessable, freely tradeable, not
subject to liens or encumbrances, and free of preemptive rights, rights of first
refusal or any other restrictions or limitations on the transfer or ownership
thereof, of any kind or nature whatsoever.
(d) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of
-14-
the original issuance or delivery of the Rights Certificates or of any
certificates for shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of Rights. The Company shall
not, however, be required to (i) pay any transfer tax which may be payable in
respect of any transfer involved in the issuance or delivery of any Rights
Certificates or the issuance or delivery of any certificates for shares of
Preferred Stock (or Common Stock and/or other securities as the case may be) to
a Person other than, or in a name other than that of, the registered holder of
the Rights Certificate evidencing Rights surrendered for exercise or (ii)
transfer or deliver any Rights Certificate or issue or deliver any certificates
for shares of Preferred Stock (or Common Stock and/or other securities as the
case may be) upon the exercise of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
(e) The Company shall use its best efforts (i) as soon as
practicable following a Triggering Event (provided the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) of this Agreement), or as soon as is required
by law following the Distribution Date, as the case may be, to prepare and file
a registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) to cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the earlier of (A) the date as of which Rights are no longer exercisable
for such securities and (B) the Expiration Date. The Company shall also use its
best efforts to take such action as may be necessary or appropriate under, or to
ensure compliance with, the securities or "blue sky" laws of the various states
in connection with the exercise of the Rights. The Company may temporarily
suspend, for a period of time not to exceed 90 days after the date of a
Triggering Event described in clause (i) of the first sentence of this paragraph
of Section 9, the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall make a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
has been declared effective.
Section 10. Preferred Stock Record Date. Each Person in whose name
---------------------------
any certificate for shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the Preferred
Stock (or Common Stock and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Purchase Price (and any applicable transfer taxes) was made; provided, however,
-------- -------
that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (and/or such other securities, as the
case may be) on, and such certificate shall
-15-
be dated, the next succeeding Business Day on which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are open.
Section 11. Adjustments to Purchase Price, Number of Shares or
--------------------------------------------------
Number of Rights. The Purchase Price, the number and kind of securities, cash
----------------
and other property obtainable upon exercise of each Right and the number of
Rights outstanding shall be subject to adjustment from time to time as provided
in this Section 11.
(a) (i) In the event the Company shall at any time on or after
the date of this Agreement (A) pay a dividend or make a distribution on the
Preferred Stock payable in shares of Preferred Stock, (B) subdivide (by a stock
split or otherwise) the outstanding Preferred Stock into a larger number of
shares (C) combine (by a reverse stock split or otherwise) the outstanding
Preferred Stock into a smaller number of shares or (D) issue any securities in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the surviving
corporation), then in each such event the Purchase Price and the Redemption
Price set forth in Section 23, as each is in effect at the time of the record
date for such dividend or distribution, or of the effective date of such
subdivision, combination or reclassification, shall be proportionately adjusted
by multiplying the Purchase Price and such Redemption Price by a fraction the
numerator of which shall be the total number of shares of Preferred Stock
outstanding immediately prior to the occurrence of such event and the
denominator of which shall be the total number of shares of Preferred Stock
outstanding immediately following the occurrence of such event. If an event
occurs which would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).
(ii) Upon the first occurrence of a Triggering Event, proper
provision shall be made so that each holder of a Right, except as otherwise
provided in this Agreement, shall thereafter have the right to receive, and the
Company shall issue, upon exercise thereof at the then-current Purchase Price
required to be paid in order to exercise a Right in accordance with the terms of
this Agreement, in lieu of the number of one one-thousandths of a share of
Preferred Stock or other securities receivable upon exercise of a Right prior to
the occurrence of the Triggering Event, such number of shares of Common Stock of
the Company as shall equal the result obtained by (x) multiplying the then-
current Purchase Price by the number of one-thousandths of a share of Preferred
Stock or other securities for which a Right was then exercisable (without giving
effect to such Triggering Event) and (y) dividing that product by 50% of the
Current Market Price per share of Common Stock on the date of the occurrence of
the Triggering Event (such number of shares being referred to as the "Adjustment
Shares"); provided, however, that if the transaction or event that would
-------- -------
otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 of this Agreement, then only the provisions of Section
13 of this Agreement shall apply and no adjustment shall be made pursuant to
this Section 11(a)(ii). Upon the occurrence of such Triggering Event, the
Purchase Price required to be paid in order to exercise a Right shall be
unchanged, and the Purchase Price shall be appropriately adjusted to reflect,
and shall thereafter mean, the amount required to be paid per share of Common
Stock upon exercise of a Right.
-16-
(iii) In lieu of issuing shares of Common Stock in accordance with
Section 11(a)(ii), the Company may, if a majority of the Board of Directors of
the Company determine that such action is necessary or appropriate and not
contrary to the interests of holders of Rights (and, in the event that the
number of shares of Common Stock which are authorized by the Company's
certificate of incorporation, but which are not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights, are not sufficient
to permit the exercise in full of the Rights in accordance with Section
11(a)(ii), the Company shall) take one or more of the following actions: (A)
reduce the Purchase Price required to be paid in order to exercise a Right by
any amount (the "Reduction Amount"), in which event the number of Adjustment
----------------
Shares and/or the amount of any Substitute Consideration (as hereinafter
defined) issuable in respect of each Right (the Adjustment Shares, if any, and
the Substitute Consideration, if any, issuable in respect of a Right are herein
collectively referred to as the "Total Consideration") shall be reduced so that
-------------------
the aggregate value of the Total Consideration issuable in respect of each Right
is equal to the Current Value (as hereinafter defined) less the Reduction Amount
(herein the "Adjusted Current Value"), and/or (B) make adequate provision with
----------------------
respect to each Right to substitute for all or part of the Adjustment Shares
otherwise obtainable upon exercise of a Right: (1) cash, (2) other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock which a majority of the Board of Directors of the
Company have determined to have the same value as shares of Common Stock (such
shares or units of preferred stock being referred to as "Common Stock
------------
Equivalents")), (3) debt securities of the Company, (4) other assets, or (5) any
-----------
combination of the foregoing (collectively, "Substitute Consideration"), having
------------------------
an aggregate value which, when added to the value of the Adjustment Shares (if
any) in respect of which no substitution is being made, is equal to the Adjusted
Current Value. If a majority of the Board of Directors of the Company determine
to issue or deliver any equity securities (other than Common Stock or Common
Stock Equivalents), debt securities and/or other assets pursuant to this Section
11(a)(iii), the value of such securities and/or assets shall be determined by a
majority of the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by a majority of the
Board of Directors of the Company. If the Company is required to make adequate
provision to deliver value pursuant to the first sentence of this Section
11(a)(iii) and the Company shall not have made such adequate provision to
deliver value within ninety (90) days following the first occurrence of a
Triggering Event (the "Substitution Period"), then notwithstanding any provision
-------------------
of Section 11(a)(ii) or this Section 11(a)(iii) to the contrary, the Company
shall be obligated to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares of Common Stock (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the excess of the Current Value over the Purchase
Price. If both Common Stock and cash are to be delivered pursuant to the
preceding sentence, amounts of both Common Stock and cash shall be delivered
upon surrender of each Right in a ratio of Common Stock to cash that bears the
same ratio as the total value of all Common Stock to be delivered (as determined
pursuant to this Section 11(a)(iii)) bears to the total value of all cash to be
delivered; provided, however, that the Company may adjust such ratio to avoid
-------- -------
issuing any fractional shares of Common Stock so long as the method of
adjustment is applied consistently to each holder of Rights entitled to receive
value thereon pursuant to this Section 11(a)(iii). To the extent that the
Company determines that some action is to be taken pursuant to the first and/or
third sentences of this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 7(e) hereof, that such action
-17-
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights but in no event to a time later than the expiration
of the Substitution Period. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. Upon any change in the Adjustment Shares
obtainable upon exercise of a Right pursuant to this Section 11(a)(iii), the
Purchase Price shall thereafter mean the amount, if any, required to be paid
upon exercise of a Right for the Adjustment Shares, if any, and the Substitute
Consideration, if any, then issuable or deliverable upon exercise of a Right,
and a majority of the Board of Directors of the Company shall make any necessary
provisions to ensure that the provisions of Section 11(e) shall thereafter apply
as appropriate to the Total Consideration. For purposes of this Section
11(a)(iii), (A) "Current Value" shall be the product derived by multiplying
-------------
(x) the number of Adjustment Shares issuable in respect of each Right determined
under Section 11(a)(ii), by (y) the Current Market Price per share of Common
Stock on the date of the Triggering Event, and (B) the value of each share of
Common Stock and each share or unit of any "Common Stock Equivalent" shall be
-----------------------
deemed conclusively to be equal to the Current Market Price per share of the
Common Stock on the date of the Triggering Event.
(iv) A majority of the Board of Directors of the Company may, at
their option, at any time and from time to time after the first occurrence of a
Triggering Event, cause the Company to exchange, for all or part of the then-
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 7(e) hereof), shares of
Common Stock or Common Stock Equivalents at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of this Agreement (such
exchange ratio being hereinafter referred to as the "Exchange Ratio"). Any
--------------
partial exchange shall be effected on a pro rata basis based on the number of
Rights (other than Rights which have become void pursuant to the provisions of
Section 7(e) hereof) held by each holder of Rights.
Immediately upon the action of a majority of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to this Section
11(a)(iv) and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock and/or
Common Stock Equivalents equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange and in addition, the Company shall promptly mail a notice
of any such exchange to all of the holders of such Rights in accordance with
Section 25 of this Agreement; provided, however, that the failure to give, any
-------- -------
delay in giving or any defect in, such notice shall not affect the validity of
such exchange. Each such notice of exchange will state the method by which the
exchange of the Common Stock or Common Stock Equivalents for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. In the event that the number of shares of Common Stock
which is authorized but not outstanding or reserved for issuance for a purpose
other than exercise of the Rights is not sufficient to permit any exchange of
Rights as contemplated in accordance with this Section 11(a)(iv), the Board of
Directors of the Company shall take all such action within its power as may be
necessary to authorize additional shares of Common
-18-
Stock for issuance upon exchange of the Rights. The Company shall not be
required to issue fractions of shares of Common Stock or Common Stock
Equivalents or to distribute certificates which evidence fractional shares of
Common Stock or Common Stock Equivalents. In lieu of such fractional shares of
Common Stock or Common Stock Equivalents, the Company shall pay to the
registered holders of the Rights Certificates with regard to which such
fractional shares of Common Stock or Common Stock Equivalents would otherwise be
issuable an amount in cash equal to the product derived by multiplying (x) the
subject fraction, by (y) the last sale price of the Company's Common Stock on
the fifth Trading Day following the public announcement of the exchange by the
Company, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices on such day, in either case on a when issued basis
(taking into account the exchange), as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the Nasdaq (or, if the Company's Common Stock is not so listed or
traded, then as determined in the manner provided under the definition of
"Current Market Price," adjusted to take into account the exchange). For the
purposes of this Section 11(a)(iv) the value of any Common Stock Equivalent on
any date shall be the same as the value of the Common Stock, as determined
pursuant to the previous sentence, on such date.
(b) If the Company shall at any time on or after the date of this
Agreement fix a record date for the issuance of rights, options or warrants to
holders of Preferred Stock entitling them to subscribe for or purchase Preferred
Stock or Equivalent Shares (or securities convertible into Preferred Stock or
Equivalent Shares) at a price per share of Preferred Stock or Equivalent Shares
(or, in the case of a convertible security, having a conversion price per share
of Preferred Stock or Equivalent Shares) less than the Current Market Price per
share of Preferred Stock on such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock and Equivalent Shares (if
any) outstanding on such record date, plus the number of shares of Preferred
Stock or Equivalent Shares, as the case may be, which the aggregate exercise
and/or conversion price for the total number of shares of Preferred Stock or
Equivalent Shares, as the case may be, which are obtainable upon exercise and/or
conversion of such rights, options, warrants or convertible securities would
purchase at such Current Market Price, and the denominator of which shall be the
number of shares of Preferred Stock and Equivalent Shares (if any) outstanding
on such record date, plus the number of additional shares of Preferred Stock or
Equivalent Shares, as the case may be, which may be obtained upon exercise
and/or conversion of such rights, options, warrants or convertible securities.
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 a majority of 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. Preferred Stock and
Equivalent Shares owned by or held for the account of the Company or any
Subsidiary of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such rights, options or warrants are
not issued following such adjustment, the Purchase Price shall be readjusted to
be the Purchase Price which would have been in effect if such record date had
not been fixed.
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(c) In case the Company shall at any time after the date of this
Agreement fix a record date for the making of a distribution to holders of
Preferred Stock (including any such distribution made in connection with a
reclassification of the Preferred Stock or a consolidation or merger in which
the Company is the surviving corporation) of securities (other than Preferred
Stock and rights, options or warrants referred to in Section 11(b)), cash (other
than a regular periodic cash dividend at an annual rate not in excess of: (x)
125% of the annual rate of the regular cash dividend paid on the Preferred Stock
during the immediately preceding fiscal year (or, if the Preferred Stock was not
outstanding during such preceding fiscal year, then 125% of the annual rate of
the regular cash dividend paid on the Common Stock during such year), or (y) in
the event that a regular cash dividend was not paid on the Preferred Stock (or
Common Stock) during such preceding fiscal year, 5% of the Current Market Value
of the Preferred Stock on the date such regular cash dividend was first
declared), property, evidences of indebtedness or assets, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price per share of Preferred
Stock on such record date, less the fair market value (as determined in good
faith by a majority of the Board of Directors of the Company whose determination
shall be described in a statement filed with the Rights Agent) of such
securities, cash, property, evidences of indebtedness or assets to be so
distributed in respect of one share of Preferred Stock, and the denominator of
which shall be such Current Market Price per share of Preferred Stock on such
record date. Such adjustments shall be made successively whenever such a record
date is fixed; and in the event that such distribution is not made following
such adjustment, the Purchase Price shall be readjusted to be the Purchase Price
which would have been in effect if such record date had not been fixed.
(d) Except as provided below, no adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price; provided, however, that any adjustments
-------- -------
which by reason of this Section 11(d) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the nearest cent, to the
nearest ten-thousandth of a share of Common Stock, or to the nearest ten-
millionth of a share of Preferred Stock, as the case may be. Notwithstanding
the first sentence of this Section 11(d), any adjustment required by this
Section 11 shall be made no later than the earlier of (i) three years from the
date of the transaction which requires such adjustment or (ii) the Expiration
Date.
(e) If, as a result of an adjustment made pursuant to Section
11(a) or Section 13(a) of this Agreement, the holder of any Right thereafter
exercised shall become entitled to receive any securities of the Company other
than shares of Preferred Stock, thereafter the Purchase Price and the number of
such other 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 with respect to the shares of Preferred Stock
contained in this Section 11 and the provisions of Sections 7, 9, 10, 12, 13, 14
and 24 with respect to the shares of Preferred Stock shall apply on like terms
to any such other securities.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase
-20-
Price, the number of shares of Preferred Stock or other securities, cash or
other property purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided in this Agreement.
(g) Unless the Company shall have exercised its election as
provided in Section 11(h), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(a)(i), 11(b) and 11(c), each
Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest one ten-millionth of a share of Preferred Stock) obtained by (i)
multiplying the number of one one-thousandths of a share of Preferred Stock
covered by a Right immediately prior to adjustment pursuant to this Section
11(g) by the Purchase Price in effect immediately prior to such adjustment of
the Purchase Price and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(h) The Company may elect, on or after the date of any adjustment
of the Purchase Price or any adjustment to the number of shares of Preferred
Stock for which a Right may be exercised, to adjust the number of Rights, in
lieu of an adjustment in the number of one one-thousandths of a share of
Preferred Stock purchasable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one one-thousandths of a share of Preferred Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right
outstanding prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one hundred-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to such adjustment by
the Purchase Price in effect immediately after such adjustment. The Company
shall make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least 10 days after the date of the
public announcement. If Rights Certificates have been issued, upon each
adjustment of the number of Rights pursuant to this Section 11(h) the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates on such record date a new Rights Certificate evidencing,
subject to Section 14, the additional Rights to which such holders shall be
entitled as a result of such adjustment, or, at the option of the Company, shall
cause to be distributed to such holders of record, in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment and upon surrender thereof (if required by the Company), new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for in this
Agreement (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price
or the number or kind of shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per one one-thousandth of a share of
-21-
Preferred Stock and the number of shares of Preferred Stock which were expressed
in the initial Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of one one-
thousandth of a share of Preferred Stock issuable upon exercise of the Rights,
the Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable one one-thousandth shares of such Preferred Stock
at such adjusted Purchase Price.
(k) In any case in which this Section 11 shall require 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 the shares of Preferred
Stock and other securities, cash or property of the Company, if any, issuable
upon such exercise over and above the shares of Preferred Stock and other
securities, cash or property of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due ▇▇▇▇ or other
-------
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or other securities, cash or property upon the
occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any combination or subdivision of the Preferred Stock, issuance
wholly for cash of any Preferred Stock at less than the Current Market Price,
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exchangeable or exercisable for Preferred Stock, stock
dividends or issuance of rights, options or warrants referred to in this Section
11, hereafter made by the Company to holders of its Preferred Stock, shall not
be taxable to such stockholders.
(m) The Company covenants and agrees that it shall not
(i) consolidate with, (ii) merge with or into or (iii) directly or indirectly
sell, lease, or otherwise transfer or dispose of (in one transaction or a series
of related transactions) assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries taken as a
whole, to any other Person if (A) at the time of or immediately after such
consolidation, merger, sale, lease, transfer or disposition there are any
rights, warrants, securities or other instruments outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights, (B) prior to, simultaneously with or
immediately after such consolidation, merger, sale, lease, transfer or
disposition the stockholders (or equity holders) of the Person who constitutes,
or would constitute, the Principal Party in such transaction shall have received
a distribution of Rights previously owned by such Person or any of its
Affiliates or Associates or (C) the form or nature of organization of the
Principal Party would preclude or limit the exercisability of the Rights. The
Company shall not consummate any such consolidation,
-22-
merger, sale, lease, transfer or disposition unless prior thereto the Company
and such other Person shall have executed and delivered to the Rights Agent a
supplemental agreement evidencing compliance with this Section 11(m).
(n) The Company covenants and agrees that, after the Stock
Acquisition Date it will not, except as permitted by Section 11(a)(iv), 26 or
29(b) of this Agreement, take (or permit any Subsidiary to take) any action if
at the time such action is taken it is reasonably foreseeable that such action
will, directly or indirectly, diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(o) Anything in this Agreement to the contrary notwithstanding, if
the Company shall at any time prior to the Distribution Date (i) pay a dividend
or distribution on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then the number of
Rights associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date, and the Purchase Price
under, and the number of one one-thousandths of a share of Preferred Stock
issuable in respect of, the Rights, shall be proportionately adjusted, so that
following such event one Right (with the Purchase Price and the number of one
one-thousandths of a share proportionately adjusted thereunder) shall thereafter
be associated with each share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date. For example, if the
Company effects a two-for-one stock split at a time when each Right (if it
becomes exercisable) would entitle the holder to purchase one one-thousandth of
a share of Preferred Stock for a Purchase Price of $"Z", then following such
stock split each previous Right would be split into two current Rights and
thereafter each current Right, upon becoming exercisable, would (subject to
further adjustment) entitle the holder to purchase one two-thousandth of a share
of Preferred Stock at a Purchase Price of 1/2 x $"Z".
Section 12. Certification of Adjustments. Whenever an adjustment
----------------------------
is made as provided in Sections 11 and 13, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief statement of the
facts accounting for such adjustment, (b) promptly file with the Rights Agent
and with each transfer agent for the Preferred Stock a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Rights Certificate (or,
if no Rights Certificates have been issued, to each holder of a certificate
representing shares of Common Stock) 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. Any adjustment to be made pursuant to Sections
11 and 13 of this Agreement shall be effective as of the date of the event
giving rise to such adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power.
-------------
(a) A "Business Combination" shall be deemed to occur in the event
that, in or following a Triggering Event, (i) the Company shall, directly or
indirectly, consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(m) and Section 11(n) of this Agreement) in a transaction in which the
-23-
Company is not the continuing, resulting or surviving corporation of such merger
or consolidation, (ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(m) and Section 11(n) of this
Agreement) shall, directly or indirectly, consolidate with the Company, or shall
merge with and into the Company, in a transaction in which the Company is the
continuing, resulting or surviving corporation of such merger or consolidation
and, in connection with such merger or consolidation, all or part of the Common
Stock shall be changed (including, without limitation, any conversion into or
exchange for securities of the Company or of any other Person, cash or any other
property), (iii) the Company shall, directly or indirectly, effect a share
exchange in which all or part of the Common Stock shall be changed (including,
without limitation, any conversion into or exchange for securities of any other
Person, cash or any other property) or (iv) the Company shall, directly or
indirectly, sell, lease, exchange, mortgage, pledge or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall directly or indirectly
sell, lease, exchange, mortgage, pledge or otherwise transfer or dispose of), in
one transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person (other than the Company or
any of its Subsidiaries in one or more transactions each and all of which comply
with Section 11(m) and Section 11(n) of this Agreement).
In the event of a Business Combination, proper provision shall be made
so that each holder of a Right (except as otherwise provided in this Agreement)
shall thereafter have the right to receive, upon the exercise thereof at the
Purchase Price immediately prior to the first occurrence of a Triggering Event
multiplied by the number of one one-thousandths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of a
Triggering Event (without giving effect to the Triggering Event) in accordance
with the terms of this Agreement, such number of shares of Common Stock of the
Principal Party as shall be equal to the result obtained by (x) multiplying the
Purchase Price immediately prior to the first occurrence of a Triggering Event
by the number of one one-thousandths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Triggering
Event (without giving effect to the Triggering Event), and (y) dividing that
product by 50% of the Current Market Price per share of the Common Stock of such
Principal Party immediately prior to the consummation of such Business
Combination. All shares of Common Stock of any Person for which any Right may
be exercised after consummation of a Business Combination as provided in this
Section 13(a) shall, when issued upon exercise thereof in accordance with this
Agreement, be duly and validly authorized and issued, fully paid, nonassessable,
freely tradeable, not subject to liens or encumbrances, and free of preemptive
rights, rights of first refusal or any other restrictions or limitations on the
transfer or ownership thereof of any kind or nature whatsoever.
(b) After consummation of any Business Combination, (i) the
Principal Party shall be liable for, and shall assume, by virtue of such
Business Combination and without the necessity of any further act, all the
obligations and duties of the Company pursuant to this Agreement, (ii) the term
"Company" as used in this Agreement shall thereafter be deemed to refer to such
Principal Party and (iii) such Principal Party shall take all steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common Stock in accordance with Section 9) in connection with such Business
Combination as necessary to ensure that the provisions
-24-
of this Agreement shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights.
(c) The Company shall not consummate any Business Combination
unless prior thereto (i) the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance (other than shares reserved for issuance pursuant to this Agreement to
the holders of Rights) to permit the exercise in full of the Rights in
accordance with this Section 13, (ii) the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the fulfillment of the Principal Party's obligations and the terms
as set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable on or after the date of such Business Combination,
the Principal Party, at its own expense, shall (A) prepare and file, if
necessary, a registration statement on an appropriate form under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights, (B) use its best efforts to cause such registration statement to
become effective as soon as practicable after such filing and remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the Expiration Date, (C) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act, (D) use its best efforts to qualify or
register the Rights and the securities purchasable upon exercise of the Rights
under the state securities or "blue sky" laws of such jurisdictions as may be
necessary or appropriate, (E) use its best efforts to list the Rights and the
securities purchasable upon exercise of the Rights on a United States national
securities exchange and (F) obtain waivers of any rights of first refusal or
preemptive rights in respect of the Common Stock of the Principal Party subject
to purchase upon exercise of outstanding Rights, (iii) the Company and the
Principal Party shall have furnished to the Rights Agent an opinion of
independent counsel stating that such supplemental agreement is a legal, valid
and binding agreement of the Principal Party enforceable against the Principal
Party in accordance with its terms, and (iv) the Company and the Principal Party
shall have filed with the Rights Agent a certificate of a nationally recognized
firm of independent accountants setting forth the number of shares of Common
Stock of such issuer which may be purchased upon the exercise of each Right
after the consummation of such Business Combination.
(d) The provisions of this Section 13 shall similarly apply to
successive Business Combinations. In the event a Business Combination shall be
consummated at any time after the occurrence of a Triggering Event, the Rights
which have not theretofore been exercised shall thereafter be exercisable for
the consideration and in the manner described in Section 13(a). Following a
Business Combination, the provisions of Section 11(a)(ii) of this Agreement
shall be of no effect.
(e) Notwithstanding any other provision of this Agreement, no
adjustment to the number of shares of Preferred Stock (or fractions of a share)
or other securities, cash or other property for which a Right is exercisable or
the number of Rights outstanding or associated with each share of Common Stock
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
-25-
have had absent such adjustment, including, without limitation, the benefits
under Sections 11 and 13, unless the terms of this Agreement are amended so as
to preserve such benefits.
(f) The Company covenants and agrees that it shall not effect any
Business Combination if at the time of, or immediately after such Business
Combination, there are any rights, options, warrants or other instruments
outstanding which would diminish or otherwise eliminate the benefits intended to
be afforded by the Rights.
(g) Without limiting the generality of this Section 13, in the
event the nature of the organization of any Principal Party shall preclude or
limit the acquisition of Common Stock of such Principal Party upon exercise of
the Rights as required by Section 13(a) as a result of a Business Combination,
it shall be a condition to such Business Combination that such Principal Party
shall take such steps (including, but not limited to, a reorganization) as may
be necessary to ensure that the benefits intended to be derived under this
Section 13 upon the exercise of the Rights are assured to the holders thereof.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractional Rights
or to distribute Rights Certificates which evidence fractional Rights. In lieu
of such fractional Rights, the Company may at its option pay to the registered
holders of the Rights Certificates with respect to which such fractional Rights
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of a Right
for the Trading Day immediately prior to the date on which such fractional
Rights otherwise would have been issuable. The closing price for any Trading Day
shall be the last sale price on such day, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, on such day, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the Nasdaq or, if the Rights are not listed or admitted
to trading on the Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal United
States national securities exchange on which the Rights are listed or admitted
to trading or, if the Rights are not listed or admitted to trading on any United
States national securities exchange, the last quoted sale price on such day or,
if not so quoted, the average of the high bid and low asked prices on such day
in the over-the-counter market as reported in any publication or by any service
which so reports over-the-counter market prices or, if on such day the Rights
are not quoted by any such system, the average of the closing bid and asked
prices on such day as furnished by a professional market maker making a market
in the Rights selected by a majority of the Board of Directors of the Company.
If on such day no such market maker is making a market in the Rights, the
current market value of the Rights on such day shall be determined in good faith
by a majority of the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding and conclusive for all purposes.
-26-
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred 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 of Preferred Stock). Fractions of shares of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock. In lieu of fractional
shares of Preferred Stock that are not integral multiples of one one-thousandth
of a share of Preferred Stock, the Company may at its option (i) issue scrip or
warrants in registered form (either represented by a certificate or
uncertificated) or in bearer form (represented by a certificate) which shall
entitle the holder to receive a full one one-thousandth of a share of Preferred
Stock upon the surrender of such scrip or warrants aggregating a full one one-
thousandth of a share of Preferred Stock, or (ii) pay to the registered holders
of Rights Certificates at the time such Rights Certificates are exercised as
provided in this Agreement an amount in cash equal to the same fraction of the
current market value of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of a share of Preferred Stock shall be the
closing price of a share of Preferred Stock (as determined pursuant to the
second sentence of the definition of "Current Market Price" in Section 1) for
the Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of shares
of Common Stock or Common Stock Equivalents or to distribute certificates which
evidence fractional shares of Common Stock or Common Stock Equivalents. In lieu
of such fractional shares of Common Stock or Common Stock Equivalents, the
Company shall pay to the registered holders of the Rights Certificates with
regard to which such fractional shares of Common Stock or Common Stock
Equivalents would otherwise be issuable an amount in cash equal to the product
derived by multiplying (x) the subject fraction, by (y) Current Market Price of
the Company's Common Stock.
(d) The holder of a Right by his acceptance thereof expressly
waives any right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as otherwise provided in this Agreement).
Section 15. Rights of Action. Except as otherwise provided, all
----------------
rights of action in respect of this Agreement are vested in the respective
registered holders of the Rights Certificates (and, prior to the Distribution
Date, any registered holders of associated Common Stock); and any registered
holder of any Rights Certificate (or, prior to the Distribution Date, any share
of associated Common Stock), without the consent of the Rights Agent or of the
holder of any other Right, may, on 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 rights pursuant to
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
-27-
under, and injunctive relief against actual or threatened violations of, the
obligations of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders Concerning Transfer and
---------------------------------------------------
Ownership of Rights. 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 Common Stock;
(b) after the Distribution Date, the Rights Certificates will be
transferable on the registry books of the Rights Agent only if surrendered at
the principal corporate trust office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person
in whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificate or the associated Common Stock certificate
made by anyone other than the Company, the transfer agent for the Common Stock
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.
Section 17. Rights Holder Not Deemed a Stockholder. No holder, as
--------------------------------------
such, of any Rights Certificate shall be entitled to vote or to receive
dividends or distributions or shall be deemed for any purpose the holder of
Preferred Stock or any other securities, cash or other property which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained in this Agreement or in any Rights Certificate be construed
to confer upon the holder of any Rights Certificate, as such, any of the rights
of a stockholder of the Company, including, without limitation, any right (i) to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, (ii) to give or withhold consent to any corporate
action, (iii) to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24), (iv) to receive dividends,
distributions or subscription rights, (v) to institute, as a holder of Preferred
Stock or other securities issuable on exercise of the Rights represented by any
Rights Certificate, any derivative action on behalf of the Company, or
otherwise, until and only to the extent that the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions of this Agreement.
Section 18. Concerning the Rights Agent. 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, willful misconduct or breach of this Agreement on the
part of the Rights Agent, for anything done
-28-
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 in the premises.
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 Rights Certificate or
certificate for Preferred Stock or Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document reasonably believed by it to be genuine and to be signed,
executed and, when necessary, verified or acknowledged, by the proper Person or
Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. Any corporation into which the Rights Agent or any successor Rights
-----
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any document 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 21. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Agreement any of the Rights Certificates shall have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificate so countersigned;
and in case at that time any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Rights
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 Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes
----------------------
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 shall be full
and complete authorization and
-29-
protection to the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or the determination of Current
Market Price) 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 specifically prescribed in this Agreement) may be deemed to
be conclusively proved and established by a certificate signed by the Chairman
of the Board, the Chief Executive Officer, the President, the Chief Financial
Officer, any Vice President or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for the
negligence, bad faith, willful misconduct or breach of this Agreement by it or
its attorneys or agent.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution and delivery of this Agreement by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Rights Certificate; nor shall it be responsible for any change or
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13 or 23 or the ascertaining of the
existence of facts that would require any such change or adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after actual
notice of any change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Preferred Stock, Common Stock or
other securities to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Preferred Stock, Common Stock or
other securities will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performance by the Rights
Agent of the provisions of this Agreement.
-30-
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer, any Vice President or the Secretary of the Company, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.
(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 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 the Rights Agent were not
serving as such under this Agreement. Nothing in this Agreement 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.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon 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 Stock or Preferred Stock
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. Notwithstanding any other provision of this Agreement, in no
event shall the resignation or removal of a Rights Agent be effective until a
successor Rights Agent shall have been appointed and have accepted such
appointment. If the Company shall fail 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
any holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the incumbent Rights
Agent or the registered holder of any Rights Certificate may apply to any court
of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York (or of any other state of the United States
so long as such corporation is authorized to conduct a corporate trust or stock
transfer business in the State of New York) in good standing, which is
authorized under such laws to exercise
-31-
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 $50,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
such 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 Stock or Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding
-----------------------------------
any of the provisions of this Agreement or of the Rights Certificates to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing new Rights in such form as may be approved by a majority of the Board
of Directors of the Company to reflect any adjustment or change in the Purchase
Price per share and the number or kind or class of securities, cash or other
property purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement.
Section 23. 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 Stock Acquisition Date and (ii) the
Expiration Date, redeem all but not less than all of the then-outstanding Rights
at a redemption price of $0.01 per Right (the "Redemption Price") appropriately
----------------
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date of this Agreement. The Company may, at its option, pay
the Redemption Price in cash, shares (including fractional shares) of Common
Stock (based on the Current Market Price of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by the Board
of Directors.
(b) At the time and date of effectiveness set forth in any
resolution of the Board of Directors of the Company ordering the redemption of
the Rights, without any further action and without any further 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; provided, however,
-------- -------
that such resolution of the Board of Directors of the Company may be revoked,
rescinded or otherwise modified at any time prior to the time and date of
effectiveness set forth in such resolution, in which event the right to exercise
will not terminate at the time and date originally set for such termination by
the Board of Directors of the Company. As soon as practicable after the action
of the Board of Directors of the Company ordering the redemption of the Rights,
the Company shall give notice of such redemption to the Rights Agent and 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 issuance of Rights Certificates, on the registry
books of the transfer
-32-
agent for the Common Stock. Any notice which is mailed in the manner provided
in this Agreement 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. 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. In
the case of a redemption permitted under this Section 23, the Company may, at
its option, discharge all of its obligations with respect to the Rights by
(i) issuing a press release announcing the manner of redemption of the Rights
and (ii) mailing payment of the Redemption Price to the registered holders of
the Rights at their last addresses as they appear on the registry books of the
Rights Agent or, prior to the issuance of the Rights Certificates, on the
registry books of the transfer agent for the Common Stock, and upon such action,
all outstanding Rights Certificates shall be null and void without any further
action by the Company. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23, and other
than in connection with the purchase of shares of Common Stock prior to the
earlier of the Distribution Date and the Expiration Date.
Section 24. Notice of Certain Events. In case the Company, on or
------------------------
after the Distribution Date, shall propose to (a) pay any dividend payable in
stock of any class to the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock (other than a regular
periodic cash dividend at an annual rate not in excess of 125% of the annualized
rate of the cash dividend paid on the Preferred Stock during the immediately
preceding fiscal year), or (b) offer to the holders of its Preferred Stock
rights, options or warrants to subscribe for or to purchase any additional
shares of Preferred Stock or shares of stock of any class or any other
securities, rights or options, or (c) effect any reclassification of the
Preferred Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock, a change in the par value of such
Preferred Stock or a change from par value to no par value), or (d) directly or
indirectly effect any consolidation or merger into or with, or effect any sale,
lease, exchange, or other transfer or disposition (or to permit one or more of
its Subsidiaries to effect any sale, lease, exchange or other transfer or
disposition), in one transaction or a series of related transactions, of more
than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to, any other Person, or (e) effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Right, in accordance with Section 25, a notice of
such proposed action, which shall specify any record date for the purposes of
such stock dividend or distribution of rights, or the date on which such
reclassification, consolidation, merger, sale, lease, exchange, transfer,
disposition, liquidation, dissolution or winding up is to take place and if such
holders will or may participate therein, the date of participation therein by
the holders of Common Stock and/or Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (a) or (b) above at least 20 days prior to the record date for
determining holders of the Preferred Stock for purposes of such action, and in
the case of any such other action, at least 20 days prior to the date of the
taking of such proposed action or the date of participation therein, if any, by
the holders of Preferred Stock, whichever shall be the earlier. The failure to
give notice as required by this Section 24 or any defect therein shall not
affect the legality or validity of the action taken by the Company or the vote
upon any such action.
-33-
In case any Triggering Event or Business Combination shall occur,
then, in any such case, the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, in accordance with Section 25, notice of
the occurrence of such Triggering Event or Business Combination, which shall
specify the Triggering Event or Business Combination and include a description
of the consequences of such event to holders of Rights under Section 11(a)(ii)
or 13.
Section 25. Notices. Notices or demands authorized by this
-------
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
Aksys, Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
First Chicago Trust Company of New York
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Tenders and Exchanges Administration
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company (or, if no Rights Certificates have been issued, if sent by
first-class mail, postage prepaid, addressed to each holder of a certificate
representing shares of Common Stock at the address of such holder as shown on
the Company's Common Stock registry books).
Section 26. Supplements and Amendments.
--------------------------
(a) At any time prior to the Stock Acquisition Date, a majority of
the Board of Directors of the Company may, except as provided in Section 26(c),
and the Rights Agent shall, if so directed, supplement or amend any provision of
this Agreement, including, without limitation, the Beneficial Ownership percent
as set forth in Section 1(a) at which a Person becomes an Acquiring Person and
the definition of Exempt Person as set forth in Section 1(q) to include any
Person in addition to the Persons described therein, without the approval of any
holders of Rights.
-34-
(b) From and after the Stock Acquisition Date, a majority of the
Board of Directors of the Company may, except as provided in Section 26(c), and
the Rights Agent shall, if so directed, amend this Agreement without the
approval of any holders of Rights Certificates (i) to cure any ambiguity,
(ii) to correct or supplement any provision contained in this Agreement which
may be defective or inconsistent with any other provision of this Agreement or
(iii) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person).
(c) No supplement or amendment to this Agreement shall be made
which changes the Purchase Price, the number of shares of Preferred Stock, other
securities, cash or other property for which a Right is then exercisable or the
Redemption Price or provides for an earlier Expiration Date.
(d) Immediately upon the action of a majority of the Board of
Directors of the Company providing for any amendment or supplement pursuant to
this Section 26, and without any further action and without notice, such
amendment or supplement shall be deemed effective. Promptly following the
adoption of any amendment or supplement pursuant to this Section 26, the Company
shall deliver to the Rights Agent a copy, certified by the Secretary or any
Assistant Secretary of the Company, of resolutions of a majority of the Board of
Directors of the Company adopting such amendment or supplement. Upon such
delivery, the amendment or supplement shall be administered by the Rights Agent
as part of this Agreement in accordance with the terms of this Agreement, as so
amended or supplemented.
Section 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Benefits of this Agreement; Determinations and Actions
------------------------------------------------------
by the Board of Directors. Nothing in this Agreement shall be construed to give
-------------------------
to any Person other than the Company, the Rights Agent and the registered
holders of Rights any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Rights.
For purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act (or any successor provision); provided,
--------
however, that any such calculation made for purposes of determining the
-------
particular percentage of outstanding shares of Common Stock of which any Person
is the Beneficial Owner shall also include any such other securities not then
actually issued and outstanding which such Person would be deemed to be the
Beneficial Owner of, or to "beneficially own," pursuant to Section 1(d) of this
Agreement. The Board of Directors of the Company shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors of the Company or the Company, or
as may be necessary or
-35-
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights, to exchange or not exchange the Rights for Common Stock or
other securities of the Company, or to amend or supplement this Agreement). All
such actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board of Directors of the Company in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other Persons, and (y) not subject the Board of
Directors of the Company to any liability to the holders of the Rights.
Section 29. Severability.
------------
(a) If any term, provision, covenant or restriction of this
Agreement or the application thereof to any Person or to any circumstance is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) If legal counsel to the Company delivers to the Company a
written opinion to the effect that, as a result of changes in federal law or
Delaware law, any term, provision, covenant or restriction of this Agreement may
be invalid, void or unenforceable, then, notwithstanding any other provision of
this Agreement, the Company and the Rights Agent may amend this Agreement to
modify, revise or delete such term, provision, covenant or restriction to the
extent necessary to comply with such law as so changed.
Section 30. Governing Law. This Agreement and each Rights
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the internal laws of such state applicable to
contracts to be made and performed entirely within such State.
Section 31. Counterparts. This Agreement may be executed in
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and both such counterparts shall together constitute but one and
the same instrument.
Section 32. Descriptive Headings. Descriptive headings of the
--------------------
several Sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Agreement.
Section 33. Grammatical Construction. Throughout this Agreement,
------------------------
where such meanings would be appropriate, (a) any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms (e.g., references
to "he" shall also include "she" and "it" and
-36-
references to "who" and "whom" shall also include "which") and (b) the plural
form of nouns and pronouns shall include the singular and vice-versa.
* * * * *
-37-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
AKSYS, LTD.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Title: Vice President and Chief
Financial Officer
FIRST CHICAGO TRUST COMPANY
OF NEW YORK, as Rights Agent
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Title: Customer Service Officer
-38-
Exhibit A
---------
AKSYS, LTD.
FORM OF CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
Pursuant to Section 151 of the Corporation Law
of the State of Delaware
I, _______________________________, the ____________________________
of Aksys, Ltd., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Restated and Integrated Certificate of Incorporation of the Corporation,
the Board of Directors on October 28, 1996, adopted the following resolution
creating a series of 50,000 shares of Preferred Stock designated as Junior
Participating Preferred Stock, Series A:
RESOLVED, that pursuant to the authority vested in the Board by the
Restated and Integrated Certificate of Incorporation of the Corporation and out
of the Preferred Stock authorized therein, the Board hereby authorizes that a
series of Preferred Stock of the Corporation be, and it hereby is, created and
that the designation and amount thereof and the voting powers, preferences and
relative, partici pating, optional and other special rights of the shares of
such series, and the qualifications, limitations or restrictions thereof are as
follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Junior Participating Preferred Stock, Series A" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
50,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior
to the shares of Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the fifteenth day of March, June,
September and December in each year (each such date, a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to
the nearest cent) equal to the greater of (a) $25.00 or (b) the
Adjustment Number (as defined below) times the aggregate per share
amount of all cash dividends, and the Adjustment Number times the
aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of
Common Stock or a subdi vision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or,
with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A
Preferred Stock. The "Adjustment Number" shall initially be 1000. In
the event the Corporation shall at any time after November 8, 1996 (i)
declare or pay any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a
greater number of shares or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $25.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends
-2-
at the time accrued and payable on such shares shall be allocated pro
rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall entitle the
holder thereof to a number of votes equal to the Adjustment Number (as
adjusted from time to time pursuant to Section 2(A) hereof) on all
matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or bylaws, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) (i) If at any time dividends on any Series A Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends
thereon, the occurrence of such contingency shall ▇▇▇▇ the beginning
of a period (a "default period") that shall extend until such time
when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly period on all shares of
Series A Preferred Stock then outstanding shall have been declared and
paid or set apart for payment. During each default period, (1) the
number of Directors shall be increased by two, effective as of the
time of election of such Directors as herein provided, and (2) the
holders of Series A Preferred Stock and the holders of other Preferred
Stock upon which these or like voting rights have been conferred and
are exercisable (the "Voting Preferred Stock") with dividends in
arrears equal to six quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect such two
Directors.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at
annual meetings of stockholders, provided that such voting right shall
not be exercised unless the holders of at least one-third in number of
the shares of Voting Preferred Stock outstanding shall be present in
person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Voting Preferred
Stock of such voting right.
-3-
(iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect Directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than 10%
of the total number of shares of Voting Preferred Stock outstanding,
irrespective of series, may request, the calling of a special meeting
of the holders of Voting Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board, the Chief Executive
Officer, the President, a Vice President or the Secretary of the
Corporation. Notice of such meeting and of any annual meeting at which
holders of Voting Preferred Stock are entitled to vote pursuant to
this paragraph (C)(iii) shall be given to each holder of record of
Voting Preferred Stock by mailing a copy of such notice to him at his
last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 10 days and not
later than 60 days after such order or request or, in default of the
calling of such meeting within 60 days after such order or request,
such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the total
number of shares of Voting Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting of
the stockholders.
(iv) In any default period, after the holders of Voting
Preferred Stock shall have exercised their right to elect Directors
voting as a class, (x) the Directors so elected by the holders of
Voting Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the
default period, and (y) any vacancy in the Board of Directors may be
filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class or classes of stock which elected
the Director whose office shall have become vacant. References in this
paragraph (C) to Directors elected by the holders of a particular
class or classes of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the
holders of Voting Preferred Stock as a class shall terminate and (z)
the number of Directors shall be such number as may be provided for in
the Certificate of Incorporation or bylaws irrespective of any
increase made pursuant to the provisions of paragraph (C) of this
Section 3 (such number being subject, however, to change thereafter in
any manner provided by law or in the Certificate of Incorporation or
bylaws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
-4-
(D) Except as set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series
A Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on
a parity with the Series A Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corpora-
-5-
tion unless the Corporation could, under paragraph (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such
manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (A) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received the greater of (i) $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, and (ii) an aggregate amount per
share, equal to the Adjustment Number (as adjusted from time to time pursuant to
Section 2(A) hereof) times the aggregate amount to be distributed per share to
holders of Common Stock, or (B) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock then outstanding shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number (as
adjusted from time to time pursuant to Section 2(A) hereof) times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
-6-
IN WITNESS WHEREOF, I have executed and subscribed this Certificate
and do affirm the foregoing as true under the penalties of perjury this ____ day
of ________________, 1996.
___________________________________
-7-
Exhibit B
---------
[Form of Rights Certificate]
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER OCTOBER 28, 2006 OR EARLIER IF NOTICE OF REDEMPTION
OR EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION OR EXCHANGE, AT
THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN ASSOCIATE OR
AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF THE RIGHTS AGREEMENT.]
Rights Certificate
AKSYS, LTD.
-----------
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 October 28, 1996 (the "Rights Agreement"),
between Aksys, Ltd., a Delaware corporation (the "Company"), and First Chicago
Trust Company of New York, a New York corporation (the "Agent"), unless notice
of redemption shall have been previously given by the Company, to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M. (New York, New York time) on
October 28, 2006, at the principal corporate trust office of the Rights Agent,
or at the office of its successor as Rights Agent, one one-thousandth of a fully
paid nonassessable share of the Junior Participating Preferred Stock, Series A,
par value $1.00 per share, of the Company (the "Preferred Stock") at a purchase
price (the "Purchase Price") of $85.00 per one one-thousandth share, upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase duly executed. The Purchase Price may be paid in cash or by
certified bank check or bank draft payable to the order of the Company.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Preferred Stock or other securities, cash or other property which
may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
If the Rights evidenced by this Rights Certificate are or were
formerly beneficially owned, on or after the earlier of the Distribution Date
and the Stock Acquisition Date, by (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person or (ii) a direct or indirect transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person), such
Rights may become null and void, in which event the holder of any such Right
(including any subsequent holder) shall not have any right with respect to such
Right.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates.
Capitalized terms used but not defined in this Rights Certificate that are
defined in the Rights Agreement shall have the same meanings ascribed to them in
the Rights Agreement. Copies of the Rights Agreement are on file at the
principal executive offices of the Company and the above-mentioned office of the
Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal corporate trust office of the Rights Agent, may
be exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Preferred Stock or other property as the Rights evidenced by
the Rights Certificate or Rights Certificates surrendered entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (a) may be redeemed by the Board of Directors of
the Company at its option at a redemption price of $0.01 per Right subject to
adjustment, payable, at the election of the Company, in cash or shares
(including fractional shares) of Common Stock or such other consideration as the
Board of Directors may determine, at any time prior to the earlier of (i) 12:00
a.m. (midnight, New York, New York time) on the Stock Acquisition Date and (ii)
the Expiration Date, or (b) may be exchanged after the Stock Acquisition Date by
the Board of Directors of the Company at its option in whole or in part for
shares of the Company's Common Stock or other Company securities.
No fractional shares of Preferred Stock (other than fractions that are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depository receipts) are
required to be issued upon the exercise of any Right or Rights evidenced hereby,
but in lieu thereof the Company may elect to (i) evidence fractional shares by
depositary receipts, (ii) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or in bearer form (represented
by a certificate) which shall entitle the holder to receive a full share upon
the surrender of such scrip or warrants aggregating a full share or (iii) make a
cash payment, as provided in the Rights Agreement.
-2-
No holder of this Rights Certificate, as such, shall be entitled to
vote or to receive dividends on, or shall be deemed for any purpose the holder
of, Preferred Stock or of any other securities, cash or property which may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or this Certificate 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 subscription rights, or to institute, as a holder of
Preferred Stock or other securities issuable on the exercise of the Rights
represented by this Certificate, any derivative action, or otherwise, until and
only to the extent the Right or Rights evidenced by this Rights Certificate
shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
* * * * *
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______ __, ____.
AKSYS, LTD.
By: ________________________________
Title:
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: __________________________
Authorized Officer
-3-
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED the undersigned ___________________________________
hereby sells, assigns and transfers unto _______________________________________
________________________________________________________________________________
(Please print name and address of transferee)
_________ Rights evidenced by this Rights Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
________________________ with a power of attorney to transfer the said Rights
and a Rights Certificate evidencing such Rights on the books of Aksys, Ltd.,
with full power of substitution.
A new Rights Certificate evidencing the remaining balance, if any, of
such Rights not hereby sold, assigned and transferred shall be mailed to and
registered in the name of the undersigned unless such person requests that such
Rights Certificate be registered in the name of and mailed to (complete only if
a Rights Certificate evidencing any remaining balance of Rights is to be
registered in a name other than the undersigned):
Please insert Social Security or
other identifying number of transferee: ________________________
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate or any Rights evidenced hereby [_] are
[_] are not being sold, assigned and transferred by or on behalf of a Person who
is or was an Acquiring Person or an Affiliate or Associate of an Acquiring
Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [_] did [_] did not acquire any of the Rights evidenced by this
Rights Certificate from any Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ___________________________ ____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution with
membership in a recognized signature guarantee medallion program as approved by
the Stock Transfer Association.
NOTICE
The signature on the foregoing Form of Assignment must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment is not completed, the Company will deem the beneficial owner of the
Rights evidenced by this Right Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the
case of an assignment or other transfer of this Rights Certificate or any Rights
evidenced hereby, will affix a legend to that effect on any Rights Certificate
issued in whole or partial exchange for this Rights Certificate.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
the Rights represented by this Rights Certificate)
To: AKSYS, LTD.
The undersigned hereby irrevocably elects to exercise ______________
____________________ Rights represented by this Rights Certificate to purchase
the shares of Preferred Stock or other securities, cash or other property
issuable upon the exercise of such Rights and requests that certificates for
such shares or other securities be issued in the name of, and such cash or other
property be paid to:
Please insert Social Security
or other identifying number of purchaser: ________________________
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
A new Rights Certificate evidencing the remaining balance, if any, of
such Rights not hereby exercised shall be mailed to and registered in the name
of the undersigned unless such person requests that such Rights Certificate be
registered in the name of and mailed to (complete only if Rights Certificate
evidencing any remaining balance of Rights is to be registered in a name other
than the undersigned):
Please insert Social Security
or other identifying number: ________________________
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [_] are [_] are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [_] did [_] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________________________ ____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by an eligible guarantor institution with
membership in a recognized signature guarantee medallion program as approved by
the Stock Transfer Association.
NOTICE
The signature on the foregoing Form of Election to Purchase must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Election
to Purchase is not completed, the Company will deem the beneficial owner of the
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and, in the
case of an assignment or other transfer of this Rights Certificate or any Rights
evidenced hereby, will affix a legend to that effect on any Rights Certificate
issued in whole or partial exchange for this Rights Certificate.
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED SHARES
On October 28, 1996, the Board of Directors of Aksys, Ltd. (the
"Company") authorized the issuance of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $0.01 per share
(the "Common Shares"), of the Company. The distribution is payable to the
stockholders of record at the close of business on November 8, 1996 (the "Record
Date"), and with respect to all Common Shares that become outstanding after the
Record Date and prior to the earliest of the Distribution Date (as defined
below), the redemption of the Rights, the exchange of the Rights and the
expiration of the Rights (and, in certain cases, following the Distribution
Date). Each Right entitles the registered holder to purchase from the Company
one one-thousandth of a share of a Junior Participating Preferred Stock, Series
A, par value $1.00 per share, of the Company (the "Preferred Shares") at a price
of $85.00 per one one-thousandth of a Preferred Share (the "Purchase Price"),
subject to adjustment. The description and terms of the Rights are set forth in
a Rights Agreement (the "Rights Agreement") between the Company and First
Chicago Trust Company of New York, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the expiration of the Company's
redemption rights following the date of public disclosure that a person or group
other than certain exempt persons (an "Acquiring Person"), together with persons
affiliated or associated with such Acquiring Person (other than those that are
exempt persons), has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding Common Shares (the "Stock
Acquisition Date") or (ii) the tenth business day after the date of commencement
or public disclosure of an intention to commence a tender offer or exchange
offer by a person other than an exempt person if, upon consummation of the
offer, such person could acquire beneficial ownership of 15% or more of the
outstanding Common Shares (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced by Common Share certificates
and not by separate certificates. The Rights Agreement provides that, until the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
the Rights will be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
new Common Share certificates issued after November 8, 1996, upon transfer or
new issuance of the Common Shares, will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights) the surrender for transfer of
any certificate for Common Shares, with or without such notation or a copy of
this Summary of Rights being attached thereto, will also constitute the transfer
of the Rights associated with the Common Shares represented by such certificate.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Common Shares as of the close of business on the Distribution Date, and
such separate Right Certificates alone will evidence the Rights.
The Rights will first become exercisable after the Distribution Date
(unless sooner redeemed or exchanged). The Rights will expire at the close of
business on October 28, 2006 (the "Expiration Date"), unless earlier redeemed or
exchanged by the Company as described below.
The Purchase Price payable, and the number of Preferred Shares or
other securities, cash or other property issuable, upon exercise of the Rights
are subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend or distribution on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to holders of the
Preferred Shares of certain rights, options or warrants to subscribe for
Preferred Shares or securities convertible into Preferred Shares at less than
the current market price of the Preferred Shares or (iii) upon the distribution
to holders of the Preferred Shares of evidences of indebtedness or assets
(excluding regular periodic cash dividends out of earnings or retained earnings)
or of subscription rights or warrants (other than those referred to above). In
addition, the Purchase Price payable and the number of Preferred Shares
purchasable, on exercise of a Right is subject to adjustment in the event that
the Company should (i) declare or pay any dividend on the Common Shares payable
in Common Shares or (ii) effect a subdivision or combination of the Common
Shares into a different number of Common Shares.
In the event that a person becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights that
are or were beneficially owned by the Acquiring Person and certain related
persons and transferees (which will thereafter be void), shall thereafter have
the right to receive upon exercise of such Right that number of Common Shares
(or other securities) having at the time of such transaction a market value of
two times the exercise price of the Right. In the event that a person becomes an
Acquiring Person and the Company is involved in a merger or other business
combination transaction where the Company is not the surviving corporation or
where Common Stock is changed or exchanged or in a transaction or transactions
in which 50% or more of its consolidated assets or earning power are sold,
proper provision shall be made so that each holder of a Right (other than such
Acquiring Person and certain related persons or transferees) shall thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction would have a market
value of two times the exercise price of the Right. In addition, the Company's
Board of Directors has the option of exchanging all or part of the Rights
(excluding void Rights) for an equal number of Common Shares in the manner
described in the Rights Agreement.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-thousandth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading date prior to the date
of exercise.
-2-
At any time prior to public disclosure that an Acquiring Person has
become such, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right (the "Redemption Price"),
payable in cash, shares (including fractional shares) of common stock or any
other form of consideration deemed appropriate by the Board of Directors.
Immediately upon action of the Board of Directors ordering redemption of the
Rights, the ability of holders to exercise the Rights will terminate and the
only rights of such holders will be to receive the Redemption Price.
At any time prior to public disclosure that an Acquiring Person has
become such, the Board of Directors of the Company may amend or supplement the
Rights Agreement without the approval of the Rights Agent or any holder of the
Rights, except for an amendment or supplement which would change the Redemption
Price, provide for an earlier expiration date of the Rights or change the
Purchase Price. Thereafter, the Board of Directors of the Company may amend or
supplement the Rights Agreement without such approval only to cure ambiguity,
correct or supplement any defective or inconsistent provision or change or
supplement the Rights Agreement in any manner which shall not adversely affect
the interests of the holders of the Rights (other than an Acquiring Person or an
affiliate or associate thereof). Immediately upon the action of the Board of
Directors providing for any amendment or supplement, such amendment or
supplement will be deemed effective.
The Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment equal to the greater of $25 per share and 1,000 times
the dividend declared per Common Share. In the event of liquidation, the holders
of the Preferred Shares will be entitled to a minimum preferential liquidation
payment equal to the greater of $100 per share and 1,000 times the payment made
per Common Share. Each Preferred Share will have 1,000 votes per share, voting
together with the Common Shares. In the event of any merger, consolidation or
other transaction in which Common Shares are exchanged, each Preferred Share
will be entitled to receive 1,000 times the amount received per Common Share.
The Rights have certain anti-takeover effects. The Rights may cause
substantial dilution to a person or group other than an exempt person that
attempts to acquire the Company on terms not approved by the Board, except
pursuant to an offer conditioned on a substantial number of Rights being
acquired. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors prior to the time a person or
group other than an exempt person has acquired beneficial ownership of 15% or
more of the Common Shares, because until such time the Rights may generally be
redeemed by the Company at $0.01 per Right.
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▇▇▇▇▇▇ persons include Coral Partners II, L.P., Coral Partners IV,
L.P. (the "Coral Group") and each member thereof so long as (i) the Coral Group
and the members thereof are the beneficial owners in the aggregate of not less
than 5% of the outstanding common stock of the Company and (ii) the aggregate
beneficial ownership of the Coral Group of the common stock of the Company is
not in excess of the base percentage owned by them at a specified time plus 5%.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to an Application for Registration on Form 8-A
and as an Exhibit to the Company's Current Report on Form 8-K. A copy of the
Rights Agreement is available free of charge from the Company. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is hereby incorporated
herein by reference.
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