EXHIBIT 4.2
RIGHTS AGREEMENT
dated as of
December 31, 1997
between
INNOTRAC CORPORATION
and
RELIANCE TRUST COMPANY
as Rights Agent
TABLE OF CONTENTS/1/
Page
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Section 1. Definitions.....................................................................1
Section 2. Appointment of Rights Agent.....................................................5
Section 3. Issue of Rights Certificates....................................................5
Section 4. Form of Rights Certificate......................................................6
Section 5. Countersignature and Registration...............................................7
Section 6. Transfer and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates...........................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights...................8
Section 8. Cancellation and Destruction of Right Certificates.............................10
Section 9. Reservation and Availability of Capital Stock..................................10
Section 10. Preferred Stock Record Date...................................................11
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights.....................................................................12
Section 12. Certificate of Adjusted Purchase Price or Number of Shares....................20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..........21
Section 14. Fractional Rights and Fractional Shares.......................................23
Section 15. Rights of Action..............................................................24
Section 16. Agreement of Right Holders....................................................25
Section 17. Right Certificate Holder Not Deemed a Shareholder.............................25
Section 18. Concerning the Rights Agent...................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent.....................26
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/1/ The Table of Contents is not a part of this Agreement.
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Section 20. Duties of Rights Agent........................................................27
Section 21. Change of Rights Agent........................................................29
Section 22. Issuance of New Right Certificates............................................29
Section 23. Redemption and Termination....................................................30
Section 24. Exchange......................................................................31
Section 25. Notice of Proposed Actions....................................................32
Section 26. Notices.......................................................................32
Section 27. Supplements and Amendments....................................................33
Section 28. Successors....................................................................33
Section 29. Determinations and Actions by the Board of Directors, etc.....................34
Section 30. Benefits of this Agreement....................................................34
Section 31. Severability..................................................................34
Section 32. Governing Law.................................................................35
Section 33. Counterparts..................................................................35
Section 34. Descriptive Headings..........................................................35
Exhibit A - Form of Board Resolution Establishing and Designating Preferred Stock
Exhibit B - Form of Rights Certificate
Exhibit C - Shareholder Rights Plan Summary of Terms
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RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of December 31, 1997, by
and between INNOTRAC CORPORATION, a Georgia corporation (the "Company"), and
RELIANCE TRUST COMPANY as Rights Agent (the "Rights Agent").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Board of Directors of the Company has approved the
execution of this Agreement and has authorized and declared a dividend
distribution of one Right (as defined below) for each outstanding share of
Common Stock, par value $0.10 per share, of the Company (the "Common Stock") at
the close of business on the Effective Date and has authorized the issuance of
one Right for each share of Common Stock, each Right representing the right to
purchase, one one-hundredth of a share of Series A Participating Cumulative
Preferred Stock of the Company having the rights, powers and preferences set
forth in the Board Resolution Establishing and Designating Series A Preferred
Stock attached hereto as Exhibit A, upon the terms and subject to the conditions
contained herein (individually, a "Right," and collectively, the "Rights");
NOW, THEREFORE, for and in consideration of the premises and the
mutual agreements contained herein, the parties hereto agree as follows:
Section 1. Definitions. The following terms, as used herein, have
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the following meanings:
(a) "Acquiring Person" means any Person who or which, together with
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all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding; provided, however,
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that, an "Acquiring Person" shall not include the following Persons: (i) any
Excluded Person, (ii) any Person who is the Beneficial Owner of 15% or more of
the shares of Common Stock outstanding as of the Effective Date, or (iii) any
Person, who alone or together with its Affiliates or Associates becomes the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
as a result of an Approved Acquisition; provided, further, that in the event
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that a Person does not become an Acquiring Person by reason of clause (iii)
above, such Person nonetheless shall become an Acquiring Person if such Person
thereafter becomes the Beneficial Owner of an additional 2% or more of the
Common Stock then outstanding, unless the acquisition of such Common Stock is an
Approved Acquisition. Notwithstanding the foregoing, if the Board of Directors
of the Company determines in good faith (but only if at the time of such
determination by the Board of Directors there are then in office not less than
two Continuing Directors and such action is approved by a majority of the
Continuing Directors then in office) that a Person who would otherwise be an
"Acquiring Person" as defined pursuant to the foregoing provisions of this
Section 1(a) has become such inadvertently, and such Person divests as promptly
as practicable a sufficient number of shares of Common Stock so that such Person
would no longer be an
"Acquiring Person" as defined pursuant to the foregoing provisions of this
Section 1(a), then such Person shall not be deemed an Acquiring Person for any
purposes of this Agreement.
(b) "Affiliate" and "Associate" have the respective meanings ascribed
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to such terms in Rule 12b-2 under the Exchange Act as in effect on the date
hereof.
(c) "Approved Acquisition" means any acquisition of Common Stock by an
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Acquiring Person that is approved in advance by a majority of the Continuing
Directors.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
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deemed to "beneficially own," any securities:
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(i) which such Person or any of its Affiliates or Associates
beneficially owns (as determined pursuant to Rule 13d-3 under the
Exchange Act as in effect on the date hereof), directly or indirectly;
(ii) which such Person or any of its Affiliates or Associates,
directly or indirectly, has
(A) the right to acquire (whether such right is
exercisable immediately or only upon the occurrence of certain events
or the passage of time or both) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights (other than pursuant to the
Rights), warrants, options or otherwise; provided, however, that a
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Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of its
Affiliates or Associates until such tendered securities are accepted
for purchase or exchange; or
(B) the right to vote or dispose of (whether such right is
exercisable immediately or only upon the occurrence of certain events
or the passage of time or both) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or otherwise; provided,
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however, that a Person shall not be deemed the "Beneficial Owner" of,
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or to "beneficially own," any security under this clause (B) as a
result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding (1) arises
solely from a revocable proxy or consent given to such Person in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act, and (2) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of its Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing)
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for the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in Subsection (ii)(B) above) or disposing of
any such securities; provided, however, that nothing in this Section 1(e)
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shall cause any Person engaged in business as an underwriter of securities
who acquires any securities of the Company through such Person's
participation in good faith in a firm commitment underwriting to be deemed
the "Beneficial Owner" of, or to "beneficially own," such securities until
the expiration of 40 days after the date of such acquisition.
(e) "Business Day" means any day other than a Saturday, Sunday or a
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day on which banking institutions in the State of Georgia are authorized or
obligated by law or executive order to close.
(f) "Close of Business" on any given date means 5:00 P.M., Atlanta,
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Georgia time, on such date; provided, however, that if such date is not a
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Business Day, then it shall mean 5:00 P.M., Atlanta, Georgia time, on the next
succeeding Business Day.
(g) "Common Stock" means the Common Stock, par value $0.10 per share,
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of the Company, except that, when used with respect to any Person other than the
Company, "Common Stock" means the capital stock (or other equity interests) of
such Person with the greatest voting power, or the equity securities or other
equity interests having the power to control or direct the management of such
Person.
(h) "Continuing Director" means any member of the Board of Directors
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of the Company, while such Person is a member of the Board, who is not an
Acquiring Person or an Affiliate or Associate of an Acquiring Person or a
representative or nominee of an Acquiring Person or of any such Affiliate or
Associate, or otherwise affiliated with an Acquiring Person or of any such
Affiliate or Associate, and who either (i) was a member of the Board immediately
prior to the Effective Date, or (ii) subsequently becomes a member of the Board,
if such Person's nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Directors serving at the time of
such nomination or election (which shall include without limitation the nominees
included in any proxy statement approved by the Continuing Directors).
(i) "Distribution Date" means the earlier of (i) the Close of Business
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on the tenth day (or such later day as may be designated by action of a majority
of the Continuing Directors) after the Share Acquisition Date, and (ii) the
Close of Business on the tenth Business Day (or such later day as may be
designated by action of a majority of the Continuing Directors) after the date
of the commencement by any Person (other than an Excluded Person) of, or of the
first public announcement of the intention by any Person (other than an Excluded
Person) to commence, a tender or exchange offer if, upon consummation thereof,
such Person, together with all Affiliates and Associates of such Person, would
be the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding.
(j) "Effective Date" means January 1, 1998.
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(k) "Employee Benefit Plan" means any employee benefit plan of the
---------------------
Company or any of its Subsidiaries or any Person organized, appointed or
established by the Company or any of its Subsidiaries for or pursuant to the
terms of any such plan.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
(m) "Excluded Person" means the Company, any of its Subsidiaries or
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any Employee Benefit Plan.
(n) "Expiration Date" means the earlier of (i) the Final Expiration
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Date, and (ii) the time at which all Rights are redeemed as provided in Section
23 or exchanged as provided in Section 24.
(o) "Final Expiration Date" means the Close of Business on
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January 1, 2008.
(p) "Flip-in Event" means any event described in Section 11(a)(ii)(A),
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(B) or (C), but excluding any event described in Section 11(a)(ii)(D).
(q) "Flip-over Event" means any event described in Section 13(a)(x),
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(y), or (z).
(r) "Person" means an individual, corporation, partnership, limited
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liability company, association, trust or any other entity or organization.
(s) "Preferred Stock" means the Series A Participating Cumulative
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Preferred Stock, par value $0.10 per share, of the Company having the terms set
forth in the form of certificate of designation attached hereto as Exhibit A.
(t) "Purchase Price" means the price (subject to adjustment as
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provided herein) at which a holder of a Right may purchase one one-hundredth of
a share of Preferred Stock (subject to adjustment as provided herein) upon
exercise of a Right, which price shall initially be $60.00.
(u) "Qualifying Tender Offer" means a tender or exchange offer for all
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outstanding shares of Common Stock of the Company approved by a majority of
Continuing Directors then in office, after taking into account the potential
long-term value of the Company and all other factors that they consider
relevant.
(v) "Securities Act" means the Securities Act of 1933, as amended.
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(w) "Share Acquisition Date" means the date of the first public
----------------------
announcement (including the filing of a report on Schedule 13D under the
Exchange Act (or any comparable or successor report)) by the Company or an
Acquiring Person indicating that an Acquiring Person has become such.
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(x) "Subsidiary" means, with respect to any Person, any other Person
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of which securities or other ownership interests having ordinary voting power,
in the absence of contingencies, to elect a majority of the board of directors
or other Persons performing similar functions are at the time directly or
indirectly owned or controlled by such first Person.
(y) "Trading Day" means a day on which the principal national
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securities exchange or inter-dealer quotation system on which the shares of
Common Stock are listed, admitted to trading or quoted is open for the
transaction of business or, if the shares of Common Stock are not listed,
admitted to trading or quoted on any national securities exchange or inter-
dealer quotation system, a Business Day.
(z) "Triggering Event" means any Flip-in Event or any Flip-over Event.
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Section 2. Appointment of Rights Agent. The Company hereby
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appoints the Rights Agent to act as agent for the Company and the holders of the
Rights (who, in accordance with Section 3, shall prior to the Distribution Date
also be the holders of the Common Stock) 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. If the Company appoints one or more co-Rights Agents,
then the respective duties of the Rights Agent and any co-Rights Agents shall be
as the Company shall determine.
Section 3. Issue of Rights Certificates. (a) Prior to the
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Distribution Date, (i) the Rights will be evidenced (subject to Section 3(b)) by
the certificates for the Common Stock and not by separate Rights Certificates
(as defined below), and the registered holders of the Common Stock shall be
deemed to be the registered holders of the associated Rights, and (ii) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As
soon as practicable after the Company has notified the Rights Agent of the
occurrence of a Distribution Date, the Rights Agent will, subject to Section
7(d), send, 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, at the
address of such holder shown on the records of the Company, one or more Rights
Certificates, in substantially the form of Exhibit B attached hereto (the
"Rights Certificates"), evidencing one Right (subject to adjustment as provided
herein) for each share of Common Stock so held. If an adjustment in the number
of Rights per share of Common Stock has been made pursuant to Section 11(p),
then the Company shall, at the time of distribution of the Rights Certificates
to record holders of Common Stock as of the Close of Business on the
Distribution Date, make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a)) so that Rights Certificates representing only
whole numbers of Rights are distributed to such holders and cash is paid to such
holders in lieu of any fractional Rights. From and after the Distribution Date,
the Rights will be evidenced solely by such Right Certificates.
(b) As soon as practicable after the Effective Date, the Company will
send a summary of the Rights substantially in the form of Exhibit C attached
hereto, by first-class, postage prepaid mail, to each record holder of the
Common Stock as of the Close of Business on the
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Effective Date at the address of such holder shown on the records of the
Company. Until the Distribution Date, the Rights shall be evidenced by such
certificates evidencing the Common Stock, and the registered holders of such
Common Stock shall also be the registered holders of the associated Rights.
(c) Rights shall be issued in respect of all shares of Common Stock
that become outstanding (on original issuance or out of treasury) after the
Effective Date but prior to the earlier of the Distribution Date or the
Expiration Date. Certificates for the Common Stock that become outstanding or
shall be transferred or exchanged after the Effective Date but prior to the
earlier of the Distribution Date or the Expiration Date shall also be deemed to
be certificates for Rights and shall have impressed on, printed on, written on
or otherwise affixed to them the following legend:
This certificate also evidences certain Rights as set forth
in a Rights Agreement between Innotrac Corporation and Reliance
Trust Company, dated as of December 31, 1997 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal office
of the Company. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge promptly
after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, such Rights
may be evidenced by separate certificates and no longer be
evidenced by this certificate, may be redeemed or exchanged or may
expire. As set forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an Acquiring Person or
an Affiliate or Associate thereof (as such terms are defined in
the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may be null and void.
(d) With respect to the certificates containing the foregoing legend,
until the earlier of the Distribution Date or the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby. If the Company purchases
or acquires any shares of Common Stock after the Effective Date but prior to the
Distribution Date, any Rights associated with such Common Stock shall be deemed
canceled and retired so that the Company shall not be entitled to exercise any
Rights associated with the Common Stock that are no longer outstanding.
Section 4. Form of Rights Certificate. (a) The Rights Certificates
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(and the forms of assignment, election to purchase and certificates to be
printed on the reverse thereof) shall be substantially in the form of Exhibit B
attached hereto and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as the Company
6
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law, rule or
regulation or with any rule or regulation of any stock exchange or inter-dealer
quotation system of a registered national securities association on which the
Rights may from time to time be listed, traded or quoted or to conform to usage.
Subject to Sections 11 and 22, the Rights Certificates, whenever distributed,
shall be dated as of the Distribution Date, shall entitle the holders thereof to
purchase such number of one one-hundredths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein, but the number of
such one one-hundredths and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate representing Rights beneficially owned by
any Person referred to in Section 7(d)(i), (ii) or (iii) shall (to the extent
feasible) contain 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). This Rights Certificate and the
Rights represented hereby may be or may become null and void in the
circumstances specified in Section 7(d) of the Rights Agreement.
Section 5. Countersignature and Registration. (a) The Rights
---------------------------------
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, its President 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 Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company whose
manual or facsimile signature is affixed to the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates may,
nevertheless, be countersigned by the Rights Agent and issued and delivered with
the same force and effect as though the individual who signed such Rights
Certificates had not ceased to be such officer of the Company. 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 will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise, transfer
or exchange, books for registration and transfer of the Rights Certificates.
Such books shall show with respect to each Rights Certificate the name and
address of the registered holder thereof, the number of Rights indicated on the
certificate, and the certificate number.
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Section 6. Transfer and Exchange of Rights Certificates; Mutilated,
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Destroyed, Lost or Stolen Rights Certificates. (a) Subject to Section 4(b),
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7(d), and 14, at any time after the Close of Business on the Distribution Date
and prior to the Close of Business on the Expiration Date, any Rights
Certificate(s) may, upon the terms and subject to the conditions set forth in
this Section 6(a), be transferred or exchanged for another Rights Certificate(s)
evidencing a like number of Rights as the Rights Certificate(s) surrendered.
Any registered holder desiring to transfer or exchange any Rights Certificate(s)
shall make such request in writing delivered to the Rights Agent, and shall
surrender such Rights Certificate(s) (with, in the case of a transfer, the form
of assignment and certificate on the reverse side thereof duly executed) to the
Rights Agent at the principal office or offices of the Rights Agent designated
for such purpose. Neither the Rights Agent nor the Company shall be obligated
to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate(s) until the registered holder of the Rights has
complied with the requirements of Section 7(e). Upon satisfaction of the
foregoing requirements, the Rights Agent shall, subject to Sections 4(b), 7(d),
14 and 24, countersign and deliver to the Person entitled thereto a Rights
Certificate(s) as so requested. The Company may require payment of a sum
sufficient to cover any transfer tax or other governmental charge that may be
imposed in connection with any transfer or exchange of any Rights
Certificate(s).
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will issue and deliver a new
Rights Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Rights Certificate so lost,
stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Expiration Date of Rights;
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Restrictions on Transfer. (a) Subject to Section 7(d), the registered holder
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of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including, without limitation, Sections 7(e), 9(c),
11(a), 13, 23, and 24), in whole or in part, at any time after the Distribution
Date and prior to the Expiration Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed (with signatures guaranteed), to the Rights Agent at the
principal office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price (in lawful money of the
United States of America by certified check or bank draft payable to the order
of the Company) with respect to the Rights then to be exercised and an amount
equal to any applicable transfer tax or other governmental charge.
(b) Upon satisfaction of the requirements of Section 7(a) and subject
to Section 20(k), the Rights Agent shall thereupon promptly (i)(A) requisition
from any transfer agent of the Preferred Stock (or make available, if the Rights
Agent is the transfer agent therefor) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be purchased (and the Company
hereby irrevocably authorizes its transfer agent to comply with all
8
such requests), or (B) if the Company shall have elected to deposit the shares
of Preferred Stock issuable upon exercise of the Rights with a depository agent,
requisition from the depository agent depository receipts representing such
number of one one-hundredths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depository agent), and the Company will direct the depository agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of issuance of fractional shares in accordance with Section
14, and (iii) after receipt of such certificates or depository receipts and
cash, if any, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate (with such certificates or receipts
registered in such name or names as may be designated by such holder). If the
Company is obligated to deliver Common Stock, other securities or assets
pursuant to this Agreement, the Company will make all arrangements necessary so
that such other securities and assets are available for distribution by the
Rights Agent, if and when appropriate.
(c) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the number of Rights remaining unexercised shall be issued by the
Rights Agent and 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, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Flip-in Event, any Rights beneficially owed
by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring Person,
(ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate)
who becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person (or any such Associate or
Affiliate) to holders of equity interests in such Acquiring Person (or in any
such Associate or Affiliate) or to any Person with whom the Acquiring Person (or
any such Associate or Affiliate) has any continuing agreement, arrangement or
understanding regarding the transferred Rights, or (B) a transfer which the
Continuing Directors have determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(d) shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise; provided,
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however, that the foregoing provisions of this Section 7(d) shall not apply to
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Rights beneficially owned by an Acquiring Person (or an Associate or Affiliate)
of such Acquiring Person or a transferee thereof if such Person became an
Acquiring Person pursuant to a Qualifying Tender Offer. The Company shall use
all reasonable efforts to insure that the provisions of Section 4(b) and this
Section 7(d) and are complied with, but shall have no liability to any holder of
Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates and
Associates or any transferee of any of them hereunder.
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(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported transfer pursuant to Section 6 or exercise pursuant to this Section 7
unless such registered holder (i) shall have completed and signed the
certificate contained in the form of assignment or election to purchase, as the
case may be, set forth on the reverse side of the Rights Certificate surrendered
for such transfer or exercise, as the case may be, (ii) shall not have indicated
an affirmative response to clause 1 or 2 thereof, and (iii) shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
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All Rights Certificates surrendered for exercise, transfer 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 this Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall 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 either such case shall deliver a certificate of
cancellation or destruction thereof, as appropriate, to the Company.
Section 9. Reservation and Availability of Capital Stock. (a) The
---------------------------------------------
Company covenants and agrees that it will use reasonable efforts to cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of Triggering Event, out of its
authorized and unissued shares of Common Stock) a number of shares of Preferred
Stock (and, following the occurrence of a Triggering Event, out of its
authorized but unissued shares of Common Stock) that will be, except as provided
in Section 11(a)(iii), sufficient to permit the exercise in full of all
outstanding Rights as provided in this Agreement.
(b) So long as the Preferred Stock (and, following the occurrence of
Triggering Event, Common Stock and other securities) issuable and deliverable
upon the exercise of the Rights may be listed on any national securities
exchange or inter-dealer quotation system of a registered national securities
association, the Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all securities reserved for such
issuance to be listed on any such exchange or quotation system upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts (i) to file, as soon as
practicable following the earliest date after the occurrence of a Flip-in Event,
or as soon as is required by law following the Distribution Date, as the case
may be, a registration statement under the Securities Act with respect to the
securities issuable 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
10
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or blue sky laws
of the various states in connection with the exercisability of the Rights. The
Company may temporarily suspend, for a period of time not to exceed 90 days
after the date set forth in this Section 9(c)(i), 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 notify the Rights
Agent and 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 that the rights are currently
exercisable. Notwithstanding any such provision of this Agreement to the
contrary, the Rights shall not be exercisable for securities in any jurisdiction
if the requisite qualification in such jurisdiction shall not have been
obtained, such exercise therefor shall not be permitted under applicable law or
a registration statement in respect of such securities shall not have been
declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
Stock or other securities) issuable upon exercise of the Rights shall, at the
time of delivery of the certificates for such securities (subject to payment of
the Purchase Price), be duly authorized, validly issued, fully paid, and
nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and other governmental
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates and of any certificates for Preferred Stock (or Common Stock
or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax or other
governmental charge which may be payable in respect of any transfer involved in
the issuance or delivery of any Rights Certificates or of any certificates for
Preferred Stock (or Common Stock or other securities, as the case may be) to a
Person other than the registered holder of the applicable Rights Certificate,
and prior to any such transfer, issuance or delivery any such tax or other
governmental charge shall have been paid by the holder of such Rights
Certificate or it shall have been established to the Company's satisfaction that
no such tax or other governmental charge is due.
Section 10. Preferred Stock Record Date. Each Person (other than
---------------------------
the Company) in whose name any certificate for Preferred Stock (or Common Stock
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 such
Preferred Stock (or Common Stock 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 or other governmental
charges) was made; provided, however, that if the date of such surrender and
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payment is a date upon which the transfer books of the Company relating to the
Preferred Stock (or Common Stock or other securities, as the case may be) are
closed, such Person shall be deemed to have become the record holder of such
shares
11
on, and such certificate shall be dated, the next succeeding Business Day
on which the applicable transfer books of the Company are open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of shares
- -------------------
covered by each Right, and the number of Rights outstanding are subject to
adjustment from time to time, as provided in this Section 11.
(a)(i) If the Company shall at any time after the date of this
Agreement (A) declare or pay a dividend on the Preferred Stock payable in shares
of Preferred Stock (or other capital stock), (B) subdivide the outstanding
Preferred Stock into a greater number of shares, (C) combine the outstanding
Preferred Stock into a smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger involving the
Company in which the Company is the surviving or continuing corporation), except
as otherwise provided in Section 7(d) and this Section 11(a), then the Purchase
Price in effect immediately prior to the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or other capital stock issuable on
such date shall be proportionately adjusted so that each holder of a Right shall
thereafter be entitled to receive, upon exercise thereof at the Purchase Price
in effect immediately prior to such date, the aggregate number and kind of
shares of Preferred Stock or other capital stock, as the case may be, which, if
such Right had been exercised immediately prior to such date and at a time when
the applicable transfer books of the Company were open, such holder would have
been entitled to receive upon such exercise and by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which requires
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) Subject to Sections 23 and 24, if:
(A) any Person, alone or together with its Affiliates
and Associates, shall, at any time after the date of this
Agreement become an Acquiring Person (other than pursuant to a
Qualifying Tender Offer), or
(B) during such time as there is an Acquiring Person,
there shall be a reclassification of securities (including any
reverse stock split), recapitalization of the Company, or any
merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions
involving the Company or any of its Subsidiaries (whether or not
with or into or otherwise involving an Acquired Person), other
than a Flip-over Event(s), which has the effect, directly or
indirectly, of increasing by more than [2%] the proportionate
share of the outstanding shares of any class of equity or
convertible securities of the Company or any of its Subsidiaries
which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring
Person, or
12
(C) any Acquiring Person or any Associate or Affiliate
of any Acquiring Person, at any time after the date of this
Agreement, directly or indirectly, (1) shall merge into the
Company or otherwise combine or consolidate with the Company and
the Company shall be the continuing or surviving corporation of
such merger, combination or consolidation and, in connection with
such merger, combination or consolidation, none of the
outstanding shares of the Common Stock of the Company shall be
changed into or exchanged for stock or other securities of the
Company or of any other Person or cash or any other property, (2)
shall, in one transaction or a series of transactions, other than
in connection with the exercise of a Right or Rights and other
than in connection with the exercise or conversion of securities
exercisable for or convertible into securities of the Company
which securities were outstanding prior to the time such
Acquiring Person became such, transfer any assets to the Company
or to any of its Subsidiaries in exchange (in whole or in part)
for shares of Common Stock, for other equity securities of the
Company, or for securities exercisable for or convertible into
shares of equity securities of the Company (Common Stock or
otherwise) or otherwise obtain from the Company, with or without
consideration, any additional shares of such equity securities or
securities exercisable for or convertible into shares of such
equity securities (other than pursuant to a pro rata offer or
distribution to all holders of Common Stock), (3) shall sell,
purchase, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of assets (in one or more transactions), to,
from, with or of, as the case may be, the Company or any of its
Subsidiaries (including, in the case of Subsidiaries, by way of a
merger, combination or consolidation of any Subsidiary), on terms
and conditions less favorable to the Company than the Company
would be able to obtain in arm's-length negotiations with an
unaffiliated third party, other than pursuant to a Flip-over
Event, (4) shall sell, purchase, lease, exchange, mortgage,
pledge, transfer or otherwise acquire or dispose of in one
transaction or a series of transactions, to, from or with (as the
case may be) the Company or any of its Subsidiaries (other than
incidental to the lines of business, if any, engaged in as of
such date between the Company and such Acquiring Person or
Associates or Affiliate) assets having an aggregate fair market
value of more than $4,000,000, other than pursuant to a
transaction set forth in Section 13(a), (5) shall receive any
compensation from the Company or any of its Subsidiaries other
than compensation for full-time employment as a regular employee,
or fees for serving as a director, at rates in accordance with
the Company's (or its Subsidiaries') past practices, or (6) shall
receive the benefit, directly or indirectly (except
proportionately as a shareholder and except if resulting from a
requirement of law or governmental regulation), of any loans,
assumptions of loans, advances, guarantees, pledges or other
financial assistance, or any tax credits or other tax advantage,
provided by the Company or any of its Subsidiaries,
(D) provided that the events described in Sections
11(a)(ii)(A), (B) and (C) shall not include a repurchase by the
Company of Common Stock that is
13
approved by a majority of Continuing Directors, promptly
following five days after the date of the occurrence of the event
described in Section 11(a)(ii)(A) hereof and promptly following
the occurrence of any event described in Section 11(a)(B) or (C)
hereof,
then proper provision shall promptly be made so that each holder of a Right
shall (except as otherwise provided herein, including, without limitation,
Section 7(d)) thereafter be entitled to receive, upon exercise of the Right,
without payment of the Purchase Price and in lieu of Preferred Stock, such
number of duly authorized, validly issued, fully paid and nonassessable shares
of Common Stock of the Company (such shares being referred to herein as the
"Adjustment Shares") as shall be equal to the result obtained by (x) multiplying
the then current Purchase Price by the number of one -hundredths of a share
of Preferred Stock for which a Right is then exercisable (such product being
thereafter referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement), and dividing that product by (y) the current market
price (determined pursuant to Section 11(d)(i)) per share of Common Stock on the
date of such first occurrence; provided, however, that if the transaction that
-------- -------
would otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13, then only the provisions of Section 13 shall apply and
no adjustment shall be made pursuant to this Section 11(a)(ii).
(iii) If the number of shares of Common Stock which are
authorized by the Company's articles of incorporation but not outstanding or
reserved for issuance other than upon exercise of the Rights is insufficient to
permit the exercise in full of the Rights in accordance with Section 11(a)(ii),
the Company shall (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (computed using the "current market
price" used to determine the number of Adjustment Shares), over (2) the Purchase
Price (such excess being referred to herein as the "Spread"), and (B) with
respect to each Right, make adequate provision to substitute for the Adjustment
Shares, (1) (to the extent available) Common Stock and then, (2) (to the extent
available) other equity securities of the Company which a majority of the
Continuing Directors has determined to be essentially equivalent to shares of
Common Stock in respect to dividend, liquidation and voting rights (such
securities being referred to herein as "common stock equivalents"), and then, if
necessary, (3) other equity or debt securities of the Company, cash or other
assets, a reduction in the Purchase Price or any combination of the foregoing,
having an aggregate value (as determined by the Continuing Directors based upon
the advice of a nationally recognized investment banking firm selected by the
Continuing Directors) equal to the value of the Adjustment Shares; provided,
--------
however, if the Company shall not have made adequate provision to deliver value
- -------
pursuant to clause (B) above within thirty (30) days following the latter of (x)
the first occurrence of a Flip-in Event and (y) the date on which the Company's
right of redemption pursuant to Section 23 expires, then 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), shares of Preferred Stock of the Company, and then, if necessary,
cash, which shares and cash have an
14
aggregate value equal to the Spread. If the Continuing Directors of the
Company shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon
exercise in full of the Rights, the 30 day period set forth above (such
period, as it may be extended, being referred to herein as the
"Substitution Period") may be extended to the extent necessary, but not
more than 90 days following the first occurrence of a Flip-In Event, in
order that the Company may seek shareholder approval for the authorization
of such additional shares. If the Company determines that some action is to
be taken pursuant to the first or second sentence of this Section
11(a)(iii), then the Company (x) shall provide, subject to Section 7(d),
that such action shall apply uniformly to all outstanding Rights, and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
or to decide the appropriate form and value of any consideration to be
delivered as referred to in such first or second sentence. If any such
suspension occurs, 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. For purposes of this Section 11(a)(iii), the value of the Common
Stock shall be the current market price per share of Common Stock (as
determined pursuant to Section 11(d)) on the later of the date of the first
occurrence of a Flip-in Event and the first date that the right to redeem
the Rights pursuant to Section 23 shall expire; any common stock equivalent
shall be deemed to have the same value as the Common Stock on such date;
and the value of other securities or assets shall be determined pursuant to
Section 11(d)(iii).
(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Preferred Stock (or securities having the same rights,
privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into or exercisable for Preferred
Stock (or equivalent preferred stock) at a price per share of Preferred Stock
(or equivalent preferred stock) (in each case, taking account of any conversion
or exercise price) less than the current market price (as determined pursuant to
Section 11(d)) 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 date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate price (taking account of any conversion or exercise price) of the
total number of shares of Preferred Stock (and/or equivalent preferred stock) so
to be offered would purchase at such current market price, and the denominator
of which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock (and/or
equivalent preferred stock) so to be offered. In case such subscription price
may be paid by delivery of consideration part or all of which shall be in a form
other than cash, the value of such consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes. Shares of Preferred Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed,
15
and if such rights, options or warrants are not so issued, the Purchase Price
shall be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger involving the Company in which
the Company is the surviving entity) of evidences of indebtedness, equity
securities other than Preferred Stock, cash or assets (other than a regular
periodic cash dividend out of the earnings or retained earnings of the Company)
or rights, options or warrants (excluding those referred to in Section 11(b)),
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 (as
determined pursuant to Section 11(d)) per share of Preferred Stock on such
record date, less the value (as determined pursuant to Section 11(d)(iii)) of
such evidences of indebtedness, equity securities, assets, rights, options or
warrants so to be distributed with respect to one share of Preferred Stock, and
the denominator of which shall be such current market price per share of
Preferred Stock (as determined by Section 11(d)). Such adjustment shall be made
successively whenever such a record date is fixed, and if such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(d)(i) For the purpose of any computation hereunder other than
computations made pursuant to Section 11(a)(iii) or 14, the "current market
price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the 30
consecutive Trading Days immediately prior to such date; for purposes of
computations made pursuant to Section 11(a)(iii), the "current market price" per
share of Common Stock on any date shall be deemed to be the average of the daily
closing prices per share of such Common Stock for the 10 consecutive Trading
Days immediately following such date; and for purposes of computations made
pursuant to Section 14, the "current market price" per share of Common Stock for
any Trading Day shall be deemed to be the closing price per share of Common
Stock for such Trading Day; provided, however, that if the current market price
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per share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities exercisable for or convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or reclassification
of such Common Stock, and prior to the expiration of the requisite 30 Trading
Day or 10 Trading Day period after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be properly adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading or, if the shares of Common Stock are not listed or admitted
to trading on any
16
national securities exchange, the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by The Nasdaq Stock Market or such other system then in use or, if on
any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by a
majority of the Continuing Directors. If on any such date no market maker is
making a market in the Common Stock, then the fair value of such shares on such
date as determined in good faith by a majority of the Continuing Directors shall
be used. If the Common Stock is not publicly held or not so listed or traded,
the "current market price" per share means the fair value per share as
determined in good faith by a majority of the Continuing Directors, or if there
are no Continuing Directors, by a nationally recognized investment banking firm
selected by the Board of Directors, which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Preferred Stock shall be determined in the same
manner set forth above for the Common Stock in Section 11(d)(i) (other than
the last sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in such manner, or if the Preferred
Stock is not publicly held or listed or traded in a manner described in
Section 11(d)(i), then the "current market price" per share of Preferred
Stock shall be conclusively deemed to be an amount equal to 100 (as such
number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Stock occurring
after the date of this Agreement) multiplied by the current market price
per share of Common Stock (as determined pursuant to Section 11(d)(i)
(other than the last sentence thereof)). If neither the Common Stock nor
the Preferred Stock is publicly held or so listed or traded, the "current
market price" per share of the Preferred Stock shall be determined in the
same manner as set forth in the last sentence of Section 11(d)(i). For all
purposes of this Agreement, the "current market price" of one one-hundredth
of a share of Preferred Stock shall be equal to the "current market price"
of one share of Preferred Stock divided by 100.
(iii) For the purpose of any computation hereunder, the value of
any securities or assets other than Common Stock or Preferred Stock shall
be the fair value as determined in good faith by a majority of the
Continuing Directors then in office, or, if there are no Continuing
Directors, by a nationally recognized investment banking firm selected by
the Board of Directors, which determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 2% in the Purchase Price; provided, however,
-------- -------
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent
17
or to the nearest ten-thousandth of a share of Common Stock or other share or
one-millionth of a share of Preferred Stock, as the case may be.
(f) If at any time, as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a), the holder of any Right shall be entitled to
receive upon exercise of such Right any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Stock
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made hereunder shall evidence the right to purchase, at the Purchase
Price then in effect, the then applicable number of one one-hundredths of a
share of Preferred Stock and other capital stock of the Company issuable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share for which a
Right was exercisable immediately prior to this adjustment by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-hundredths of a share of Preferred Stock issuable 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-hundredths of a
share of Preferred Stock for which such Right was exercisable immediately prior
to such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
ten-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. 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 later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the
18
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredth of a
share and the number of shares which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the par value, if any, of the number of one one-
hundredths 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 such number of one one-hundredths of a share of
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-hundredths of a share of Preferred Stock or other capital
stock of the Company, if any, issuable upon such exercise over and above the
number of one one-hundredths of a share of Preferred Stock or other capital
stock 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
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Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) 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 (i) consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of any Preferred Stock at less than the current market
price, (iii) issuance wholly for cash of Preferred Stock or securities which by
their terms are convertible into or exercisable for Preferred Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to the holders of its Preferred Stock,
shall not be taxable to such shareholders.
19
(n) The Company covenants and agrees that it will not at any time
after the Distribution Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person, (iii) effect a statutory share exchange with any
Person, or (iv) sell, lease or otherwise transfer (and/or permit any of its
Subsidiaries to sell, lease or otherwise transfer), in one transaction or a
series of related transactions, assets aggregating more than 50% of the assets
(measured by either book value or fair market value) or generating more than 50%
of operating income or cash flow of the Company and its Subsidiaries, taken as a
whole, to any other Person or Persons if (x) at the time of or immediately after
such consolidation, merger, statutory share exchange, sale, lease or transfer
there are any rights, warrants or other instruments or securities outstanding or
any agreements or arrangements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, or (y)
prior to, simultaneously with or immediately after such consolidation, merger,
statutory share exchange, sale, lease or transfer, the shareholders of a Person
who constitutes, or would constitute, the "Principal Party" for the purposes of
Section 13 shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that after the Distribution
Date, it will not, except as permitted by Sections 23, 24 or 27, 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 substantially diminish or otherwise
eliminate the benefits intended to be afforded by the Rights, unless such action
is approved by a majority of the Continuing Directors.
(p) Notwithstanding anything in this Agreement to the contrary, if at
any time after the Effective Date and prior to the Distribution Date the Company
shall (i) pay a dividend on the outstanding shares of Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock into a
larger number of shares, or (iii) combine the outstanding Common Stock into a
smaller number of shares, the number of Rights associated with each share of
Common Stock then outstanding, or issued or delivered thereafter shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.
Section 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. 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
and the Common Stock a copy of such certificate, and (c) mail a brief summary
thereof to each holder of a Rights Certificate (or, if prior to the Distribution
Date, to each holder of a certificate representing shares of Common Stock) in
the manner set forth in Section 26. The Rights Agent shall be fully protected
in relying on any such certificate and on any adjustment contained therein.
20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. (a) Except for any transaction with a Person who has
- -------------
consummated a Qualifying Tender Offer which transaction is approved by a
majority of the Continuing Directors, if following the Share Acquisition Date,
directly or indirectly,
(w) the Company shall consolidate with, merge with or
into, or otherwise combine with, any other Person, and the
Company shall not be the continuing or surviving corporation of
such consolidation, merger or combination, or
(x) any Person shall consolidate with, merge with or
into, or otherwise combine with, the Company, and the Company
shall be the continuing or surviving corporation of such
consolidation, merger or combination and, in connection with such
consolidation, merger or combination, all or part of the
outstanding shares of Common Stock shall be changed into or
exchanged for other stock or securities of the Company or any
other Person or cash or any other property, or
(y) the Company shall be a party to any statutory share
exchange with any other Person after which the Company is a
subsidiary of any other Person, or
(z) the Company and/or one or more of its Subsidiaries
shall sell, lease or otherwise transfer, in one transaction or a
series of related transactions, assets aggregating more than 50%
of the assets (measured by either book value or fair market
value) or generating more than 50% of the operating income or
cash flow of the Company and its Subsidiaries, taken as a whole,
to any other Person or Persons,
then, and in each such case, proper provision shall promptly be made so that (i)
each holder of a Right, except as provided in Section 7(d), shall thereafter be
entitled to receive, upon exercise thereof at the then current Purchase Price,
such number of duly authorized, validly issued, fully paid and nonassessable
shares of freely tradable Common Stock of the Principal Party (as defined
below), not subject to any rights of call or first refusal, liens, encumbrances
or other claims, as shall be equal to the result obtained by (A) multiplying the
then current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Flip-over Event (or, if a Flip-in Event has previously occurred,
multiplying the number of such one one-hundredths of a share of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of a
Flip-in Event by the Purchase Price in effect immediately prior to such first
occurrence) (such product being thereafter referred to as the "Purchase Price"
for each Right and for all purposes of this Agreement), and dividing that
product by (B) 50% of the current market price (determined pursuant to Section
11(d)(i)) per share of the Common Stock or other securities of such Principal
Party) on the date of consummation of such consolidation, merger, combination,
statutory share exchange, sale, lease or transfer;
21
(ii) the Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, combination, statutory
share exchange, sale, lease or transfer, all the obligations and duties of
the Company pursuant to this Agreement;
(iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Flip-over Event;
(iv) such Principal Party shall take such steps (including, without
limitation, the authorization and reservation of a sufficient number of
shares of its Common Stock to permit exercise of all outstanding Rights in
accordance with this Section 13(a)) in connection with the consummation of
any such transaction as may be necessary to assure that the provisions
hereof 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; and
(v) the provisions of Section 11(a)(ii) shall be of no effect
following the first occurrence of a Flip-over Event.
(b) "Principal Party" means:
(i) in the case of any transaction described in Sections 13(a) (w),
(x) or (y), (A) the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted in such merger,
consolidation, or combination or for which shares of Common Stock of the
Company are exchanged in such statutory share exchange, or, if there is
more than one such issuer, the issuer of the Common Stock of which has the
greatest aggregate market value, or (B) if no securities are issued, (x)
the person that survives such consolidation or is the other party to the
merger, combination or statutory share exchange, or, if there is more than
one such Person, the Person the Common Stock of which has the greatest
aggregate market value, or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the merger
(including the Company if it survives); and
(ii) in the case of any transactions described in Sections 13(a)(z),
the Person that is the party receiving the greatest portion of the assets,
operating income or cash flow transferred pursuant to such transaction or
transactions, or, if each person that is a party to such transaction or
transactions receives the same portion of the assets, operating income or
cash flow so transferred, or, if the Person receiving the greatest portion
of the assets, operating income or cash flow cannot be determined, the
person the Common Stock of which has the greatest aggregate market value;
provided, however, that in any such case, (A) 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 another Person the
22
Common Stock of which is and has been so registered, "Principal Party" shall
refer to such other Person; and (B) in case such Person is a Subsidiary,
directly or indirectly, of more than one Person, the Common Stock of two or more
of which are and have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common Stock having the greatest
aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
combination, statutory share exchange, sale, lease or transfer unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which are not outstanding or otherwise reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in Sections 13(a) and (b) and further providing that, as soon as
practicable after the date of any consolidation, merger, combination, statutory
share exchange, sale, lease or transfer mentioned in Section 13(a), the
Principal Party will (i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities issuable upon
exercise of the Rights on an appropriate form, and will use its best efforts to
cause such registration statement (A) to become effective as soon as practicable
after such filing, and (B) to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date; and
(ii) 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 under the Exchange Act.
(d) The provisions of this Section 13 shall similarly apply to
successive mergers, consolidations, combinations, statutory share exchanges,
sales, leases or other transfers. If any Flip-over Event shall occur at any time
after the occurrence of a Flip-in Event, the Rights which have not theretofore
been exercised shall thereafter become exercisable in the manner described in
Section 13(a).
Section 14. Fractional Rights and Fractional Shares. (a) The
---------------------------------------
Company shall not be required to issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p), or to distribute Rights
Certificates which evidence fractional Rights. In lieu of any such fractional
Rights, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable an amount in cash equal to the same fraction of the current market
price of a whole Right. For purposes of this Section 14(a), the current market
price 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 would otherwise
have been issuable. The closing price of a Right for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported on the principal 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 national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the over-the-
counter market, as reported by The Nasdaq Stock Market or such other system then
in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional
23
market maker making a market in the Rights selected by a majority of the
Continuing Directors. If on any such date no such market maker is making a
market in the Rights, the current market price of the Rights on such date shall
be as determined in good faith by a majority of the Continuing Directors.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are multiples of one one-hundredth
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 multiples of one one-hundredth of a share of Preferred
Stock). In lieu of any such fractional shares of Preferred Stock, the Company
shall pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market price of one one-hundredth of a share of
Preferred Stock. For purposes this Section 14(b), the current market price of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)) for the Trading Day immediately prior to the date of such
exercise.
(c) Following the occurrence of any Triggering Event or upon any
exchange pursuant to Section 24, the Company shall not be required to issue
fractions of shares of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock. In lieu of
fractional shares of Common Stock, the Company shall pay to the registered
holders of Rights Certificates at the time such Rights are exercised or
exchanged as provided herein an amount in cash equal to the same fraction of the
current market price of a share of Common Stock. For purposes of this Section
14(c), the current market price of a share of Common Stock shall be the closing
price of a share of Common Stock (as determined pursuant to Section 11(d)(i))
for the Trading Day immediately prior to the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as permitted by this Section 14.
Section 15. Rights of Action. 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, the registered holders of
Common Stock), and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of any Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of any Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive
24
relief against actual or threatened violations of the obligations of, any Person
subject to this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right by
--------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Sections 6(a) and 7(e), the Company and the Rights
Agent may deem and treat the Person in whose name a Rights Certificate (or,
prior to the Distribution Date, a certificate representing Common Stock) 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 certificate representing shares of Common Stock made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent, subject to the last sentence of Section 7(d),
shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation; provided, however, that the Company must use its
-------- -------
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of capital stock
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting shareholders (except as provided
in Section 25), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
25
Section 18. Concerning the Rights Agent. (a) The Company agrees to
---------------------------
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the execution or
administration of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement or the exercise or performance of its
duties hereunder, including the costs and expenses of defending against any
claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with the administration of this Agreement or the exercise or performance of its
duties hereunder in reliance upon any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice,
instruction, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
- -----
Agent may be merged or 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 or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such 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 a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
26
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 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" and the
determination of "current market price") be proved or established by the Company
prior to taking, suffering or omitting to take any action hereunder, such fact
or matter (unless other evidence in respect thereof is specifically prescribed
herein) may be deemed to be conclusively proved and established by a certificate
signed by the Chairman of the Board, the President, any Vice President, the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent. Any such certificate shall be full authorization to the Rights Agent for
any action taken, suffered or omitted 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 its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this 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 hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(d)) or any adjustment in the terms of
the Rights (including the manner, method or amount thereof) provided for in
Sections 3, 11, 13, 23 or 24, or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
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 Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of
27
Common Stock or Preferred Stock will, when issued, be duly authorized, validly
issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President any Vice President, the Secretary or any
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken, suffered or omitted to be taken by it in good faith in accordance
with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company or to any holders of Rights resulting from
any such act, default, neglect or misconduct; provided, however, that reasonable
-------- -------
care was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate 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 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' written notice mailed to the Company and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and, subsequent to the Distribution Date, 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' written notice, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock by registered or certified mail,
and subsequent to the Distribution Date, to the holders of
28
the Rights Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days of giving notice of such removal or after
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his Rights Certificate for inspection by
the Company), then the registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment of a new Rights Agent.
Any successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of the
United States or of the States of Georgia (or any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the States of Georgia), in good standing, having a principal
office in the State of Georgia, and which is authorized under such laws to
exercise stock transfer or corporate trust powers and is subject to supervision
or examination by federal or state authority or (b) an Affiliate of a
corporation described in Section 21(a). After appointment, the successor Rights
Agent shall be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose. Not later than the effective date of any such appointment, the Company
shall file notice thereof in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred Stock, and, subsequent to
the Distribution Date, 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, 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 Right Certificates. Notwithstanding
----------------------------------
any of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities issuable or property purchasable upon exercise of the Rights
made in accordance with the provisions of this Agreement.
Section 23. Redemption and Termination. (a) The Company may, at its
--------------------------
option, but only upon the vote of a majority of the Continuing Directors then in
office, at any time prior to the earlier of (i) the Close of Business on the
Share Acquisition Date, or (ii) the Final Expiration Date, redeem all but not
less than all of the then outstanding Rights at a redemption price of $0.001 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being
29
referred to herein as the "Redemption Price"), and the Company may, at its
option, pay the Redemption Price in shares of Common Stock (based on the
"current market value," as defined in Section 11(d), of the shares of Common
Stock at the time of redemption), cash or any other form of consideration deemed
appropriate by the Board of Directors; provided, however, that any redemption
-------- -------
of Rights shall also be subject to any additional approval procedures required
by the articles of incorporation or bylaws of the Company. Notwithstanding
anything in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Flip-in Event until such time as the Company's
right of redemption hereunder has expired.
(b) If, following the occurrence of a Share Acquisition Date (i) a
Person who is an Acquiring Person shall have transferred or otherwise disposed
of a number of shares of Common Stock in one transaction or series of
transactions, not directly or indirectly involving the Company or any of its
Subsidiaries, which did not result in the occurrence of a Triggering Event such
that such Person is thereafter the Beneficial Owner of 10% or less of the
outstanding Common Stock, and (ii) there are no other Persons immediately
following the occurrence of the event described in clause (i) who are Acquiring
Persons, then the right of redemption shall be reinstated and thereafter be
subject to the provisions of this Section 23.
(c) Immediately upon the action of the Continuing Directors electing
to redeem the Rights, and without any further action and without any notice, the
right to exercise the Rights will terminate and thereafter the only right of the
holders of Rights shall be to receive the Redemption Price for each Right so
held. The Company shall promptly thereafter give notice of such redemption to
the Rights Agent and the holders of the Rights in the manner set forth in
Section 26; provided, however, that the failure to give, or any defect in, such
-------- -------
notice shall not affect the validity of such redemption. Any notice which is
mailed in the manner provided herein 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.
Section 24. Exchange. (a) At any time after any Person becomes an
--------
Acquiring Person, a majority of the Continuing Directors may, at their option,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to Section 7(d)) for shares of
Common Stock 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 hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Continuing Directors electing
to exchange any Rights pursuant to Section 24(a) and without any further action
and without any notice, the right to exercise such Rights will terminate and
thereafter the only right of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly thereafter
give notice of such exchange to the Rights Agent and the holders of the Rights
to be exchanged in the manner set forth in Section 26; provided, however, that
-------- -------
the failure to give, or any defect in, such notice shall not affect the validity
of such exchange. Any notice which is mailed in the manner provided herein
shall be deemed given, whether or not the holder receives the notice.
30
Each such notice of exchange will state the method by which the exchange of the
shares of Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to Section 7(d)) held by each holder of
Rights.
(c) If there shall not be sufficient Common Stock issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated by this Section 24, the Company shall take all such action as may
be necessary to authorize additional Common Stock for issuance upon exchange of
the Rights. In the event the Company shall, after a good faith effort, be
unable to take all such action as may be necessary to authorize such additional
Common Stock, the Company may substitute common stock equivalents (as defined in
Section 11(a)(iii)) for shares of Common Stock exchangeable for Rights, at the
initial rate of one common stock equivalent for each share of Common Stock, as
appropriately adjusted to reflect adjustments in dividend, liquidation and
voting rights of common stock equivalents pursuant to the terms thereof, so that
each common stock equivalent delivered in lieu of each share of Common Stock
shall have essentially the same dividend, liquidation and voting rights as one
share of Common Stock.
(d) The Company shall not be required to issue fractional shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of Rights Certificates with regard to which
such fractional shares of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the current market value of a whole share of
Common Stock. For purposes of this Section 24(d), the current market value of a
whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to Section 11(d)) for the Trading Day immediately
prior to the date of the exchange.
Section 25. Notice of Proposed Actions. (a) If the Company shall
--------------------------
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained earnings of the Company),
(ii) to offer to the holders of its Preferred Stock rights 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, (iii) to
effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision or combination of outstanding
shares of Preferred Stock), (iv) to effect any consolidation or merger with or
into any other Person, or to effect a statutory share exchange with any Person,
or to effect and/or to permit one or more of its Subsidiaries to effect any
sale, lease or other transfer, in one transaction or a series of related
transactions, of assets aggregating more than 50% of the assets (measured by
either book value or fair market value) or generating more than 50% of the
operating income or cash flow of the Company and its Subsidiaries, taken as a
whole, to any other Person or Persons, or (v) to 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, to the extent feasible and in accordance
with Section 26, a notice of such proposed action, which shall specify the
record date for the purposes of any such
31
dividend, distribution or offering of rights or warrants, or the date on which
any such reclassification, consolidation, merger, statutory share exchange,
sale, lease, transfer, liquidation, dissolution or winding up is to take place
and the date of participation therein by the holders of 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 (i) or (ii) above at least 20 days prior to the record
date for determining holders of the Preferred Stock entitled to participate in
such dividend, distribution or offering, 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 by the holders of Preferred Stock,
whichever shall be the earlier. The failure to give notice required by this
Section 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.
(b) Notwithstanding anything in this Agreement to the contrary, prior
to the Distribution Date a public filling by the Company with the Securities and
Exchange Commission shall constitute sufficient notice to the holders of
securities of the Company, including the Rights, for purposes of this Agreement
and no other notice need be given to such holders.
(c) If a Triggering Event shall occur, then, in any such case, (i) the
Company shall as soon as practicable thereafter give to each holder of a Right,
in accordance with Section 26, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to holders of Rights
under Section 11(a)(ii) or 13, as the case may be, and (ii) all references in
Section 25(a) to Preferred Stock shall be deemed thereafter to refer to Common
Stock or other capital stock, as the case may be.
Section 26. Notices. Notices or demands authorized by this
-------
Agreement to be given or made by the Rights Agent or by the holder of any Right
to or on the Company shall be sufficiently given or made if sent by first-class,
postage prepaid mail to the address of the Company indicated on the signature
page hereof or such other address as the Company shall specify in writing to the
Rights Agent. 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 Right to or on the Rights Agent shall be sufficiently given or made if
sent by first-class, postage prepaid mail to the address of the Rights Agent
indicated on the signature page hereof or such other address as the Rights Agent
shall specify in writing to the Company. 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 (or, prior to the Distribution Date, to the holder of
any certificate representing shares of Common Stock) shall be sufficiently given
or made if sent by first-class, postage prepaid mail to the address of such
holder shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution
--------------------------
Date and subject to the penultimate sentence of this Section 27, the Company may
and the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date, and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without
32
the approval of any holders of Right Certificates in order (a) to cure any
ambiguity, (b) to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provisions herein, (c) to shorten or
lengthen any time period hereunder (which shortening or lengthening shall be
effective only if there are Continuing Directors in office and shall require the
concurrence of a majority of such Continuing Directors), or (d) to change or
supplement the provisions hereof in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, however, that this Agreement may not be
-------- -------
supplemented or amended pursuant to Section 27(c) to lengthen (i) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable, or (ii) any other time period, unless lengthening such other
time period is for the purpose of protecting, enhancing, or clarifying the
rights of, or benefits to the holders of, the Rights. Notwithstanding the
foregoing, after any Person has become an Acquiring Person, any supplement or
amendment shall be effective only if there are Continuing Directors then in
office, and such supplement or amendment shall have been approved by a majority
of such Continuing Directors. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock. Notwithstanding anything contained in this Agreement
to the contrary, no supplement or amendment shall be made at any time which
changes the Redemption Price, the Final Expiration Date, the Purchase Price, the
requisite ownership of Common Stock necessary for a Person to be deemed an
Acquiring Person, the number of one one-hundredths of a share of Preferred Stock
for which a Right is exercisable, or the definition of an Excluded Person,
unless in any such case there are Continuing Directors then in office and such
supplement or amendment shall have been approved by a majority of such
Continuing Directors. Upon the delivery of a certificate from an appropriate
officer of the Company which states that the proposed supplement or amendment is
in compliance with the terms of this Section, the Rights Agent shall execute
such supplement or amendment.
Section 28. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors.
----------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence of Rule 13d-3(d)(1)(i) under the Exchange Act as in effect on
the date of this Agreement. A majority of the Continuing Directors shall have
the exclusive power and authority to administer this Agreement and to exercise
all rights and powers specifically granted to the Board or to the Company, or as
may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (a) interpret the
provisions of this Agreement, and (b) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or exchange or not to redeem or exchange the Rights or to amend this
Agreement); provided, however, that any redemption of Rights shall also be
-------- -------
subject to any additional approval procedures required by the articles of
incorporation or bylaws of the Company. 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
Continuing Directors in good faith, shall (x) be final, conclusive and binding
on the Company (subject to any additional
33
redemption approval procedures referred to in the proviso to the immediately
preceding sentence), the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board of Directors of the Company or the
Continuing Directors to any liability to the holders of the Rights.
Section 30. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the certificates representing the shares of Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the certificates representing the shares of Common Stock).
Section 31. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that, notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and a majority of the
Continuing Directors determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Continuing Directors.
Section 32. Governing Law. This Agreement, each Right and each
-------------
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of Georgia and for all purposes shall be governed by and
construed in accordance with the laws of such State (other than its conflicts of
laws rules) applicable to contracts to be made and performed entirely within
such State.
Section 33. Counterparts. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
one and the same instrument.
Section 34. Descriptive Headings. The captions herein are included
--------------------
for convenience of reference only, do not constitute a part of this Agreement
and shall be ignored in the construction and interpretation hereof.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
INNOTRAC CORPORATION
By: /s/ Scott Dorfman
-------------------------------------
Name: Scott Dorfman
--------------------------------
Title: President
-------------------------------
1828 Meca Way
Norcross, Georgia 30093
Attention: President
RELIANCE TRUST COMPANY
By: /s/ Jerry W. Dawson
-------------------------------------
Name: Jerry W. Dawson
--------------------------------
Title: Senior Vice President
-------------------------------
Reliance Trust Company
-------------------------------------
3384 Peachtree Rd., N.E., Suite 900
-------------------------------------
Atlanta, GA 30326-1106
-------------------------------------
Attention: Jerry W. Dawson
---------------------------
35
Exhibit A
FORM OF
BOARD RESOLUTION ESTABLISHING AND DESIGNATING
SERIES A PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
INNOTRAC CORPORATION
Pursuant to Section 14-2-602 of the Georgia
Business Corporation Code
Section 1. Designation and Number of Shares. The shares of such
series shall be designated as "Series A Participating Cumulative Preferred
Stock" (the "Series A Preferred Stock"), and the number of shares constituting
such series shall be 500,000. Such number of shares of the Series A Preferred
Stock may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Preferred Stock to a number less than the number of shares then outstanding
plus the number of shares issuable upon exercise or conversion of outstanding
rights, options or other securities issued by the Corporation.
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, if any, the holders of
shares of Series A Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable on the last day of March, June, September
and December of each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of any 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) $1.00 and (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per share amount
(payable in kind) of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other distributions
(other than (i) a dividend payable in shares of Common Stock, par value $0.10
per share, of the Corporation (the "Common Stock") or (ii) a subdivision
A-1
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. If the Corporation shall at any time after _________, ____
(the "Rights Declaration Date") declare or pay any dividend on Common Stock
payable in shares of Common Stock or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in Section 2(A) immediately after it
declares a dividend or distribution on the Common Stock (other than as described
in clauses (i) and (ii) of the first sentence of Section 2(A)); provided,
however, that if 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 (or, with respect to the
first Quarterly Dividend Payment Date, the period between the first issuance of
any share or fraction of a share of Series A Preferred Stock and such first
Quarterly Dividend Payment Date), a dividend of $1.00 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 on or before the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issue of such shares, or
unless the date of issue 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 on or before such Quarterly Dividend Payment Date, in which case
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 shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. 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 not be more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. In addition to any other voting rights
required by law, the holders of shares of Series A Preferred Stock shall have
the following voting rights:
A-2
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of shareholders of the Corporation. If
the Corporation shall at any time after the Rights Declaration Date declare or
pay any dividend on Common Stock payable in shares of Common Stock or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as a single class on all matters submitted to a vote of
shareholders 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 (whether or
not consecutive), the occurrence of such contingency shall mark the beginning of
a period (herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend 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, all holders of Series A Preferred
Stock and any other series of Preferred Stock then entitled as a class to elect
directors, voting together as a single class, irrespective of series, shall have
the right to elect one Director.
(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 Section 3(C)(iii) or at any annual meeting of shareholders, and
thereafter at annual meetings of shareholders; provided, however, that neither
such voting right nor the right of the holders of any other series of Preferred
Stock, if any, to increase, in certain cases, the authorized number of Directors
shall be exercised unless the holders of 10% in number of shares of Preferred
Stock outstanding shall be present in person or by proxy. The absence of a
quorum of holders of Common Stock shall not affect the exercise by holders of
Preferred Stock of such voting right. At any meeting at which holders of
Preferred Stock shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to elect Directors
to fill such vacancy, if any, in the Board of Directors as may then exist up to
one Director or, if such right is exercised at an annual meeting, to elect one
Director. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or pari passu with the Series A Preferred Stock.
---- -----
A-3
(iii) Notwithstanding anything to the contrary contained in the
Corporation's Articles of Incorporation or Bylaws, unless the holders of
Preferred Stock shall, during an existing default period, have previously
exercised their right to elect Directors, the Board of Directors may order, or
any shareholder(s) owning in the aggregate not less than ten percent (10%) of
the total number of shares of Preferred Stock outstanding, irrespective of
series, may request, the calling of a special meeting of holders of Preferred
Stock, which meeting shall thereupon be called by the President, a Vice
President or the Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of Preferred Stock are entitled to vote pursuant
to this Section 3(C)(iii) shall be given to each holder of record of 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 20 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 shareholder(s)
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series. Notwithstanding
the provisions of this Section 3(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 shareholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect one Director voting as a class, after
the exercise of which right (x) the Directors so elected by the holders of
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 (except as provided in Section
3(C)(ii) be filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class of stock which elected the Director whose
office shall have become vacant. References in this Section 3(C) to Directors
elected by the holders of a particular class 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 Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the Articles of Incorporation or Bylaws irrespective
of any increase made pursuant to the provisions of Section 3(C)(ii) (such number
being subject, however, to change thereafter in any manner provided by law or in
the Articles 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.
(D) Except as otherwise provided 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.
A-4
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 outstanding shares of Series A
Preferred Stock 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
other 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, purchase or otherwise acquire for value any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock; provided,
however, that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of stock of
the Corporation ranking junior (as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) redeem, purchase or otherwise acquire for value any shares of
Series A Preferred Stock, or 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 in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of Series A Preferred Stock and all such other
parity stock 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 value any shares of stock of
the Corporation unless the Corporation could, under Section 4(A), purchase or
otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof.
All such shares shall upon their cancellation become authorized but unissued
shares of Preferred Stock without designation as to series and may be reissued
as part of a new series of Preferred Stock to be created by resolution
A-5
or resolutions of the Board of Directors as permitted by the Articles of
Incorporation or as otherwise permitted under Georgia law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (1) 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 $1.00 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment; provided, however, that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of Common
Stock, or (2) 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 such other 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. If the Corporation shall at any time after the
Rights Declaration Date pay any dividend on Common Stock payable in shares of
Common Stock or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock 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.
Section 7. Consolidation or Merger. If 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 or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged for or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of stock,
securities, cash or any other property, as the case may be, into which or for
which each share of Common Stock is exchanged or changed. If the Corporation
shall at any time after the Rights Declaration Date pay any dividend on Common
Stock payable in shares of Common Stock or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
A-6
Section 8. No Redemption. The Series A Preferred Stock shall not be
redeemable.
Section 9. Rank. The Series A Preferred Stock shall rank junior (as
to dividends and upon liquidation, dissolution and winding up) to all other
series of the Corporation's preferred stock, except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.
Section 10. Fractional Shares. Series A Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
Section 11. Amendment. The Articles of Incorporation of the
Corporation shall not be further 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 a majority or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
A-7
Exhibit B
Form of Rights Certificate
Certificate No. R- _______________Rights
NOT EXERCISABLE AFTER THE EARLIER OF JANUARY 1, 2008, AND THE DATE ON WHICH
THE RIGHTS EVIDENCED HEREBY ARE REDEEMED OR EXCHANGED BY THE COMPANY AS SET
FORTH IN THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001
PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. AS
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO
IS, WAS OR BECOMES AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE THEREOF (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BE NULL AND VOID. [THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY
A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE
OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BE OR MAY BECOME
NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(d) OF THE RIGHTS
AGREEMENT.)]/1/
RIGHTS CERTIFICATE
INNOTRAC CORPORATION
This Rights Certificate certifies that ________, or registered
assigns, is the registered holder of the number of Rights set forth above, each
of which entitles the holder (upon the terms and subject to the conditions set
forth in the Rights Agreement, dated as of December 31, 1997 (the "Rights
Agreement"), between Innotrac Corporation, a Georgia corporation (the
"Company"), and Reliance Trust Company (the "Rights Agent")), to purchase
from the Company, at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to the Expiration Date (as such term
is defined in the Rights Agreement), one one-hundredth{s} of a fully paid, non-
assessable share of Series A Participating Cumulative Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $60.00 per one one-
hundredth of a share (the "Purchase Price"), payable in lawful money of the
United States of America, upon surrender of this Rights Certificate, with the
form of election to purchase and related certificate duly executed, and payment
of the Purchase Price at an office of the Rights Agent designated for such
purpose.
- ---------------------
/1/ If applicable, insert this portion of the legend and delete the preceding
sentence.
B-1
Terms used herein and not otherwise defined herein have the meanings
assigned to them in the Rights Agreement.
The number of Rights evidenced by this Rights Certificate (and the
number and kind of shares issuable upon exercise of each Right) and the Purchase
Price set forth above are as of ____________, _____, and may have been or in the
future may be adjusted as a result of the occurrence of certain events, as more
fully provided in the Rights Agreement.
Upon the occurrence of a Flip-in Event, if the Rights evidenced by
this Rights Certificate are beneficially owned by (a) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (b) a transferee of an Acquiring
Person (or any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (c) under certain circumstances specified in
the Rights Agreement, a transferee of an Acquiring Person (or any such Associate
or Affiliate) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such, such Rights shall become null and void, and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Flip-in Event.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the office of the Company and are
also available upon written request to the Company.
Upon surrender at the principal office or offices of the Rights Agent
designated for such purpose and subject to the terms and conditions set forth in
the Rights Agreement, any Rights Certificate(s) may be transferred or exchanged
for another Rights Certificate(s) evidencing a like number of Rights as the
Rights Certificate(s) surrendered. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate(s) for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Board of
Directors of the Company may, at its option,
(a) at any time prior to the earlier of (i) the Close of Business
on the Share Acquisition Date and (ii) the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a
redemption price of $0.001 per Right; or
(b) at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding Rights (other than Rights
held by the Acquiring Person and certain related Persons) for shares
of Common Stock at an exchange ratio of one share of Common Stock per
Right. If the Rights shall be exchanged in part, the holder of this
Rights Certificate shall be entitled to receive
B-2
upon surrender hereof another Rights Certificate(s) for the number of
whole Rights not exchanged.
After the expiration of the redemption period, the Company's right of
redemption may be reinstated if an Acquiring Person reduces his beneficial
ownership to ten percent (10%) or less of the outstanding shares of Common Stock
in a transaction or series of transactions not involving the Company and there
is no other Acquiring Person.
No fractional shares of Preferred Stock are required to be issued upon
the exercise of any Right(s) evidenced hereby (other than fractions which are
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depository receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the shares of
capital stock which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right(s)
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-3
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal by its authorized officers.
Dated as of _____________________, ______
INNOTRAC CORPORATION
By:
----------------------------
Title:
(SEAL)
Attest:
- ------------------------------------
Secretary
Countersigned:
Reliance Trust Company
as Rights Agent
By:
---------------------------------
Authorized Signature
B-4
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed if the registered holder
desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED
------------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated:
------------------------- -----------------------------
Signature
Signature Guaranteed:
B-5
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate ___ are ___ are
not being assigned by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Acquiring Person (as such terms are
defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
___ did ___ did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring person.
Dated:
--------------------------- --------------------------------
Signature
NOTICE
The signatures to the foregoing Assignment and Certificate 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.
B-6
-------------------
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to exercise Rights represented
by the Rights Certificate.)
To: Innotrac Corporation
The undersigned hereby irrevocably elects to exercise ______________
Rights represented by this Rights Certificate to purchase shares of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other Person which may be issuable upon the exercise of the
Rights) and requests that certificates for such securities be issued in the name
of and delivered to:
Please insert social security
or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number
- ---------------------------------------------
(Please print name and address)
- ---------------------------------------------
Dated: ____________________, _______
-------------------------
Signature
Signature Guaranteed:
B-7
EXHIBIT C
------------
INNOTRAC CORPORATION
SHAREHOLDER RIGHTS PLAN
Summary of Terms
Form of Security: The Board of Directors has declared a dividend
of one preferred stock purchase right for each
outstanding share of the Company's Common Stock,
payable to holders of record as of the close of
business on January 1, 1998 (the "Effective
Date") (each a "Right," and collectively, the
"Rights").
Distribution Date: The earlier of:
(1) the 10th day after public announcement
that (a) any person or group has become,
after the Effective Date, the beneficial
owner of 15% or more of the Company's
Common Stock, or (b) an acquisition (other
than an Approved Acquisition) of an
additional 2% or more of the Common Stock
has been made by (i) a person or group which
previously acquired a 15% or greater
interest in an Approved Acquisition or (ii)
a person or group which owned 15% or more
of the Company's Common Stock prior to the
Effective Date; and
(2) the 10th business day after the date of
the commencement of a tender or exchange
offer (other than a Qualifying Tender Offer)
by any person which would, if consummated,
result in such person becoming the
beneficial owner of 15% or more of the
Company's Common Stock, in each case,
subject to extension by a majority of the
Continuing Directors.
Approved Acquisition: An acquisition, approved in advance by a
majority of the Continuing Directors, of (i)
15% or more of the Common Stock by any person,
or (ii) an additional 2% or more of the Common
Stock by a previously approved 15% or more
holder.
Qualifying Tender Offer: A tender or exchange offer for all the Common
Stock which
C-1
is approved in advance by a majority of the
Continuing Directors.
Transfer: Prior to the Distribution Date, the Rights will
be evidenced by the certificates for and will be
transferred with the Common Stock, and the
registered holders of the Common Stock will be
deemed to be the registered holders of the
Rights.
After the Distribution Date, the Rights Agent
will mail separate certificates evidencing the
Rights to each record holder of the Common Stock
as of the close of business of the Distribution
Date, and thereafter the Rights will be
transferable separately from the Common Stock.
Exercise: Prior to the Distribution Date, the Rights will
not be exercisable.
After the Distribution Date, each Right will be
exercisable to purchase, for $60.00 (the
"Purchase Price"), one one-hundredth of a share
of Series A Participating Cumulative Preferred
Stock, par value $0.10 per share, of the
Company.
Flip-In: If (1) any person or group (an "Acquiring
Person") becomes, after the Effective Date, the
beneficial owner of 15% or more of the
Company's Common Stock (other than an Approved
Acquisition or a Qualifying Tender Offer), (2)
during such time as there is an Acquiring
Person, an event occurs which results in such
Acquiring Person acquiring an additional 2% or
more of the Common Stock (other than an Approved
Acquisition or a Qualifying Tender Offer), (3)
the Company is the surviving corporation in a
merger with an Acquiring Person and its Common
Stock is not changed or exchanged, or (4) an
Acquiring Person engages in one or more "self-
dealing" transactions as set forth in the Rights
Agreement, then each Right (other than Rights
beneficially owned by the Acquiring Person and
certain affiliated persons) will entitle the
holder to elect to receive a number of shares of
the Company's Common Stock (or in certain
circumstances, cash, property or other
securities of the Company) having a market value
equal to the Purchase Price, without payment of
the Purchase Price and in lieu of the Preferred
Stock. Notwithstanding the foregoing, in most
instances following the occurrence of the events
set forth in this paragraph, all Rights that
are, or (under certain circumstances specified
in the Rights Agreement) were, beneficially
owned by any Acquiring Person will be null and
void. However, Rights are not exercisable
following the occurrence of the events set
C-2
forth above until such time as the Rights are no
longer redeemable by the Company as set forth
below.
Flip-Over: If, after any person has become an Acquiring
Person (other than pursuant to an Approved
Acquisition or a Qualifying Tender Offer), (1)
the Company is involved in a merger or other
business combination in which the Company is not
the surviving corporation or its Common Stock is
exchanged for other securities or assets, or (2)
the Company and/or one or more of its
subsidiaries sell or otherwise transfer assets
aggregating more than 50% of the assets or
generating more than 50% of the operating income
or cash flow of the Company and its
subsidiaries, taken as a whole (other than a
Qualifying Tender Offer), then each Right will
entitle the holder to purchase, for the Purchase
Price, a number of shares of common stock of the
other party to such business combination or sale
(or in certain circumstances, an affiliate)
having a market value of twice the Purchase
Price.
Exchange: At any time after any person has become an
Acquiring Person a majority of the Continuing
Directors may exchange all or part of the Rights
(other than the Rights beneficially owned by the
Acquiring Person and certain affiliated persons)
for shares of Common Stock at an exchange ratio
of one share of Common Stock per Right.
Redemption: Subject to the applicable provisions in the
Company's articles of incorporation and bylaws,
a majority of Continuing Directors may redeem
all of the Rights at a price of $0.001 per Right
at any time prior to the close of business on
the date of the public announcement that any
person has become an Acquiring Person (subject
to extension by a majority of the Continuing
Directors). The Company's right of redemption
may be reinstated if an Acquiring Person reduces
his beneficial ownership to 10% or less of the
outstanding shares of Common Stock in a
transaction or series of transactions not
involving the Company. Immediately upon the
action of a majority of Continuing Directors
ordering redemption of the Rights, the Rights
will terminate and the only right of the holders
of the Rights will be to receive the redemption
price thereof.
Continuing Director: Means any member of the Board of Directors who
was a member of the Board prior to the Effective
Date or any person who is subsequently elected
to the Board if such person is recommended or
approved by a majority of the
C-3
Continuing Directors. Continuing Directors do
not include an Acquiring Person, an affiliate or
associate of an Acquiring Person or any
representative or nominee of the foregoing.
Expiration: The Rights will expire 10 years from the
Effective Date unless earlier exchanged or
redeemed.
Amendments: Prior to the Distribution Date, the Rights
Agreement may be amended in any respect;
provided that, at any time, any change in the
Redemption Price, the Expiration Date, the
Purchase Price or the number of shares of
Preferred Stock for which a Right is
exercisable must be approved by a majority of
the Continuing Directors.
After the Distribution Date, the Rights
Agreement may be amended in any respect that
does not adversely affect the Rights holders
(other than any Acquiring Person and certain
affiliated persons); provided that, at any time,
any change in the Redemption Price, the
Expiration Date, the Purchase Price or the
number of shares of Preferred Stock for which a
Right is exercisable must be approved by a
majority of the Continuing Directors.
After any person has become an Acquiring Person,
the Rights Agreement may be amended only with
the approval of a majority of the Continuing
Directors.
Voting Rights: Rights holders have no rights as a shareholder
of the Company, including the right to vote and
to receive dividends.
Antidilution Provisions: The Purchase Price payable, and the number of
shares of Preferred Stock or other securities or
property issuable upon exercise of the Rights
are subject to adjustment from time to time to
prevent dilution (1) in the event of a stock
dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (2)
upon the grant to holders of the Preferred Stock
of certain rights or warrants to subscribe for
or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with
a conversion price, less than the then-current
market price of the Preferred Stock, or (3) upon
the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends paid
out of earnings or retained earnings) or of
subscription rights or warrants.
The number of outstanding Rights and the number
of 1/100ths of a share of Preferred Stock
issuable upon exercise of each Right are also
subject to adjustment in the event of a stock
split of the Common Stock or a stock dividend on
the Common Stock payable in Common Stock or
subdivisions, consolidations or combinations of
the Common Stock occurring prior to the
Distribution Date.
C-4
With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative
adjustments amount to at least of the Purchase
Price. No fractional shares of Preferred Stock
will be issued (other than fractions which are
integral multiples of 1/100th of a share of a
Preferred Stock), and in lieu thereof, an
adjustment in cash will be made based on the
market price of the Preferred Stock on the last
trading date prior to the date of exercise.
Preferred Stock: The dividend and liquidation rights of the
Preferred Stock are designed so that the value
of one one-hundredth of a share of Preferred
Stock issuable upon exercise of each Right will
approximate the same economic value of one share
of Common Stock, including voting rights. Shares
of Preferred Stock issuable upon exercise of the
Rights will not be redeemable. Each share of
Preferred Stock will entitle the holder to a
minimum preferential dividend of $1.00 per
share, but will entitle the holder to an
aggregate dividend payment of 100 times the
dividend declared on each share of Common Stock.
In the event of liquidation, each share of
Preferred Stock will be entitled to a minimum
preferential liquidation payment of $1.00, plus
accrued and unpaid dividends and distributions
thereon, but will be entitled to an aggregate
payment of 100 times the payment made per share
of Common Stock. In the event of any merger,
consolidation or other transaction in which
Common Stock is exchanged for or changed into
other stock or securities, cash or other
property, each share of Preferred Stock will be
entitled to receive 100 times the amount
received per share of Common Stock.
Each share of Preferred Stock will be entitled
to 100 votes on all matters submitted to a vote
of the shareholders of the Company, and shares
of Preferred Stock will generally vote together
as one class with the Common Stock and any other
voting capital stock of the Company on all
matters submitted to a vote of the Company's
shareholders. Further, whenever dividends on the
Preferred Stock are in arrears in an amount
equal to six quarterly payments, the Preferred
Stock, together with any other shares of
preferred stock then entitled to elect
directors, shall have the right, as a single
class, to elect one director until the default
has been cured.
C-5
Taxes: While the dividend of the Rights will not be
taxable to shareholders or to the Company,
shareholders or the Company may, depending upon
the circumstances, recognize taxable income in
the event that the Rights become exercisable as
set forth above.
C-6