AEHR TEST SYSTEMS
and
U.S. Stock Transfer Corporation
Rights Agent
PREFERRED SHARES RIGHTS AGREEMENT
Dated as of March 5, 2001
TABLE OF CONTENTS
Page
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Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 8
Section 3. Issuance of Rights Certificates 8
Section 4. Form of Right Certificate 10
Section 5. Countersignature and Registration 11
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates 12
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights 13
Section 8. Cancellation and Destruction of Rights Certificates 15
Section 9. Reservation and Availability of Preferred Shares 15
Section 10. Record Date 17
Section 11. Adjustment of Exercise Price, Number of Shares or
Number of Rights 17
Section 12. Certificate of Adjusted Exercise Price or Number of Shares 24
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power 24
Section 14. Fractional Rights and Fractional Shares 28
Section 15. Rights of Action 29
Section 16. Agreement of Rights Holders 30
Section 17. Rights Certificate Holder Not Deemed a Shareholder 30
Section 18. Concerning the Rights Agent 31
Section 19. Merger or Consolidation or Change of Name of Rights Agent 31
Section 20. Duties of Rights Agent 32
Section 21. Change of Rights Agent 35
Section 22. Issuance of New Rights Certificates 35
Section 23. Redemption 36
Section 24. Exchange 37
Section 25. Notice of Certain Events 39
Section 26. Notices 39
Section 27. Supplements and Amendments 40
Section 28. Successors 40
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TABLE OF CONTENTS
(continued)
Page
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Section 29. Determinations and Actions by the Board of Directors, etc 41
Section 30. Benefits of this Agreement 41
Section 31. Severability 41
Section 32. Governing Law 41
Section 33. Counterparts 42
Section 34. Descriptive Headings 42
EXHIBITS
Exhibit A Form of Certificate of Determination
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights
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RIGHTS AGREEMENT
Agreement, dated as of March 5, 2001, between Aehr Test Systems, a
California corporation (the "Company"), and U.S. Stock Transfer Corporation.
On April 3, 2000 (the "Rights Dividend Declaration Date"), the Board of
Directors of the Company authorized and declared a dividend of one Preferred
Share Purchase Right (a "Right") for each Common Share (as hereinafter
defined) of the Company outstanding as of the Close of Business (as hereinafter
defined) on April 2, 2001 (the "Record Date"), each Right representing the
right to purchase one one-thousandth of a share of Series A Participating
Preferred Stock (as such number may be adjusted pursuant to the provisions of
this Agreement), having the rights, preferences and privileges set forth in the
form of Certificate of Determinations of Rights, Preferences and Privileges of
Series A Participating Preferred Stock attached hereto as Exhibit A, upon the
terms and subject to the conditions herein set forth, and further authorized
and directed the issuance of one Right (as such number may be adjusted pursuant
to the provisions of this Agreement) with respect to each Common Share that
shall become outstanding between the Record Date and the earlier of the
Distribution Date and the Expiration Date (as such terms are hereinafter
defined), and in certain circumstances after the Distribution Date.
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the Common Shares then outstanding, but shall not
include the Company, any Subsidiary of the Company or any employee benefit plan
of the Company or of any Subsidiary of the Company, or any entity holding
Common Shares for or pursuant to the terms of any such plan Notwithstanding the
foregoing, no Person shall be deemed to be an Acquiring Person as the result of
an acquisition of Common Shares by the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 20% or more of the Common Shares of the Company then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 20% or more of the Common Shares of the Company then outstanding by
reason of share purchases by the Company and shall, after such share purchases
by the Company, become the Beneficial Owner of any additional Common Shares of
the Company (other than pursuant to a dividend or distribution paid or made by
the Company on the outstanding Common Shares in Common Shares or pursuant to a
split or subdivision of the outstanding Common Shares), then such Person shall
be deemed to be an Acquiring Person unless upon becoming the Beneficial Owner
of such additional Common Shares of the Company such Person does not
beneficially own 20% or more of the Common Shares of the Company then
outstanding. Notwithstanding the foregoing, (i) if the Company's Board of
Directors determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently (including,
without limitation, because (A) such Person was unaware that it beneficially
owned a percentage of the Common Shares that would otherwise cause such Person
to be an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), or (B) such Person was aware of the extent of the Common
Shares it beneficially owned but had no actual knowledge of the consequences of
such beneficial ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person divested or
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an "Acquiring Person," as defined pursuant to
the foregoing provisions of this paragraph (a), then such Person shall not be
deemed to be or to have become an "Acquiring Person" for any purposes of this
Agreement; and (ii) if, as of the Record Date, any Person is the Beneficial
Owner of 20% or more of the Common Shares outstanding, such Person shall not be
or become an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), unless and until such time as such Person
shall become the Beneficial Owner of additional Common Shares (other than
pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or
subdivision of the outstanding Common Shares), unless, upon becoming the
Beneficial Owner of such additional Common Shares, such Person is not then the
Beneficial Owner of 20% or more of the Common Shares then outstanding.
(b) "Adjustment Fraction" shall have the meaning set forth in Section
11(a)(i) hereof.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase
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or exchange, or (2) securities which a Person or any of such Person's
Affiliates or Associates may be deemed to have the right to acquire pursuant to
any merger or other acquisition agreement between the Company and such Person
(or one or more of its Affiliates or Associates) if such agreement has been
approved by the Board of Directors of the Company prior to there being an
Acquiring Person; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security under this
Section 1(d)(ii)(B) if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange
Act and (2) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person or
any of such Person's Affiliates or Associates has any agreement, arrangement or
understanding, whether or not in writing (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities) for the purpose of acquiring, holding, voting
(except to the extent contemplated by the proviso to Section 1(d)(ii)(B)) or
disposing of any securities of the Company; provided, however, that in no case
shall an officer or director of the Company be deemed (x) the Beneficial Owner
of any securities beneficially owned by another officer or director of the
Company solely by reason of actions undertaken by such persons in their
capacity as officers or directors of the Company or (y) the Beneficial Owner of
securities held of record by the trustee of any employee benefit plan of the
Company or any Subsidiary of the Company for the benefit of any employee of the
Company or any Subsidiary of the Company, other than the officer or director,
by reason of any influence that such officer or director may have over the
voting of the securities held in the plan.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
a day on which banking institutions in New York are authorized or obligated by
law or executive order to close.
(f) "Close of Business" on any given date shall mean 5:00 P.M.,
California time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., California time, on the next succeeding
Business Day.
(g) "Common Shares" when used with reference to the Company shall mean
the shares of Common Stock of the Company, no par value Common Shares when used
with reference to any Person other than the Company shall mean the capital
stock (or equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
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(h) "Common Stock Equivalents" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(i) "Company" shall mean Aehr Test Systems, a California corporation,
subject to the terms of Section 13(a)(iii)(C) hereof.
(j) "Current Per Share Market Price" of any security (a "Security" for
purposes of this definition), for all computations other than those made
pursuant to Section 11(a)(iii) hereof, shall mean the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to such date, and for purposes of computations
made pursuant to Section 11(a)(iii) hereof, the Current Per Share Market Price
of any Security on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the ten (10) consecutive Trading
Days immediately prior to such date; provided, however, that in the event that
the Current Per Share Market Price of the Security is determined during a
period following the announcement by the issuer of such Security of (i) a
dividend or distribution on such Security payable in shares of such Security or
securities convertible into such shares or (ii) any subdivision, combination or
reclassification of such Security, and prior to the expiration of the
applicable thirty (30) Trading Day or ten (10) Trading Day period, after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
Current Per Share Market Price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security
. The closing price for each day shall be the last sale price, regular way,
or, in case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last sale price
or, if such last sale price is not reported, the average of the high bid and
low asked prices in the over-the-counter market, as reported by Nasdaq or such
other system then in use, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. If on any such date no
market maker is making a market in the Security, the fair value of such shares
on such date as determined in good faith by the Board of Directors of the
Company shall be used. If the Preferred Shares are not publicly traded, the
Current Per Share Market Price of the Preferred Shares shall be conclusively
deemed to be the Current Per Share Market Price of the Common Shares as
determined pursuant to this Section 1(j), as appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof, multiplied by 1000. If the Security is not publicly held or so listed
or traded, Current Per Share Market Price shall mean the fair value per share
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
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(k) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(l) "Distribution Date" shall mean the earlier of (i) the Close of
Business on the tenth day after the Shares Acquisition Date (or, if the tenth
day after the Shares Acquisition Date occurs before the Record Date, the Close
of Business on the Record Date) or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the
Company's Board of Directors) after the date that a tender or exchange offer by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published or sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act, if, assuming the successful consummation thereof, such Person
would be an Acquiring Person.
(m) "Equivalent Shares" shall mean Preferred Shares and any other class
or series of capital stock of the Company which is entitled to the same rights,
privileges and preferences as the Preferred Shares.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(o) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.
(p) "Exercise Price" shall have the meaning set forth in Section 4(a)
hereof.
(q) "Expiration Date" shall mean the earliest to occur of: (i) the
Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Directors orders the exchange of the
Rights as provided in Section 24 hereof.
(r) "Final Expiration Date" shall mean April 3, 2010.
(s) "Nasdaq" shall mean the National Association of Securities Dealers,
Inc Automated Quotations System.
(t) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.
(u) "Post-Event Transferee" shall have the meaning set forth in Section
7(e) hereof.
(v) "Preferred Shares" shall mean shares of Series A Participating
Preferred Stock, no par value, of the Company
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(w) "Pre-Event Transferee" shall have the meaning set forth in Section
7(e) hereof.
(x) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(y) "Record Date" shall have the meaning set forth in the recitals at
the beginning of this Agreement.
(z) "Redemption Date" shall have the meaning set forth in Section
23(a) hereof.
(aa) "Redemption Price" shall have the meaning set forth in Section
23(a) hereof.
(bb) "Rights Agent" shall means U.S. Stock Transfer Corporation or its
successor or replacement as provided in Sections 19 and 21 hereof.
(cc) "Rights Certificate" shall mean a certificate substantially in the
form attached hereto as Exhibit B.
(dd) "Rights Dividend Declaration Date" shall have the meaning set
forth in the recitals at the beginning of this Agreement.
(ee) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(ff) "Section 13 Event" shall mean any event described in clause (i),
(ii) or (iii) of Section 13(a) hereof.
(gg) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(hh) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such;
provided that, if such Person is determined not to have become an Acquiring
Person pursuant to Section 1(a) hereof, then no Shares Acquisition Date shall
be deemed to have occurred.
(ii) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(jj) "Subsidiary" of any Person shall mean any corporation or other
entity of which an amount of voting securities sufficient to elect a majority
of the directors or Persons having
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similar authority of such corporation or other entity is beneficially owned,
directly or indirectly, by such Person, or any corporation or other entity
otherwise controlled by such Person.
(kk) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ll) "Summary of Rights" shall mean a summary of this Agreement
substantially in the form attached hereto as Exhibit C.
(mm) "Total Exercise Price" shall have the meaning set forth in Section
4(a) hereof.
(nn) "Trading Day" shall mean a day on which the principal national
securities exchange on which a referenced security is listed or admitted to
trading is open for the transaction of business or, if a referenced security is
not listed or admitted to trading on any national securities exchange, a
Business Day.
(oo) "Triggering Event" shall be deemed to have occurred upon any
Person, becoming an Acquiring Person.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of the Common Shares) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.
Section 3. Issuance of Rights Certificates
(a) Until the Distribution Date, (i) the Rights will be evidenced
(subject to the provisions of Sections 3(b) and 3(c) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the right to receive Rights Certificates
will be transferable only in connection with the transfer of Common Shares.
Until the earlier of the Distribution Date or the Expiration Date, the
surrender for transfer of certificates for Common Shares shall also constitute
the surrender for transfer of the Rights associated with the Common Shares
represented thereby. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign, and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send) by first-class, postage-prepaid mail, to each record holder of Common
Shares as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of
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the Company, a Rights Certificate evidencing one Right for each Common Share so
held, subject to adjustment as provided herein. In the event that an
adjustment in the number of Rights per Common Share has been made pursuant to
Section 11 hereof, then at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of the Distribution Date, the Rights will be evidenced
solely by such Rights Certificates and may be transferred by the transfer of
the Rights Certificates as permitted hereby, separately and apart from any
transfer of Common Shares, and the holders of such Rights Certificates as
listed in the records of the Company or any transfer agent or registrar for the
Rights shall be the record holders thereof.
(b) On the Record Date or as soon as practicable thereafter, the
Company will send a copy of the Summary of Rights by first-class, postage-
prepaid mail, to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company's transfer agent and registrar. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of
the holders thereof together with the Summary of Rights. Until the
Distribution Date (or, if earlier, the Expiration Date), the surrender for
transfer of any certificate for Common Shares outstanding on the Record Date,
with or without a copy of the Summary of Rights, shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
(c) Unless the Board of Directors by resolution adopted at or before
the time of the issuance of any Common Shares specifies to the contrary, Rights
shall be issued in respect of all Common Shares that are issued after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date. Certificates representing such Common Shares shall also be
deemed to be certificates for Rights, and shall bear the following legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN AEHR TEST SYSTEMS AND
U.S. STOCK TRANSFER CORPORATION, AS THE RIGHTS AGENT, DATED AS OF MARCH
5, 2001, (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY
INCORPORATED HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF AEHR TEST SYSTEMS. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, SUCH RIGHTS WILL BE
EVIDENCED BY SEPARATE CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY
THIS CERTIFICATE. AEHR TEST SYSTEMS WILL MAIL TO THE HOLDER OF THIS
CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE AFTER RECEIPT
OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET FORTH IN
THE RIGHTS AGREEMENT,
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RIGHTS ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN
ACQUIRING PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON BEHALF
OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND VOID.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Shares represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any
such certificate shall also constitute the transfer of the Rights associated
with the Common Shares represented thereby.
(d) In the event that the Company purchases or acquires any Common
Shares after the Record Date but prior to the Distribution Date, any Rights
associated with such Common Shares shall be deemed canceled and retired so that
the Company shall not be entitled to exercise any Rights associated with the
Common Shares which are no longer outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase
Common Shares and of assignment to be printed on the reverse thereof) shall be
substantially in the form of Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or automated quotation system, on
which the Rights may from time to time be listed or included, or to conform to
usage. Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
(or in the case of Rights issued with respect to Common Shares issued by the
Company after the Record Date, as of the date of issuance of such Common
Shares) and on their face shall entitle the holders thereof to purchase such
number of one-thousandths of a Preferred Share as shall be set forth therein at
the price set forth therein (such exercise price per one one-thousandth of a
Preferred Share being hereinafter referred to as the "Exercise Price" and the
aggregate Exercise Price of all Preferred Shares issuable upon exercise of one
Right being hereinafter referred to as the "Total Exercise Price"), but the
number and type of securities purchasable upon the exercise of each Right and
the Exercise Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a 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 to holders of equity
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interests in such Acquiring Person or to any Person with whom such Acquiring
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Company's Board of Directors has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF THE RIGHTS AGREEMENT.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its Chief Executive Officer, its Chief Financial
Officer, its President or any Vice President, either manually or by facsimile
signature, and by the Secretary or an Assistant Secretary of the Company,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal (if any) or a facsimile thereof. The Rights Certificates shall
be manually countersigned by the Rights Agent and shall not be valid for any
purpose unless countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of
the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates on behalf of the Company had not ceased to be such officer of the
Company; and any Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Rights Certificate,
shall be a proper officer of the Company to sign such Rights Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.
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Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 7(e), 14 and 24 hereof, at
any time after the Close of Business on the Distribution Date, and at or prior
to the Close of Business on the Expiration Date, any Rights Certificate or
Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of one-thousandths of a Preferred Share (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as the Rights Certificate or Rights Certificates surrendered then
entitled such holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Rights Certificates
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Rights Certificates to be transferred,
split up, combined or exchanged at the principal office of the Rights Agent.
Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the
Rights Agent shall, subject to Sections 7(e), 14 and 24 hereof, countersign and
deliver to the person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
(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 make and
deliver a new Rights Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of
Rights.
(a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the registered
holder of any Rights Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein) in whole or in part at any time after the
Distribution Date and prior to the Close of Business on the Expiration Date by
surrender of the Rights Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the principal
office of the Rights Agent, together with payment of the Exercise Price for
each one-thousandth of a Preferred Share (or,
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following a Triggering Event, other securities, cash or other assets as the
case may be) as to which the Rights are exercised.
(b) The Exercise Price for each one-thousandth of a Preferred Share
issuable pursuant to the exercise of a Right shall initially be thirty-five
dollars ($35.00), shall be subject to adjustment from time to time as provided
in Sections 11 and 13 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the number of one-thousandths of a Preferred
Share (or, following a Triggering Event, other securities, cash or other assets
as the case may be) to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Rights Certificate in
accordance with Section 9(e) hereof, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i)(A) requisition from any transfer agent of
the Preferred Shares (or make available, if the Rights Agent is the transfer
agent for the Preferred Shares) a certificate or certificates for the number of
one-thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all
such requests or (B) if the Company shall have elected to deposit the total
number of one-thousandths of a Preferred Share (or, following a Triggering
Event, other securities, cash or other assets as the case may be) issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one-
thousandths of a Preferred Share (or, following a Triggering Event, other
securities, cash or other assets as the case may be) as are to be purchased (in
which case certificates for the Preferred Shares (or, following a Triggering
Event, other securities, cash or other assets as the case may be) represented
by such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs the depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company the amount of cash
to be paid in lieu of issuance of fractional shares in accordance with Section
14 hereof, (iii) after receipt of such certificates or depositary receipts,
cause the same to be delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as may be designated
by such holder and (iv) when appropriate, after receipt thereof, deliver such
cash to or upon the order of the registered holder of such Rights Certificate.
The payment of the Exercise Price (as such amount may be reduced (including to
zero) pursuant to Section 11(a)(iii) hereof) and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof, may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue securities of the
Company other than Preferred Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
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(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be
issued by the Rights Agent to the registered holder of such Rights Certificate
or to his or her duly authorized assigns, subject to the provisions of Section
14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Triggering Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such (a
"Post-Event Transferee"), (iii) a transferee of an Acquiring Person (or of any
such Associate or Affiliate) who becomes a transferee prior to or concurrently
with the Acquiring Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring Person or to any Person
with whom the Acquiring Person has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the
Company's Board of Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e) (a "Pre-Event Transferee") or (iv) any subsequent transferee
receiving transferred Rights from a Post-Event Transferee or a Pre-Event
Transferee, either directly or through one or more intermediate transferees,
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or to any other Person as a result of its failure
to make any determinations with respect to an Acquiring Person or any of such
Acquiring Person's Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall, in
addition to having complied with the requirements of Section 7(a), have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered
for such exercise and (ii) provided such additional evidence of the identity of
the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by any of the provisions of this Agreement. The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any Rights Certificate purchased or acquired
by the
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Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company, or shall, at the
written request of the Company, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will use its best efforts
to cause to be reserved and kept available out of its authorized and unissued
Preferred Shares not reserved for another purpose (and, following the
occurrence of a Triggering Event, out of its authorized and unissued Common
Shares and/or other securities), the number of Preferred Shares (and, following
the occurrence of the Triggering Event, Common Shares and/or other securities)
that will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) If the Company shall hereafter list any of its Preferred Shares on
a national securities exchange, then so long as the Preferred Shares (and,
following the occurrence of a Triggering Event, Common Shares and/or other
securities) issuable and deliverable upon exercise of the Rights may be listed
on such exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable (but only to the extent that
it is reasonably likely that the Rights will be exercised), all shares reserved
for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a
Triggering Event in which the consideration to be delivered by the Company upon
exercise of the Rights is described in Section 11(a)(ii) or Section 11(a)(iii)
hereof, or as soon as is required by law following the Distribution Date, as
the case may be, a registration statement under the Securities Act with respect
to the securities purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become effective as soon as
practicable after such filing and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the earlier of (A) the date as of which the Rights
are no longer exercisable for such securities and (B) the date of expiration of
the Rights. The Company may temporarily suspend, for a period not to exceed
ninety (90) days after the date set forth in clause(i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating, and
notify the Rights Agent, that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement and notification to the
Rights Agent at such time as the suspension is no longer in effect. The
Company will also take such action as may be appropriate under, or to ensure
compliance with, the securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction, unless the requisite
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qualification in such jurisdiction shall have been obtained, or an exemption
therefrom shall be available, and until a registration statement has been
declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares (or other securities of
the Company) delivered upon exercise of Rights shall, at the time of delivery
of the certificates for such securities (subject to payment of the Exercise
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the original issuance or delivery of the Rights
Certificates or of any Preferred Shares (or other securities of the Company)
upon the exercise of Rights. The Company shall not, however, be required to
pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Shares (or
other securities of the Company) in a name other than that of, the registered
holder of the Rights Certificate evidencing Rights surrendered for exercise or
to issue or to deliver any certificates or depositary receipts for Preferred
Shares (or other securities of the Company) upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 10. Record Date. Each Person in whose name any certificate for
a number of one-thousandths of a Preferred Share (or other securities of the
Company) is issued upon the exercise of Rights shall for all purposes be deemed
to have become the holder of record of the Preferred Shares (or other
securities of the Company) represented thereby on, and such certificate shall
be dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Exercise Price with respect to which the
Rights have been exercised (and any applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date
upon which the transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate shall not be entitled to any rights of a
holder of Preferred Shares (or other securities of the Company) for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
Section 11. Adjustment of Exercise Price, Number of Shares or Number of
Rights. The Exercise Price, the number and kind of shares or other property
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
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(a) (i) Anything in this Agreement to the contrary notwithstanding, in
the event the Company shall at any time after the date of this Agreement (A)
declare a dividend on the Preferred Shares payable in Preferred Shares, (B)
subdivide the outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares (by reverse stock split or otherwise) into a smaller number of
Preferred Shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such event, except as
otherwise provided in this Section 11 and Section 7(e) hereof: (1) the Exercise
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
adjusted so that the Exercise Price thereafter shall equal the result obtained
by dividing the Exercise Price in effect immediately prior to such time by a
fraction (the "Adjustment Fraction"), the numerator of which shall be the
total number of Preferred Shares (or shares of capital stock issued in such
reclassification of the Preferred Shares) outstanding immediately following
such time and the denominator of which shall be the total number of Preferred
Shares outstanding immediately prior to such time; provided, however, that in
no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of such Right; and (2) the number of one-thousandths of
a Preferred Share (or share of such other capital stock) issuable upon the
exercise of each Right shall equal the number of one-thousandths of a Preferred
Share (or share of such other capital stock) as was issuable upon exercise of a
Right immediately prior to the occurrence of the event described in clauses
(A)-(D) of this Section 11(a)(i), multiplied by the Adjustment Fraction;
provided, however, that, no such adjustment shall be made pursuant to this
Section 11(a)(i) to the extent that there shall have simultaneously occurred an
event described in clause (A), (B), (C) or (D) of Section 11(n) with a
proportionate adjustment being made thereunder. Each Common Share that shall
become outstanding after an adjustment has been made pursuant to this Section
11(a)(i) shall have associated with it the number of Rights, exercisable at the
Exercise Price and for the number of one-thousandths of a Preferred Share (or
shares of such other capital stock) as one Common Share has associated with it
immediately following the adjustment made pursuant to this Section 11(a)(i).
(ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price
in effect immediately prior to the occurrence of the Triggering Event, in lieu
of a number of one-thousandths of a Preferred Share, such number of Common
Shares of the Company as shall equal the result obtained by multiplying the
Exercise Price in effect immediately prior to the occurrence of the Triggering
Event by the number of one-thousandths of a Preferred Share for which a Right
was exercisable (or would have been exercisable if the Distribution Date had
occurred) immediately prior to the first occurrence of a Triggering Event, and
dividing that product by 50% of the Current Per Share Market Price for Common
Shares on the date of occurrence of the Triggering Event; provided, however,
that the Exercise Price and the number of Common Shares of the Company so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate
-16-
in accordance with Section 11(e) hereof to reflect any events occurring in
respect of the Common Shares of the Company after the occurrence of the
Triggering Event.
(iii) In lieu of issuing Common Shares in accordance with Section
11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common
Shares which are authorized by the Company's Certificate of Incorporation but
not outstanding or reserved for issuance for purposes other than upon exercise
of the Rights are not sufficient to permit the exercise in full of the Rights,
or if any necessary regulatory approval for such issuance has not been obtained
by the Company, the Company shall: (A) determine the excess of (1) the value
of the Common Shares issuable upon the exercise of a Right (the "Current
Value") over (2) the Exercise Price (such excess, the "Spread") and (B) with
respect to each Right, make adequate provision to substitute for such Common
Shares, upon exercise of the Rights, (1) cash, (2) a reduction in the Exercise
Price, (3) other equity securities of the Company (including, without
limitation, shares or units of shares of any series of preferred stock which
the Company's Board of Directors has deemed to have the same value as Common
Shares (such shares or units of shares of preferred stock are herein called
"Common Stock Equivalents")), except to the extent that the Company has not
obtained any necessary shareholder or regulatory approval for such issuance,
(4) debt securities of the Company, except to the extent that the Company has
not obtained any necessary shareholder or regulatory approval for such
issuance, (5) other assets or (6) any combination of the foregoing, having an
aggregate value equal to the Current Value, where such aggregate value has been
determined by the Company's Board of Directors based upon the advice of a
nationally recognized investment banking firm selected by the Company's Board
of Directors; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the later of (x) the first occurrence of a Triggering Event and (y)
the date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Exercise Price, Common Shares (to the extent available), except to the extent
that the Company has not obtained any necessary shareholder or regulatory
approval for such issuance, and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Company's Board of
Directors shall determine in good faith that it is likely that sufficient
additional Common Shares could be authorized for issuance upon exercise in full
of the Rights or that any necessary regulatory approval for such issuance will
be obtained, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek shareholder approval
for the authorization of such additional shares or take action to obtain such
regulatory approval (such period, as it may be extended, the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the first and/or second sentences of this Section 11(a)(iii),
the Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares, to take any action to
obtain any required regulatory approval and/or to decide the appropriate form
of distribution to be made pursuant to such first sentence and
-17-
to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. For purposes of this
Section 11(a)(iii), the value of the Common Shares shall be the Current Per
Share Market Price of the Common Shares on the Section 11(a)(ii) Trigger Date
and the value of any Common Stock Equivalent shall be deemed to have the same
value as the Common Shares on such date.
(b) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the issuance of rights, options or warrants to
all holders of Preferred Shares entitling such holders (for a period expiring
within forty-five (45) calendar days after such record date) to subscribe for
or purchase Preferred Shares or Equivalent Shares or securities convertible
into Preferred Shares or Equivalent Shares at a price per share (or having a
conversion price per share, if a security convertible into Preferred Shares or
Equivalent Shares) less than the then Current Per Share Market Price of the
Preferred Shares or Equivalent Shares on such record date, then, in each such
case, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Preferred Shares and Equivalent Shares (if any) outstanding on such record
date, plus the number of Preferred Shares or Equivalent Shares, as the case may
be, which the aggregate offering price of the total number of Preferred Shares
or Equivalent Shares, as the case may be, to be offered or issued (and/or the
aggregate initial conversion price of the convertible securities to be offered
or issued) would purchase at such current market price, and the denominator of
which shall be the number of Preferred Shares and Equivalent Shares (if any)
outstanding on such record date, plus the number of additional Preferred Shares
or Equivalent Shares, as the case may be, to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the
Company's Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Preferred Shares and Equivalent Shares owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights,
options or warrants are not so issued, the Exercise Price shall be adjusted to
be the Exercise Price which would then be in effect if such record date had not
been fixed.
(c) In case the Company shall, at any time after the date of this
Agreement, fix a record date for the making of a distribution to all holders of
the Preferred Shares or of any class or series of Equivalent Shares (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend, if any,
or a dividend payable in Preferred Shares) or subscription rights, options or
warrants (excluding those referred to in Section 11(b)), then, in each such
case, the Exercise Price to be in effect after such record date shall
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be determined by multiplying the Exercise Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the Current Per
Share Market Price of a Preferred Share or an Equivalent Share on such record
date, less the fair market value per Preferred Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a
Preferred Share or Equivalent Share, as the case may be, and the denominator of
which shall be such Current Per Share Market Price of a Preferred Share or
Equivalent Share on such record date; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such distribution is not so
made, the Exercise Price shall be adjusted to be the Exercise Price which would
have been in effect if such record date had not been fixed.
(d) Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(d) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the
nearest cent or to the nearest ten-thousandth of a Common Share or other share
or one hundred-thousandth of a Preferred Share, as the case may be.
Notwithstanding the first sentence of this Section 11(d), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three (3) years from the date of the transaction which requires such adjustment
or (ii) the Expiration Date.
(e) If as a result of an adjustment made pursuant to Section 11(a) or
13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and, if required, the Exercise Price thereof, shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), 11(b), 11(c), 11(d), 11(g), 11(h), 11(i), 11(j), 11(k) and
11(l), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Shares shall apply on like terms to any such other shares.
(f) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one-thousandths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(g) Unless the Company shall have exercised its election as provided in
Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of
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Preferred Shares (calculated to the nearest one hundred-thousandth of a share)
obtained by (i) multiplying (x) the number of Preferred Shares covered by a
Right immediately prior to this adjustment, by (y) the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price, and (ii) dividing
the product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(h) The Company may elect on or after the date of any adjustment of the
Exercise Price as a result of the calculations made in Section 11(b) or (c) to
adjust the number of Rights, in substitution for any adjustment in the number
of Preferred Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of one-thousandths of a Preferred Share for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one hundred-thousandth) obtained by
dividing the Exercise Price in effect immediately prior to adjustment of the
Exercise Price by the Exercise Price in effect immediately after adjustment of
the Exercise Price. The Company shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Exercise Price is adjusted or any
day thereafter, but, if the Rights Certificates have been issued, shall be at
least ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(h), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the
option of the Company, the adjusted Exercise Price) and shall be registered in
the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(i) Irrespective of any adjustment or change in the Exercise Price or
the number of Preferred Shares issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Exercise Price per one one-thousandth of a Preferred Share and the number
of one-thousandths of a Preferred Share which were expressed in the initial
Rights Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing
the Exercise Price below the par or stated value, if any, of the number of one-
thousandths of a Preferred Share issuable upon exercise of the Rights, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
as
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fully paid and nonassessable shares such number of one-thousandths of a
Preferred Share at such adjusted Exercise Price.
(k) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
of the number of one-thousandths of a Preferred Share and other capital stock
or securities of the Company, if any, issuable upon such exercise over and
above the number of one-thousandths of a Preferred Share and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) upon the occurrence of the event
requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, prior
to the Distribution Date, the Company shall be entitled to make such reductions
in the Exercise Price, in addition to those adjustments expressly required by
this Section 11, as and to the extent that it in its sole discretion shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred or Common Shares, (ii) issuance wholly for cash of any Preferred
or Common Shares at less than the current market price, (iii) issuance wholly
for cash of Preferred or Common Shares or securities which by their terms are
convertible into or exchangeable for Preferred or Common Shares, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred or Common
Shares shall not be taxable to such shareholders.
(m) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Sections 23, 24 or 27 hereof, take (or
permit to be taken) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(n) In the event the Company shall at any time after the date of this
Agreement (A) declare a dividend on the Common Shares payable in Common Shares,
(B) subdivide the outstanding Common Shares, (C) combine the outstanding Common
Shares (by reverse stock split or otherwise) into a smaller number of Common
Shares, or (D) issue any shares of its capital stock in a reclassification of
the Common Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such event, except as otherwise provided in this
Section 11(a) and Section 7(e) hereof: (1) each Common Share (or shares of
capital stock issued in such reclassification of the Common Shares) outstanding
immediately following such time shall have associated with it the number of
Rights as were associated with one Common Share immediately prior to the
occurrence of the event described in clauses (A)-(D) above; (2) the Exercise
Price in effect at the time of the record date for such
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dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that the Exercise Price thereafter shall
equal the result obtained by multiplying the Exercise Price in effect
immediately prior to such time by a fraction, the numerator of which shall be
the total number of Common Shares outstanding immediately prior to the event
described in clauses (A)-(D) above, and the denominator of which shall be the
total number of Common Shares outstanding immediately after such event;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of such Right; and (3) the
number of one-thousandths of a Preferred Share (or shares of such other capital
stock) issuable upon the exercise of each Right outstanding after such event
shall equal the number of one-thousandths of a Preferred Share (or shares of
such other capital stock) as were issuable with respect to one Right
immediately prior to such event. Each Common Share that shall become
outstanding after an adjustment has been made pursuant to this Section 11(n)
shall have associated with it the number of Rights, exercisable at the Exercise
Price and for the number of one-thousandths of a Preferred Share (or shares of
such other capital stock) as one Common Share has associated with it
immediately following the adjustment made pursuant to this Section 11(n). If
an event occurs which would require an adjustment under both this Section 11(n)
and Section 11(a)(ii) hereof, the adjustment provided for in this Section 11(n)
shall be in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Preferred Shares a
copy of such certificate and (c) mail a brief summary thereof to each holder of
a Rights Certificate in accordance with Section 26 hereof. Notwithstanding the
foregoing sentence, the failure of the Company to make such certification or
give such notice shall not affect the validity of such adjustment or the force
or effect of the requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment
contained therein and shall not be deemed to have knowledge of such adjustment
unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event that, following a Triggering Event, directly or
indirectly:
(i) the Company shall consolidate with, or merge with and into, any
other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);
(ii) any Person shall consolidate with the Company, or merge with
and into the Company and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any other person (or the Company); or
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(iii) the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereof),
then, concurrent with and in each such case,
(A) each holder of a Right (except as provided in Section
7(e) hereof) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the Total Exercise Price applicable immediately
prior to the occurrence of the Section 13 Event in accordance with the terms of
this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by 50% of the Current Per Share Market Price of the
Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with
Section 11(e) hereof;
(B) such Principal Party shall thereafter be liable for,
and shall assume, by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement;
(C) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event;
(D) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of its Common
Shares) in connection with the consummation of any such transaction as may be
necessary to ensure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights; and
(E) upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right and payment of the Total Exercise
Price as provided in this Section 13(a), such cash, shares, rights, warrants
and other property which such holder would have been entitled to receive had
such holder, at the time of such transaction, owned the Common Shares of the
Principal Party receivable upon the exercise of such Right pursuant to this
Section 13(a), and such Principal Party shall take such steps (including, but
not limited to, reservation of shares of stock) as may be necessary to permit
the subsequent exercise of the Rights in accordance with the terms hereof for
such cash, shares, rights, warrants and other property.
-23-
(F) For purposes hereof, the "earning power" of the Company
and its Subsidiaries shall be determined in good faith by the Company's Board
of Directors on the basis of the operating earnings of each business operated
by the Company and its Subsidiaries during the three fiscal years preceding the
date of such determination (or, in the case of any business not operated by the
Company or any Subsidiary during three full fiscal years preceding such date,
during the period such business was operated by the Company or any Subsidiary).
(b) For purposes of this Agreement, the term "Principal Party" shall
mean:
(i) in the case of any transaction described in clause (i) or (ii)
of Section 13(a) hereof: (A) the Person that is the issuer of the securities
into which the Common Shares are converted in such merger or consolidation, or,
if there is more than one such issuer, the issuer the Common Shares of which
have the greatest aggregate market value of shares outstanding, or (B) if no
securities are so issued, (x) the Person that is the other party to the merger,
if such Person survives said merger, or, if there is more than one such Person,
the Person the Common Shares of which have the greatest aggregate market value
of shares outstanding or (y) if the Person that is the other party to the
merger does not survive the merger, the Person that does survive the merger
(including the Company if it survives) or (z) the Person resulting from the
consolidation; and
(ii) in the case of any transaction described in clause (iii) of
Section 13(a) hereof, the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets
or earning power cannot be determined, whichever of such Persons is the issuer
of Common Shares having the greatest aggregate market value of shares
outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Shares of such Person are not at such time or
have not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, then (1) if such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one
Person, the Common Shares of which are and have been so registered, the term
"Principal Party" shall refer to whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding,
or (3) if such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly by the
same Person, the rules set forth in clauses (1) and (2) above shall apply to
each of the owners having an interest in the venture as if the Person owned by
the joint venture was a Subsidiary of both or all of such joint venturers, and
the Principal Party in each such case shall bear the obligations set forth in
this Section 13 in the same ratio as its interest in such Person bears to the
total of such interests.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized Common Shares that
have not been
-24-
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13 and unless prior thereto the Company and such
issuer shall have executed and delivered to the Rights Agent a supplemental
agreement confirming that such Principal Party shall, upon consummation of such
Section 13 Event, assume this Agreement in accordance with Sections 13(a) and
13(b) hereof, that all rights of first refusal or preemptive rights in respect
of the issuance of Common Shares of such Principal Party upon exercise of
outstanding Rights have been waived, that there are no rights, warrants,
instruments or securities outstanding or any agreements or arrangements which,
as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights and
that such transaction shall not result in a default by such Principal Party
under this Agreement, and further providing that, as soon as practicable after
the date of such Section 13 Event, such Principal Party will:
(i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, use its best efforts to cause such
registration statement to become effective as soon as practicable after such
filing and use its best efforts to cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date, and similarly comply with applicable
state securities laws;
(ii) use its best efforts to list (or continue the listing of) the
Rights and the securities purchasable upon exercise of the Rights on a national
securities exchange or to meet the eligibility requirements for quotation on
Nasdaq and list (or continue the listing of) the Rights and the securities
purchasable upon exercise of the Rights on Nasdaq; and
(iii) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
In the event that at any time after the occurrence of a Triggering Event
some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).
(d) In case the "Principal Party" for purposes of Section 13(b) hereof
has provision in any of its authorized securities or in its certificate of
incorporation or by-laws or other instrument governing its corporate affairs,
which provision would have the effect of (i) causing such Principal Party to
issue (other than to holders of Rights pursuant to Section 13 hereof), in
connection with, or as a consequence of, the consummation of a Section 13
Event, Common Shares or Equivalent Shares of such Principal Party at less than
the then Current Per Share Market Price thereof or securities exercisable for,
or convertible into, Common Shares or Equivalent Shares of such Principal Party
at less than such then Current Per Share Market Price, or (ii) providing for
any special payment, tax or similar provision in connection with the issuance
of the Common Shares of such Principal Party pursuant to the provisions of
Section 13 hereof, then, in such event, the Company hereby agrees with each
holder of Rights that it shall not consummate any such transaction
-25-
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with or as a consequence
of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, effect or permit to occur any Section 13 Event, if
(i) at the time or immediately after such Section 13 Event there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights, (ii) prior to, simultaneously
with or immediately after such Section 13 Event, the shareholders of the Person
who constitutes, or would constitute, the "Principal Party" for purposes of
Section 13(b) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates or Associates or (iii) the form
or nature of organization of the Principal Party would preclude or limit the
exercisability of the Rights.
(f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights
. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. For the purposes of this
Section 14(a), the current market value of a whole Right shall be the closing
price of the Rights for the Trading Day immediately prior to the date on which
such fractional Rights would have been otherwise issuable, as determined
pursuant to the second sentence of Section 1(j) hereof.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions that are
integral multiples of one one-thousandth of a Preferred Share). Interests in
fractions of Preferred Shares in integral multiples of one one-thousandth of a
Preferred Share may, at the election of the Company, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall provide that the
holders of such depositary receipts shall have all the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional
Preferred Shares that are not integral multiples of one one-thousandth of a
Preferred Share, the Company shall pay to the registered holders of Rights
-26-
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a Preferred
Share. For purposes of this Section 14(b), the current market value of a
Preferred Share shall be one thousand times the closing price of a Common Share
(as determined pursuant to the second sentence of Section 1(j) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares
upon the exercise or exchange of Rights. In lieu of such fractional Common
Shares, the Company shall pay to the registered holders of Rights Certificates
at the time such Rights are exercised as herein provided an amount in cash
equal to the same fraction of the current market value of a Common Share. For
purposes of this Section 14(c), the current market value of a Common Share
shall be the closing price of a Common Share (as determined pursuant to the
second sentence of Section 1(j) hereof) for the Trading Day immediately prior
to the date of such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his or her right to receive any fractional Rights or any fractional
shares (other than fractions that are integral multiples of one one-thousandth
of a Preferred Share) upon exercise of a Right.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Shares); and any registered holder of any Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), without
the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the Common Shares), may, in
his or her own behalf and for his or her own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his or her right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or
any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at
law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly
-27-
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed; and
(c) subject to Sections 6(a) and 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary.
Section 17. Rights Certificate Holder Not Deemed a Shareholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose to be the holder of the Preferred Shares
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a 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 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability or expense, incurred without negligence, bad faith
or willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. In no event will the Rights
Agent be liable for special, indirect, incidental or consequential loss or
damage of any kind whatsoever, even if the Rights Agent has been advised of the
possibility of such loss or damage.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document reasonably believed by it to
be genuine and to be signed, executed and, where
-28-
necessary, verified or acknowledged, by the proper Person or Persons, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
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 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
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have
been countersigned but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at
that time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes 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 written advice or 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
written advice or opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of Current Per Share Market Price) be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to
-29-
be conclusively proved and established by a certificate signed by any one of
the Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person 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 or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 or 24, or the ascertaining of
the existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Rights Certificates after
receipt by the Rights Agent of a certificate furnished pursuant to Section 12
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares to be issued pursuant to this Agreement or
any Rights Certificate or as to whether any Preferred Shares will, when issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Secretary 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 or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for
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those instructions. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken or omitted by the Rights Agent under
this Rights Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be
liable for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in any such application on or after the date specified
in such application (which date shall not be less than five (5) Business Days
after the date any officer of the Company actually receives such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of
an omission), the Rights Agent shall have received written instructions in
response to such application specifying the action to be taken or omitted.
(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 Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, default, neglect or misconduct of any such
attorneys or agents or for any loss to the Company resulting from any such act,
default, neglect or misconduct, provided reasonable care was exercised in the
selection and continued employment thereof.
(j) 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 and/or 2
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Preferred Shares and the Common Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days'
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notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Preferred Shares and the Common
Shares by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of thirty (30) days after giving notice of
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his or her Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of any state of the
United States, in good standing, which is authorized under such laws to
exercise corporate trust or shareholder services powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Preferred Shares and the Common Shares, and mail a notice thereof
in writing to the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, however, or any defect
therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such
form as may be approved by its Board of Directors to reflect any adjustment or
change in the Exercise Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Shares following the Distribution Date and
prior to the redemption or expiration of the Rights, the Company (a) shall,
with respect to Common Shares so issued or sold pursuant to the exercise of
stock options or under any employee plan or arrangement or upon the exercise,
conversion or exchange of other securities of the Company outstanding at the
date hereof or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued and this sentence shall be null and void ab initio if, and to
the extent that, such issuance or this sentence would create a significant risk
of or result in material adverse tax consequences to the Company or the Person
to whom such Rights Certificate would be issued or would create a significant
risk of or result in such options' or employee plans' or arrangements' failing
to qualify for otherwise available special tax treatment and
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(ii) no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption.
(a) The Company may, at its option and with the approval of the Board
of Directors, at any time prior to the earlier of (i) the Distribution Date or
(ii) the Close of Business on the Final Expiration Date, redeem all but not
less than all the then outstanding Rights at a redemption price of $.001 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price
being herein referred to as the "Redemption Price") and the Company may, at
its option, pay the Redemption Price either in Common Shares (based on the
Current Per Share Market Price thereof at the time of redemption) or cash.
Such redemption of the Rights by the Company may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish. The date on which the Board of Directors elects
to make the redemption effective shall be referred to as the "Redemption
Date."
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent, and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after the action
of the Board of Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates
or Associates may redeem, acquire or purchase for value any Rights at any time
in any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares prior to the Distribution Date.
Section 24. Exchange.
(a) Subject to applicable laws, rules and regulations, and subject to
subsection 24(c) below, the Company may, at its option, by action of the Board
of Directors, at any time after the occurrence of a Triggering Event, exchange
all or part of the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the provisions of Section 7(e)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such
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exchange at any time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or any such
Subsidiary, or any entity holding Common Shares for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection 24(a) and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of Common Shares equal to the number of such Rights held by
such holder multiplied by the Exchange Ratio. The Company shall give public
notice of any such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) In the event that there shall not be sufficient Common Shares
issued but not outstanding or authorized but unissued to permit any exchange of
Rights as contemplated in accordance with Section 24(a), the Company shall
either take such action as may be necessary to authorize additional Common
Shares for issuance upon exchange of the Rights or alternatively, at the option
of a majority of the Board of Directors, with respect to each Right (i) pay
cash in an amount equal to the Current Value (as hereinafter defined), in lieu
of issuing Common Shares in exchange therefor, or (ii) issue debt or equity
securities or a combination thereof, having a value equal to the Current Value,
in lieu of issuing Common Shares in exchange for each such Right, where the
value of such securities shall be determined by a nationally recognized
investment banking firm selected by majority vote of the Board of Directors, or
(iii) deliver any combination of cash, property, Common Shares and/or other
securities having a value equal to the Current Value in exchange for each
Right. For purposes of this Section 24(c) only, the Current Value shall mean
the product of the Current Per Share Market Price of Common Shares on the date
of the occurrence of the event described above in subparagraph (a), multiplied
by the number of Common Shares for which the Right otherwise would be
exchangeable if there were sufficient shares available. To the extent that the
Company determines that some action need be taken pursuant to clauses (i), (ii)
or (iii) of this Section 24(c), the Board of Directors may temporarily suspend
the exercisability of the Rights for a period of up to sixty (60) days
following the date on which the event described in Section 24(a) shall have
occurred, in order to seek any authorization of additional Common Shares and/or
to decide the appropriate form of distribution to be made pursuant to the above
provision and
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to determine the value thereof. In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended.
(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates which evidence fractional Common Shares
. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).
(e) The Company may, at its option, by majority vote of the Board of
Directors, at any time before any Person has become an Acquiring Person,
exchange all or part of the then outstanding Rights for rights of substantially
equivalent value, as determined reasonably and with good faith by the Board of
Directors, based upon the advice of one or more nationally recognized
investment banking firms.
(f) Immediately upon the action of the Board of Directors ordering the
exchange of any Rights pursuant to subsection 24(e) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of rights in exchange therefor as has been
determined by the Board of Directors in accordance with subsection 24(e) above
. The Company shall give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall mail a notice of any
such exchange to all of the holders of such Rights at their last addresses as
they appear upon the registry books of the transfer agent for the Common Shares
of the Company. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Rights
will be effected.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose to effect or permit to occur any
Triggering Event or Section 13 Event, the Company shall give notice thereof to
each holder of Rights in accordance with Section 26 hereof at least twenty (20)
days prior to occurrence of such Triggering Event or such Section 13 Event.
(b) In case any Triggering Event or Section 13 Event shall occur, then,
in any such case, the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Sections 11(a)(ii) and 13
hereof.
-35-
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Aehr Test Systems
400 Kato Terrace
Fremont, CA 94539
Attention: Rhea Posedel / Gary Larson
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: RoseAnn Rotandaro
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
U.S. Stock Transfer Corporation
1745 Gardena Avenue
Glendale, CA 91204-2991
Attention: Operations Manager
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments.
(a) Prior to the occurrence of a Distribution Date, the Company may
supplement or amend this Agreement in any respect without the approval of any
holders of Rights and the Rights Agent shall, if the Company so directs,
execute such supplement or amendment. From and after the occurrence of a
Distribution Date, the Company and the Rights Agent may from time to time
supplement or amend this Agreement without the approval of any holders of
Rights in order to (i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) shorten or lengthen any time period hereunder or
(iv) to change or supplement the provisions hereunder in any manner that the
Company may deem necessary or desirable and that shall not adversely affect the
interests of the holders of Rights (other than an Acquiring Person or an
Affiliate or Associate of an Acquiring Person);
-36-
provided, this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable
or (B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person). Upon the delivery of a certificate from an
appropriate officer of the Company that states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment. Prior to the Distribution Date,
the interests of the holders of Rights shall be deemed coincident with the
interests of the holders of Common Shares.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of
which any Person is the Beneficial Owner, shall be made in accordance with the
last sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board, or the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or
not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determinations (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights Certificates and
all other parties and (y) not subject the Board 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 Common Shares) 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 Common
Shares).
Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
-37-
Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the Close of Business on
the tenth day following the date of such determination by the Board of
Directors.
Section 32. Governing Law. This Agreement and each Right and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of California and for all purposes shall be governed by
and construed in accordance with the laws of such State applicable to contracts
to be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
"COMPANY" AEHR TEST SYSTEMS
By: /S/ RHEA J. POSEDEL
-------------------------
Name: Rhea J. Posedel
-----------------------
Title: Chief Executive Officer
----------------------
"RIGHTS AGENT" U.S. STOCK TRANSFER CORPORATION
By: /S/ SYED HUSSAINI
-------------------------
Name: Syed Hussaini
-----------------------
Title: Assistant Vice President
----------------------
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EXHIBIT A
---------
CERTIFICATE OF DETERMINATION OF RIGHTS, PREFERENCES
AND PRIVILEGES OF
SERIES A PARTICIPATING PREFERRED STOCK
OF AEHR TEST SYSTEMS
The undersigned, Rhea J. Posedel and Mario M. Rosati do hereby certify:
1. That they are the duly elected and acting Chief Executive Officer
and Secretary, respectively, of Aehr Test Systems, a California corporation
(the "Corporation").
2. That pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of the said Corporation, the said
Board of Directors on October 24, 2000 adopted the following resolution
creating a series of 40,000 shares of Preferred Stock designated as Series A
Participating Preferred Stock, none of which has been previously issued:
"RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation by the Restated Articles of Incorporation, the
Board of Directors does hereby provide for the issue of a series of Preferred
Stock of the Corporation and does hereby fix and herein state and express the
designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions of such series of Preferred Stock
as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Participating Preferred Stock." The Series A
Participating Preferred Stock shall have no par value, and the number of shares
constituting such series shall be 40,000.
Section 2. Proportional Adjustment. In the event the Corporation shall
at any time after the issuance of any share or shares of Series A Participating
Preferred Stock (i) declare any dividend on Common Stock of the Corporation
("Common Stock") payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Corporation shall
simultaneously effect a proportional adjustment to the number of outstanding
shares of Series A Participating Preferred Stock.
Section 3. Dividends and Distributions.
(a) Subject to the prior and superior right of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Participating Preferred Stock shall be entitled
to receive when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
last day of January, April, July and October in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Participating Preferred Stock, in
an amount per share (rounded to the nearest cent) equal to 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Participating Preferred Stock.
(b) The Corporation shall declare a dividend or distribution on the
Series A Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue on outstanding shares of Series A
Participating Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Participating Preferred
Stock, unless the date of issue of such shares is prior to the record date for
the first Quarterly Dividend Payment Date, in which case dividends on such
shares shall begin to accrue from the date of issue of such shares, or unless
the date of issue is a Quarterly Dividend Payment Date or is a date after the
record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Participating Preferred Stock in an amount less than the
total amount of such dividends at the time accrued and payable on such shares
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 4. Voting Rights. The holders of shares of Series A
Participating Preferred Stock shall have the following voting rights:
(a) Each share of Series A Participating Preferred Stock shall entitle
the holder thereof to 1,000 votes on all matters submitted to a vote of the
shareholders of the Corporation.
(b) Except as otherwise provided herein or by law, the holders of
shares of Series A Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.
(c) Except as provided in Section 11 herein or required by law, holders
of Series A Participating 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.
-2-
Section 5. Certain Restrictions.
(a) The Corporation shall not declare any dividend on, make any
distribution on, or redeem or purchase or otherwise acquire for consideration
any shares of Common Stock after the first issuance of a share or fraction of a
share of Series A Participating Preferred Stock unless concurrently therewith
it shall declare a dividend on the Series A Participating Preferred Stock as
required by Section 3 hereof.
(b) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 3
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the Corporation shall
not
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on, 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 Series A Participating Preferred
Stock, except dividends paid ratably on the Series A Participating Preferred
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Participating
Preferred Stock, except (A) in exchange for shares of any stock of the
Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Participating Preferred Stock; or
(B) in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(c) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this
Section 5, purchase or otherwise acquire such shares at such time and in such
manner.
Section 6. Reacquired Shares. Any shares of Series A Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the
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conditions and restrictions on issuance set forth herein and, in the Restated
Articles of Incorporation, as then amended.
Section 7. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, the holders of
shares of Series A Participating Preferred Stock shall be entitled to receive
an aggregate amount per share equal to 1000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock plus an amount equal
to any accrued and unpaid dividends on such shares of Series A Participating
Preferred Stock.
Section 8. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Participating Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share equal to 1,000 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.
Section 9. No Redemption. The shares of Series A Participating
Preferred Stock shall not be redeemable.
Section 10. Ranking. The Series A Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 11. Amendment. Neither the Restated Articles of Incorporation
of the Corporation nor any Certificate of Determination issued under the
authority of the Restated Articles shall be further amended in any manner which
would materially alter or change the powers, preference or special rights of
the Series A Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority of the outstanding
shares of Series A Participating Preferred Stock, voting separately as a class.
Section 12. Fractional Shares. Series A Participating Preferred Stock
may be issued in fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Participating Preferred Stock.
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RESOLVED FURTHER, that the President or any Vice President and the
Secretary or any Assistant Secretary of this corporation be, and they hereby
are, authorized and directed to prepare and file a Certificate of Determination
of Rights, Preferences and Privileges in accordance with the foregoing
resolution and the provisions of California law and to take such actions as
they may deem necessary or appropriate to carry out the intent of the foregoing
resolution."
We further declare under penalty of perjury that the matters set forth in
the foregoing Certificate of Determination are true and correct of our own
knowledge.
Executed at Fremont, CA on March 5, 2001.
/S/ RHEA J. POSEDEL
-----------------------------------------
Rhea J. Posedel, Chief Executive Officer
/S/ MARIO M. ROSATI
-----------------------------------------
Mario M. Rosati, Secretary
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EXHIBIT B
---------
FORM OF RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
NOT EXERCISABLE AFTER THE EARLIER OF (i) APRIL 3, 2010 (ii) THE DATE
TERMINATED BY THE COMPANY OR (iii) THE DATE THE COMPANY EXCHANGES THE RIGHTS
PURSUANT TO THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH RIGHTS AGREEMENT.]*
RIGHTS CERTIFICATE
AEHR TEST SYSTEMS
This certifies that ______________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of March 5, 2001, (the "Rights
Agreement"), between Aehr Test Systems, a California corporation (the
"Company"), and U.S. Stock Transfer Corporation ( the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., New York time, on
April 3, 2010 at the principal office of the Rights Agent, or at the office of
its successor as Rights Agent, one one-thousandth (1/1,000) of a fully paid
non-assessable share of Series A Participating Preferred Stock, no par value,
(the "Preferred Shares"), of the
- ---------------------------
* The portion of the legend in bracket shall be inserted only if applicable
and shall be replace the preceding sentence.
Company, at a Exercise Price of thirty-five dollars ($35.00) per one-thousandth
of a Preferred Share (the "Exercise Price"), upon presentation and surrender
of this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of one-thousandths of a Preferred Share which may
be purchased upon exercise hereof) set forth above are the number and Exercise
Price as of April 3, 2000 based on the Preferred Shares as constituted at such
date. As provided in the Rights Agreement, the Exercise Price and the number
and kind of Preferred Shares or other securities which may be purchased upon
the exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive offices
of the Company and the above-mentioned office of the Rights Agent.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be redeemed by the Company, at its option,
at a redemption price of $0.001 per Right or (ii) may be exchanged by the
Company in whole or in part for Common Shares, substantially equivalent rights
or other consideration as determined by the Company.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate amount of
securities as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
No fractional portion of less than one one-thousandth of a Preferred
Share will be issued upon the exercise of any Right or Rights evidenced hereby
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a 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
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the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________________, ________.
ATTEST: AEHR TEST SYSTEMS
- --------------------------- By:
----------------------------------
- ---------------, Assistant Secretary
Its:
---------------------------------
Countersigned:
U.S. Stock Transfer Corporation
as Rights Agent
By:
--------------------------------
Its:
-------------------------------
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Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and
transfers unto
- ------------------------------------------------------------------------------
(Please print name and address of transferee)
- ------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint __________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: __________________, ________
--------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person, or
an Affiliate or Associate of any such Person (as such terms are defined in the
Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: __________________, ________
--------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if holder desires to
exercise the Rights Certificate)
To:___________________________
The undersigned hereby irrevocably elects to exercise ___________________
Rights represented by this Rights Certificate to purchase the number of one-
thousandths of a Preferred Share issuable upon the exercise of such Rights and
requests that certificates for such number of one-thousandths of a Preferred
Share issued in the name of:
Please insert social security
or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- ------------------------------------------------------------------------------
(Please print name and address)
- ------------------------------------------------------------------------------
Dated: __________________, ________
--------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
CERTIFICATE
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined in
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of any such Person.
Dated: __________________, ________
--------------------------------
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
Form of Reverse Side of Rights Certificate -- continued
NOTICE
------
The signature in the foregoing Forms of Assignment and Election must
conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
EXHIBIT C
---------
SHAREHOLDER RIGHTS PLAN
AEHR TEST SYSTEMS
Summary of Rights
-----------------
Distribution and The Board of Directors has declared a dividend of one
Transfer of Rights; Right for each share of Aehr Test Systems Common Stock
Rights Certificate: outstanding. Prior to the Distribution Date referred
to below, the Rights will be evidenced by and trade
with the certificates for the Common Stock. After the
Distribution Date, Aehr Test Systems (the "Company")
will mail Rights Certificates to the Company's
shareholders and the Rights will become transferable
apart from the Common Stock.
Distribution Date: Rights will separate from the Common Stock and become
exercisable following the tenth day (or such later
date as may be determined the Company's Directors)
after a person or group (a) acquires beneficial
ownership of 20% or more of the Company's Common Stock
or (b) announces a tender or exchange offer, the
consummation of which would result in ownership by a
person or group of 20% or more of the Company's Common
Stock.
Preferred Stock After the Distribution Date, each Right will entitle
Purchasable Upon the holder to purchase for $35.00 (the "Exercise
Exercise of Rights: Price"), a fraction of a share of the Company's Series
A Preferred Stock with economic terms similar to that
of one share of the Company's Common Stock.
Flip-In: If an acquiror (an "Acquiring Person") obtains 20% or
more of the Company's Common Stock then each Right
its affiliates) will entitle the holder thereof to
purchase, for the Exercise Price, a number of shares
of the Company's Common Stock having a then current
market value of twice the Exercise Price.
Flip-Over: If, after an Acquiring Person obtains 20% or more of
the Company's Common Stock, (a) the Company merges
into another entity, (b) an acquiring entity merges
into the Company or (c) the Company sells more than
50% of the Company's assets or earning power, then
each Right (other than Rights owned by an Acquiring
Person or its affiliates) will entitle the holder
thereof to purchase, for the Exercise Price, a number
of shares of Common Stock of the person engaging in
the transaction having a then current market value of
twice the Exercise Price.
Exchange Provision: At any time after the date an Acquiring Person obtains
20% or more of the Company's Common Stock and prior to
the acquisition by the Acquiring Person of 50% of the
outstanding Common Stock, the Company's Board of
Directors may exchange the Rights (other than Rights
owned by the Acquiring Person or its affiliates), in
whole or in part, for shares of Common Stock of the
Company at an exchange ratio of one share of Common
Stock per Right (subject to adjustment).
Redemption of Rights will be redeemable at the Company's option for
the Rights: $0.001 per Right at any time on or prior to the tenth
day (or such later date as may be determined by a
majority of the Continuing Directors) after public
announcement that an Acquiring Person has acquired
beneficial ownership of 20% or more of the Company's
Common Stock (the "Shares Acquisition Date").
Expiration of The Rights expire on the earliest of (a) April 3,
the Rights: 2010, (b) exchange or redemption of the Rights as
described above, or (c) consummation of a merger or
consolidation resulting in expiration of the Rights as
described above.
Amendment of The terms of the Rights and the Rights Agreement may
Terms of Rights: be amended in any respect without the consent of the
Rights holders on or prior to the Distribution Date;
thereafter, the terms of the Rights and the Rights
Agreement may be amended without the consent of the
Rights holders in order to cure any ambiguities or to
make changes which do not adversely affect the
interests of Rights holders (other than the Acquiring
Person).
Voting Rights: Rights will not have any voting rights.
Anti-Dilution Rights will have the benefit of certain customary
Provisions: anti-dilution provisions.
Taxes: The Rights distribution should not be taxable for
federal income tax purposes. However, following an
event which renders the Rights exercisable or upon
redemption of the Rights, shareholders may recognize
taxable income.
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The foregoing is a summary of certain principal terms of the Shareholder
Rights Plan only and is qualified in its entirety by reference to the detailed
terms of the Rights Agreement dated as of March 5, 2001, between the Company
and the Rights Agent.
THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT BETWEEN AEHR
TEST SYSTEMS AND U.S. STOCK TRANSFER CORPORATION DATED AS OF MARCH 5, 2001.
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