SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Rights Agreement, dated as of February 6, 2004, by
and between Discovery Laboratories, Inc., a Delaware corporation (the
"Company"), and Continental Stock Transfer & Trust Company, a New York
corporation (the "Rights Agent").
W I T N E S S E T H
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") desires to provide shareholders of the Company with the opportunity
to benefit from the long-term prospects and value of the Company and to ensure
that the shareholders of the Company receive fair and equal treatment in the
event of any proposed takeover of the Company.
WHEREAS, on December 12, 2003, the Board of Directors (i) authorized
and declared a dividend distribution of one Right (as defined below) for each
share of Common Stock, par value $0.001 per share, of the Company outstanding as
of February 6, 2004 (the "Record Date") and (ii) authorized the issuance of one
Right for each share of Common Stock of the Company issued (whether or not
originally issued or sold from the Company's treasury, except in the case of
treasury shares having associated Rights) between the Record Date and the
earlier of the Distribution Date or the Expiration Date (as such terms are
defined below), each Right initially representing the right to purchase one
ten-thousandth of a share of Series A Junior Participating Cumulative Preferred
Stock of the Company having the rights, powers and preferences set forth in the
form of Certificate of Designations attached hereto as Exhibit A hereto, upon
the terms and subject to the conditions hereinafter set forth (the "Rights").
WHEREAS, the Company desires to appoint the Rights Agent to act as
rights agent hereunder, in accordance with the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, shall be the Beneficial Owner (as such term is hereinafter defined)
of 15% or more of the shares of Common Stock of the Company then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary (as such term is
hereinafter defined) of the Company, (iii) any employee benefit plan or
compensation arrangement of the Company or any Subsidiary of the Company or (iv)
any Person holding shares of Common Stock of the Company organized, appointed or
established by the Company or any Subsidiary of the Company for or pursuant to
the terms of any such employee benefit plan or compensation arrangement or for
the purpose of funding other employee benefits for employees of the Company or
any Subsidiary of the Company (the Persons described in clauses (i) through (iv)
above are referred to herein as "Exempt Persons"); provided, however, that the
term "Acquiring Person" shall not include any Grandfathered Person, unless such
Grandfathered Person becomes the Beneficial Owner of a percentage of the shares
of Common Stock of the Company then outstanding equal to or exceeding such
Grandfathered Person's Grandfathered Percentage. Notwithstanding the foregoing,
no Person shall become an "Acquiring Person" as the result of an acquisition by
the Company of Common Stock of the Company which, by reducing the number of
shares outstanding, increases the proportionate number of shares Beneficially
Owned by such Person to 15% (or in the case of a Grandfathered Person, the
Grandfathered Percentage applicable to such Grandfathered Person) or more of the
shares of Common Stock of the Company then outstanding; provided, however, that
if a Person shall become the Beneficial Owner of 15% (or in the case of a
Grandfathered Person, the Grandfathered Percentage applicable to such
Grandfathered Person) or more of the shares of Common Stock 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
shares (other than pursuant to a stock split, stock dividend or similar
transaction) of Common Stock of the Company and immediately thereafter be the
Beneficial Owner of 15% (or in the case of a Grandfathered Person, the
Grandfathered Percentage applicable to such Grandfathered Person) or more of the
shares of Common Stock of the Company then outstanding, then such Person shall
be deemed to be an "Acquiring Person." In addition, notwithstanding the
foregoing, a Person shall not be an "Acquiring Person" if the Board of Directors
determines, in its sole discretion, at any time that a Person who would
otherwise be an "Acquiring Person," has become such without intending to become
an "Acquiring Person," and such Person divests as promptly as practicable (or
within such period of time as the Board of Directors determines is reasonable) a
sufficient number of shares of Common Stock of the Company so that such Person
would no longer be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this Section 1(a).
(b) "Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii).
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 as in effect on the date of this Agreement;
provided, however, that no Person who is an officer or director of the Company
shall be deemed an Affiliate or an Associate of any other officer or director of
the Company solely as a result of his or her position as an officer or director
of the Company.
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "Beneficially Own" and have "Beneficial Ownership" of, any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, Beneficially Owns (as determined pursuant to
Rule 13d-3 as in effect on the date of this Agreement);
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has:
(A) the right to acquire (whether or not such right is
exercisable immediately or only after the passage of time or upon the
satisfaction of any conditions or both) pursuant to 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) or upon the exercise of conversion rights,
exchange rights, rights (other than the Rights), warrants or options, or
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otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "Beneficially Own" or have "Beneficial Ownership" of: (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 or exchange; (2) securities
issuable upon exercise of these Rights at any time prior to the occurrence of a
Triggering Event; or (3) securities issuable upon exercise of Rights from and
after the occurrence of a Triggering Event, which Rights were acquired by such
Person or any of such Person's Affiliates or Associates prior to the
Distribution Date or pursuant to Sections 3(a), 11(i) or 22;
(B) the right to vote pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to "Beneficially
Own" or have "Beneficial Ownership" of, any security under this clause (B) if
the agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the Rules and (2) is not
also then reportable by such person on Schedule 13D promulgated under the
Exchange Act (or any comparable or successor report);
(C) the right to dispose of pursuant to any agreement,
arrangement or understanding (whether or not in writing) (other than customary
arrangements with and between underwriters and selling group members with
respect to a bona fide public offering of securities); 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 pursuant to a revocable proxy as described in clause (B) of
Section 1(d)(ii)) or disposing of any securities of the Company; provided,
however, that (1) no Person engaged in business as an underwriter of securities
shall be deemed the Beneficial Owner of any securities acquired through such
Person's participation as an underwriter in good faith in a firm commitment
underwriting until the expiration of forty (40) days after the date of such
acquisition and (2) no Person who is an officer or director of the Company shall
be deemed, as a result of his or her position as director or officer of the
Company, the Beneficial Owner of any securities of the Company that are
Beneficially Owned by any other officer or director of the Company or any
treasury shares of the Company. For purposes of this Agreement, the phrase "then
outstanding," when used with reference to the percentage of the then outstanding
securities Beneficially Owned by a Person, shall mean the number of securities
then issued and outstanding together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to
Beneficially Own hereunder.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
(f) "Certificate of Incorporation" when used in reference to the
Company shall mean the Company's Restated Certificate of Incorporation, as may
be amended from time to time.
(g) "Close of Business" on any given date shall mean 5:00 p.m., New
York, New York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., New York, New York time, on the next
succeeding Business Day.
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(h) "Commission" shall mean the Securities and Exchange Commission.
(i) "Common Stock" when used in reference to the Company shall mean
the common stock, par value $0.001 per share, of the Company or any other shares
of capital stock of the Company into which such stock shall be reclassified or
changed. "Common Stock" when used with reference to any Person other than the
Company organized in corporate form shall mean (i) the capital stock or other
equity interest of such Person with the greatest voting power, (ii) the equity
securities or other equity interests having power to control or direct the
management of such Person or (iii) if such Person is a Subsidiary of another
Person, the Person or Persons which ultimately control such first-mentioned
Person and which have issued any such outstanding capital stock, equity
securities or equity interest. "Common Stock" when used with reference to any
Person not organized in corporate form shall mean units of beneficial interest
which (x) shall represent the right to participate generally in the profits and
losses of such Person (including without limitation any flow-through tax
benefits resulting from an ownership interest in such Person) and (y) shall be
entitled to exercise the greatest voting power of such Person or, in the case of
a limited partnership, shall have the power to remove or otherwise replace the
general partner or partners.
(j) "Current Value" shall have the meaning set forth in Section
11(a)(iii).
(k) "Depository Agent" shall have the meaning set forth in Section
7(c).
(l) "Distribution Date" shall have the meaning defined in Section
3(a).
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(n) "Exempt Person" shall have the meaning set forth in the
definition of "Acquiring Person".
(o) "Exercise Price" shall have the meaning set forth in Section
4(a).
(p) "Expiration Date" and "Final Expiration Date" shall have the
meanings set forth in Section 7(a).
(q) "Fair Market Value" of any securities or other property shall be
as determined in accordance with Section 11(d).
(r) "Grandfathered Percentage" shall mean, with respect to any
Grandfathered Person, the percentage of the outstanding shares of Common Stock
of the Company that such Grandfathered Person, together with all Affiliates and
Associates of such Grandfathered Person, Beneficially Owns as of the
Grandfathered Time, plus an additional 0.5%; provided, however, that in the
event any Grandfathered Person shall sell, transfer or otherwise dispose of any
outstanding shares of Common Stock of the Company after the Grandfathered Time,
the Grandfathered Percentage shall, subsequent to such sale, transfer or
disposition, mean, with respect to such Grandfathered Person, the lesser of (i)
the Grandfathered Percentage as in effect immediately prior to such sale,
transfer or disposition or (ii) the percentage of outstanding shares of Common
Stock of the Company that such Grandfathered Person Beneficially Owns
immediately following such sale, transfer or disposition, plus an additional
0.5%.
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(s) "Grandfathered Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, is, as of the
Grandfathered Time, the Beneficial Owner of 15% or more of the shares of Common
Stock of the Company then outstanding. Notwithstanding anything to the contrary
provided in this Agreement, any Grandfathered Person who after the Grandfathered
Time becomes the Beneficial Owner of less than 15% of the shares of Common Stock
of the Company then outstanding shall cease to be a Grandfathered Person and
shall be subject to all of the provisions of this Agreement in the same manner
as any Person who is not and was not a Grandfathered Person.
(t) "Grandfathered Time" shall mean 7:00 p.m., New York, New York
time, on December 12, 2003.
(u) "Group" shall have the meaning set forth in clause (b) of the
definition of "Person".
(v) "Person" shall mean (a) an individual, corporation, partnership,
limited liability company, association, joint stock company, trust, business
trust, government or political subdivision, any unincorporated organization or
any other association or entity including any successor (by merger or otherwise)
thereof or thereto and (b) a "group" as that term is used for purposes of
Section 13(d)(3) of the Exchange Act.
(w) "Preferred Stock" shall mean the Company's Series A Junior
Participating Cumulative Preferred Stock, par value $.001 per share, of having
the rights and preferences set forth in the form of Certificate of Designations
attached hereto as Exhibit A.
(x) "Preferred Stock Equivalents" shall have the meaning set forth
in Section 11(b).
(y) "Principal Party" shall have the meaning defined in Section
13(b).
(z) "Redemption Price" shall have the meaning defined in Section 23.
(aa) "Registered Common Stock" shall have the meaning set forth in
Section 13(b).
(bb) "Right Certificate" shall have the meaning set forth in Section
3(a).
(cc) "Rule", with respect to any reference to a numbered rule, shall
refer to the general rules and regulations promulgated under the Exchange Act
unless otherwise stated.
(dd) "Section 11(a)(ii) Event" shall have the meaning set forth in
Section 11(a)(ii).
(ee) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii).
(ff) "Section 13 Event" shall mean any event described in clauses
(x), (y) or (z) of Section 13(a).
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(gg) "Section 24(a)(i) Exchange Ratio" shall have the meaning set
forth in Section 24(a)(i).
(hh) "Section 24(a)(ii) Exchange Ratio" shall have the meaning set
forth in Section 24(a)(ii).
(ii) "Spread" shall have the meaning set forth in Section
11(a)(iii).
(jj) "Stock Acquisition Date" shall mean the date of the first
public announcement (which for purposes of this definition shall include,
without limitation, the issuance of a press release or the filing of a
publicly-available report or other document with the Commission or any other
governmental agency) by the Company, acting pursuant to a resolution adopted by
the Board of Directors or an Acquiring Person, subject in each case to the last
paragraph of Section 1(a), that an Acquiring Person has become such.
(kk) "Subsidiary" shall mean, with reference to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power sufficient, in the absence of contingencies, to
elect a majority of the board of directors or other persons performing similar
functions of such corporation or other entity are at the time directly or
indirectly Beneficially Owned or otherwise controlled by such Person either
alone or together with one or more Affiliates of such Person.
(ll) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii).
(mm) "Triggering Event" shall mean any Section 11(a)(ii) Event or
any Section 13 Event.
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, shall
prior to the Distribution Date (as hereinafter defined in Section 3(a)) also be
the holders of the Common Stock of the Company) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or more Co-Rights
Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall
be determined by the Company.
Section 3. Issue of Right Certificates.
(a) From the date hereof until the earlier of (i) the Close of
Business on the tenth calendar day after the Stock Acquisition Date or (ii) the
Close of Business on the tenth Business Day (or such later calendar day, if any,
as the Board of Directors may determine in its sole discretion; provided, that
the Board of Directors may not postpone such date after a Person becomes an
Acquiring Person) after the date a tender or exchange offer by any Person, other
than an Exempt Person, is first published or sent or given within the meaning of
Rule 14d-4(a), or any successor rule, if, upon consummation thereof, such Person
could become the Beneficial Owner of 15% (or in the case of a Grandfathered
Person, the Grandfathered Percentage applicable to such Grandfathered Person) or
more of the shares of Common Stock of the Company then outstanding (including
any such date which is after the date of this Agreement and prior to the
issuance of the Rights) (the earliest of such dates being herein referred to as
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the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b)) by the certificates for the Common Stock of the
Company registered in the names of the holders of the Common Stock of the
Company (which certificates shall be deemed also to be certificates for Rights)
and not by separate certificates and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Common Stock of the
Company. As soon as practicable after the Distribution Date, the Rights Agent
will, at the Company's expense, send, by first-class, insured, postage prepaid
mail, to each record holder of the Common Stock of the Company as of the Close
of Business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more certificates, in substantially the form of
Exhibit B hereto (the "Right Certificates"), evidencing one Right for each share
of Common Stock of the Company so held, subject to adjustment as provided
herein. In the event that an adjustment in the number of Rights per share of
Common Stock of the Company has been made pursuant to Section 11(o), the Company
may make the necessary and appropriate rounding adjustments (in accordance with
Section 14(a)) at the time of distribution of the Right Certificates, so that
Right Certificates representing only whole numbers of Rights are distributed and
cash is paid in lieu of any fractional Rights. As of and after the Close of
Business on the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) With respect to certificates for the Common Stock of the Company
issued prior to the Close of Business on the Record Date, the Rights will be
evidenced by such certificates for the Common Stock of the Company on or until
the Distribution Date (or the earlier redemption, expiration or termination of
the Rights), and the registered holders of the Common Stock of the Company also
shall be the registered holders of the associated Rights. Until the Distribution
Date (or the earlier redemption, expiration or termination of the Rights), the
transfer of any of the certificates for the Common Stock of the Company
outstanding prior to the date of this Agreement shall also constitute the
transfer of the Rights associated with the Common Stock of the Company
represented by such certificate.
(c) (i) Certificates for the Common Stock of the Company issued
after the Record Date, but prior to the earlier of the Distribution Date or the
redemption, expiration or termination of the Rights, shall be deemed also to be
certificates for Rights, and shall bear a legend, substantially in the following
form:
THIS CERTIFICATE EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN RIGHTS AS
SET FORTH IN A SHAREHOLDER RIGHTS AGREEMENT BETWEEN DISCOVERY LABORATORIES,
INC., AND CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS RIGHTS AGENT, DATED AS
OF FEBRUARY 6, 2004, AS MAY BE AMENDED, RESTATED, RENEWED OR EXTENDED FROM TIME
TO TIME (THE "RIGHTS AGREEMENT"), THE TERMS OF WHICH ARE HEREBY INCORPORATED
HEREIN BY REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF
DISCOVERY LABORATORIES, INC., AND THE STOCK TRANSFER ADMINISTRATION OFFICE OF
THE RIGHTS AGENT. 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. DISCOVERY LABORATORIES, INC., MAY
REDEEM THE RIGHTS AT A REDEMPTION PRICE OF $0.001 PER RIGHT, SUBJECT TO
ADJUSTMENT, UNDER THE TERMS OF THE RIGHTS AGREEMENT. DISCOVERY LABORATORIES,
INC., WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
AGREEMENT, AS IN EFFECT ON THE DATE OF MAILING, WITHOUT CHARGE PROMPTLY AFTER
RECEIPT OF A WRITTEN REQUEST THEREFOR.
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(ii) Under certain circumstances, the Rights issued to or held
by Acquiring Persons or any Affiliates or Associates thereof (as defined in the
Rights Agreement), and any subsequent holder of such Rights, may become null and
void. The Rights shall not be exercisable, and shall be void so long as held, by
a holder in any jurisdiction where the requisite qualification, if any, to the
issuance to such holder, or the exercise by such holder, of the Rights in such
jurisdiction shall not have been obtained or be obtainable.
(iii) With respect to such certificates containing the legend
set forth above, the rights associated with the Common Stock of the Company
represented by such certificates shall be evidenced by such certificates alone
until the Distribution Date (or the earlier redemption, expiration or
termination of the Rights), and the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with the Common Stock of
the Company represented by such certificates.
(iv) In the event that the Company purchases or acquires any
shares of Common Stock of the Company after the Record Date but prior to the
Distribution Date, any Rights associated with such Common Stock of the Company
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the shares of Common Stock of the Company
which are no longer outstanding. The failure to print the foregoing legend on
any such certificate representing Common Stock of the Company or any defect
therein shall not affect in any manner whatsoever the application or
interpretation of the provisions of Section 7(e).
(d) As promptly as practicable after the Distribution Date, the
Rights Agent shall send, by first class mail, postage prepaid, to each record
holder of the Common Stock of the Company as of the close of business on the
Distribution Date, as shown by the records of the Company, at the address of
such holder shown on such records, a certificate in the form provided by Section
4 (a "Right Certificate"), evidencing one Right for each share of Common Stock
of the Company so held. As of and after the Distribution Date, the Rights shall
be evidenced solely by Right Certificates, and may be transferred by the
transfer of the Right Certificate as permitted hereby, separately and apart from
any transfer of one or more shares of Common Stock of the Company.
Section 4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase
shares and of assignment and certificate to be printed on the reverse thereof)
shall each 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, rule or regulation or with any rule or
regulation of any stock exchange on which the Rights may from time to time be
listed, or to conform to customary usage. The Right Certificates shall be in a
machine printable format and in a form reasonably satisfactory to the Rights
Agent. Subject to the provisions of Section 11 and Section 22, the Right
Certificates, whenever distributed, shall be dated as of the Record Date, shall
show the date of countersignature, and on their face shall entitle the holders
thereof to purchase such number of one ten-thousandths of a share of Preferred
Stock as shall be set forth therein at the price set forth therein (the
"Exercise Price"), but the number of such shares and the Exercise Price shall be
subject to adjustment as provided herein.
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(b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 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 Associate or Affiliate of an Acquiring Person) 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 interests in such
Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
regarding the transferred Rights, the shares of Common Stock of the Company
associated with such Rights or the Company or (B) a transfer which the Board of
Directors has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect the avoidance of Section 7(e), and any Right
Certificate issued pursuant to Section 6, Section 11 or Section 22 upon
transfer, exchange, replacement or adjustment of any other Right Certificate
referred to in this sentence, shall have deleted therefrom the second sentence
of the existing legend on such Right Certificate and in substitution therefor
shall contain the following legend:
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY OWNED
BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR AN
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME
NULL AND VOID UNDER CERTAIN CIRCUMSTANCES AS SPECIFIED IN SECTION 7(E) OF THE
RIGHTS AGREEMENT.
The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence and identity of any Acquiring Person or any Associate or
Affiliate thereof. The Company shall instruct the Rights Agent in writing of the
Rights which should be so legended. The failure to print the foregoing legend on
any such Right certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e).
Section 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chairman of the Board of Directors, or its President or any Vice
President and by its Treasurer or any Assistant Treasurer, or by its Secretary
or any Assistant Secretary, either manually or by facsimile signature, and shall
have affixed thereto the Company's seal or a facsimile thereof which shall be
attested to by the Secretary or any Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates shall be manually
countersigned by an authorized signatory of the Rights Agent and shall not be
valid for any purpose unless so countersigned, and such countersignature upon
any Right Certificate shall be conclusive evidence, and the only evidence, that
such Right Certificate has been duly countersigned as required hereunder. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by an authorized
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signatory of the Rights Agent, and issued and delivered by the Company with the
same force and effect as though the person who signed such Right Certificates
had not ceased to be such officer of the Company; and any Right Certificates may
be signed on behalf of the Company by any person who, at the actual date of the
execution of such Right Certificate, shall be a proper officer of the Company to
sign such Right 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 one of its offices designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14, at any time after the Close of Business on the Distribution Date,
and at or prior to the Close of Business on the Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Certificates, entitling the registered holder
to purchase a like number of one ten-thousandths of a share of Preferred Stock
(or following a Triggering Event, preferred stock, cash, property, debt
securities, Common Stock of the Company, Common Stock or other securities of any
other company or any combination thereof) as the Right Certificate or
Certificates surrendered then entitled such holder to purchase and at the same
Exercise Price. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate or Certificates to
be transferred, split up, combined or exchanged, with the form of assignment and
certificate duly executed, at the office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Right Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request;
thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and
Section 14, countersign and deliver to the Person entitled thereto a Right
Certificate or Certificates, as the case may be, as so requested. The Company
may require payment by the registered holder of a Right Certificate of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and reimbursement to the Company and the Rights
Agent of all reasonable expenses incidental thereto, and upon surrender to the
Rights Agent and cancellation of the Right Certificate, if mutilated, the
Company will execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
10
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights.
(a) Subject to Section 7(e), the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Exercise Price for the total number of
one ten-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) the Close of Business on the
tenth anniversary of the Record Date (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in Section 23 or (iii) the
time at which such Rights are exchanged as provided in Section 24 (the earlier
of (i), (ii) or (iii) being herein referred to as the "Expiration Date"). Except
as set forth in Section 7(e) and notwithstanding any other provision of this
Agreement, any Person who prior to the Distribution Date becomes a record holder
of shares of Common Stock of the Company may exercise all of the rights of a
registered holder of a Right Certificate with respect to the Rights associated
with such shares of Common Stock of the Company in accordance with the
provisions of this Agreement, as of the date such Person becomes a record holder
of shares of Common Stock of the Company.
(b) The Exercise Price for each one ten-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be Fifty
United States Dollars (U.S. $50.00), shall be subject to adjustment from time to
time as provided in Section 11 and Section 13 and shall be payable in lawful
money of the United States of America in accordance with Section 7(c) below.
(c) As promptly as practicable following the Distribution Date, the
Company shall deposit with a corporation, trust, bank or similar institution in
good standing organized under the laws of the United States or any State of the
United States, which is authorized under such laws to exercise corporate trust
or stock transfer powers and is subject to supervision or examination by a
federal or state authority (such institution is hereinafter referred to as the
"Depositary Agent"), certificates representing the shares of Preferred Stock
that may be acquired upon exercise of the Rights and the Company shall cause
such Depositary Agent to enter into an agreement pursuant to which the
Depositary Agent shall issue receipts representing interests in the shares of
Preferred Stock so deposited. Upon receipt of a Right Certificate representing
exercisable Rights, with the form of election to purchase and the certificate on
the reverse side thereof duly executed, accompanied by payment of the Exercise
Price for the shares to be purchased and an amount equal to any applicable
transfer tax (as determined by the Rights Agent) by certified check or bank
draft payable to the order of the Company or by money order, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) requisition from
the Depositary Agent (or make available, if the Rights Agent is the Depositary
Agent) depositary receipts or certificates for the number of one ten-thousandths
of a share of Preferred Stock to be purchased and the Company hereby irrevocably
authorizes the Depositary Agent to comply with all such requests, (ii) when
appropriate, requisition from the Company the amount of cash, if any, to be paid
in lieu of issuance of fractional shares in accordance with Section 14, (iii)
promptly after receipt of such certificates or depositary receipts, cause the
same to be delivered to or upon the order of the registered holder of such Right
11
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate. In the event
that the Company is obligated to issue other securities (including Common Stock)
of the Company, pay cash or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash or other property are available for distribution by the Rights
Agent, if and when appropriate. The payment of the Exercise Price may be made by
certified or bank check payable to the order of the Company, or by money order
or wire transfer of immediately available funds to the account of the Company
(provided that notice of such wire transfer shall be given by the holder of the
related Right to the Rights Agent).
(d) In case the registered holder of any Right Certificate shall
exercise less than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 14.
(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 any Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any Associate or
Affiliate of an Acquiring Person) who becomes a transferee after the Acquiring
Person becomes such or (iii) a transferee of an Acquiring Person (or of any
Associate or Affiliate of an Acquiring Person) 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, the shares of
Common Stock of the Company associated with such Rights or the Company, or (B) a
transfer which the 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), shall be automatically null and void and of no
further force or effect without any further action of any party 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) are complied with, but shall have no liability to any holder of
Right Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or any Affiliates or
Associates of an Acquiring Person or any transferee of any of them 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 of Rights upon the occurrence of any
purported exercise as set forth in this Section 7 unless such registered holder
shall have (i) completed and signed the certificate contained in the form of
election to purchase set forth on the reverse side of the Right Certificate
surrendered for such exercise, and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates.
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or 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 Right 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 other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Right Certificates to the Company, or shall, upon the written
request of the Company, destroy such cancelled Rights Certificates, and in such
case, shall deliver a certificate of destruction thereof to the Company.
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Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that, from and after the
Distribution Date, it will cause to be reserved and kept available out of its
authorized and unissued shares of Preferred Stock or any authorized and issued
shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding and exercisable Rights. Upon the occurrence of any events resulting
in an increase in the aggregate number of shares of Preferred Stock issuable
upon exercise of all outstanding Rights in excess of the number then reserved,
the Company shall make appropriate increases in the number of shares so
reserved.
(b) The Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares of Preferred Stock issued
or reserved for issuance pursuant to this Agreement (or Common Stock of the
Company issuable in lieu thereof) to be listed, upon official notice of
issuance, upon the principal national securities exchange, if any, upon which
the Common Stock of the Company is listed or, if the principal market for the
Common Stock of the Company is not on any national securities exchange, to be
eligible for quotation on the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or any successor thereto or other
comparable quotation system upon which the Common Stock of the Company is
quoted.
(c) The Company shall use best efforts, if necessary, to (i) file,
as soon as practicable following the earliest date after the occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii), or as soon as required by law following the Distribution
Date, as the case may be, a registration statement under the Securities Act of
1933 (the "Securities Act"), with respect to the securities issuable 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 that at
all times meets 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 or
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, and which will ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date determined in accordance with the
provisions 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 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, in each case with prompt written notice to the Rights Agent.
Notwithstanding any such provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained.
13
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (or
other securities issuable upon exercise of the Rights) delivered upon the
exercise of the Rights shall, at the time of delivery of the certificates or
depository receipts for such shares (subject to payment of the Exercise Price),
be duly and validly authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of the Right Certificates
or of any certificates for shares of Preferred Stock (or other securities
issuable upon exercise of the 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 Right Certificates to a person other than, or in respect of the
issuance or delivery of securities in a name other than that of, the registered
holder of the Right Certificates evidencing Rights surrendered for exercise or
to issue or deliver any certificates for securities in a name other than that of
the registered holder upon the exercise of any Rights until such tax shall have
been paid (any such tax being payable by the holder of such Right Certificate at
the time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date.
Each Person in whose name any certificate for Preferred Stock
(including any fraction of a share of Preferred Stock) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of the shares of Preferred Stock represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Exercise Price (and any
applicable transfer taxes) was made; provided, however, that if the date of such
surrender and payment is a date upon which the Preferred Stock 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 Preferred Stock transfer books of the
Company are open; provided, further, that if the delivery of shares of Preferred
Stock is delayed pursuant to Section 9(c), such Person shall be deemed to have
become the record holder of such shares of Preferred Stock only when such shares
first become deliverable. Prior to the exercise of the Right evidenced thereby,
the holder of a Right Certificate shall not be entitled to any rights of a
shareholder of the Company with respect to shares 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 and Kind of Shares or
Number of Rights. The Exercise Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as follows:
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of shares or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a) and Section 7(e), 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, and the number and
14
kind of shares of capital stock issuable on such date, shall be proportionately
adjusted so that the holder of any Right exercised after such time shall be
entitled to receive the aggregate number and kind of shares of capital stock
which, if such Right had been exercised immediately prior to such date and at a
time when the Preferred Stock transfer books of the Company were open, such
holder would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification; provided,
however, that in no event shall the consideration to be paid upon the exercise
of a Right be less than the aggregate par value of the shares of capital stock
of the Company issuable upon exercise of a Right. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to the provisions of Sections 23 and 24, in the
event any Person, alone or together with its Affiliates and Associates, shall
become an Acquiring Person, then, promptly following any such occurrence (a
"Section 11(a)(ii) Event"), proper provision shall be made so that each holder
of a Right, except as provided in Section 7(e), shall thereafter have a right to
receive, upon exercise thereof at a price per Right equal to the then current
Exercise Price multiplied by the number of one ten-thousandths of a share of
Preferred Stock for which a Right is then exercisable (without giving effect to
this Section 11(a)(ii)), in accordance with the terms of this Agreement and in
lieu of shares of Preferred Stock, such number of shares of Common Stock of the
Company as shall equal the result obtained by (x) multiplying the then current
Exercise Price by the then number of one ten-thousandths of a share of Preferred
Stock for which a Right is then exercisable (without giving effect to this
Section 11(a)(ii)) and (y) dividing that product by 50% of the current per share
closing price of the Common Stock of the Company (determined pursuant to Section
11(d)) on the date of the occurrence of a Section 11(a)(ii) Event (such number
of shares of Common Stock of the Company being referred to as the "Adjustment
Shares"); 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 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. Shares of Preferred Stock and
Preferred Stock Equivalents owned by or held for the account of the Company or
any Subsidiary of the Company shall not be deemed outstanding for the purpose of
any such computation. Such adjustments shall be made successively whenever such
a record date is fixed; and in the event that such rights 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.
(iii) In lieu of issuing any shares of Common Stock of the
Company in accordance with Section 11(a)(ii), the Company, acting by or pursuant
to a resolution of the Board of Directors, may, and in the event that the number
of shares of Common Stock of the Company which are authorized by the Certificate
of Incorporation but not outstanding or reserved for issuance for purposes other
than upon exercise of the Rights is not sufficient to permit the exercise in
full of the Rights in accordance with Section 11(a)(ii), the Company, acting by
or pursuant to a resolution of the Board of Directors, shall: (A) determine the
excess of (X) the Fair Market Value of the Adjustment Shares issuable upon the
exercise of each Right (the "Current Value") over (Y) the Exercise Price
attributable to each Right (such excess being referred to as the "Spread"); and
(B) with respect to all or a portion of each Right (subject to Section 7(e)),
make adequate provision to substitute for the Adjustment Shares, upon payment of
the applicable Exercise Price, (1) Common Stock of the Company, (2) cash, (3) a
15
reduction in the Exercise Price, (4) Preferred Stock Equivalents which the Board
of Directors has deemed to have the same value as shares of the Preferred Stock,
(5) debt securities of the Company, (6) other assets or securities of the
Company or (7) any combination of the foregoing which, when added to any shares
of Preferred Stock issued upon such exercise, has an aggregate value equal to
the Current Value, where such aggregate value has been determined by the Board
of Directors based upon the advice of a nationally recognized investment banking
firm selected by the Board of Directors; provided, however, that 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 Section 11(a)(ii) 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, shares of Preferred Stock (to
the extent available) and then, if necessary, cash, which shares and/or cash
have an aggregate value equal to the Spread. If the Board of Directors shall
determine in good faith that it is likely that sufficient additional shares of
Preferred Stock could be authorized for issuance upon exercise in full of the
Rights, the 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 (such period, as it may be extended,
being referred to herein as 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), 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 and/or to decide the appropriate form of distribution to be
made pursuant to such first sentence and 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 and
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 Preferred Stock shall be
the Fair Market Value (as determined pursuant to Section 11(d)) per share of the
Preferred Stock on the Section 11(a)(ii) Trigger Date and the value of any
Preferred Stock Equivalent shall be deemed to have the same value as the
Preferred Stock on such 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 to be issued
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 Purchase Price shall again be adjusted to be the Exercise Price which
would then be in effect if such record date had not been fixed.
(b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within forty-five (45) calendar days after such record
date) to subscribe for or purchase Preferred Stock (or securities having the
same or more favorable rights, privileges and preferences as the shares of
Preferred Stock ("Preferred Stock Equivalents")) or securities convertible into
Preferred Stock or Preferred Stock Equivalents at a price per share of Preferred
Stock or per share of Preferred Stock Equivalents (or having a conversion price
per share, if a security convertible into Preferred Stock or Preferred Stock
Equivalents) less than the Fair Market Value (as determined pursuant to Section
11(d)) per share of Preferred Stock on such record date, 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,
16
the numerator of which shall be the number of shares of Preferred Stock or
Preferred Stock Equivalents, as applicable, outstanding on such record date,
plus the number of shares of Preferred Stock or Preferred Stock Equivalents, as
applicable, which the aggregate offering price of the total number of shares of
Preferred Stock and/or Preferred Stock Equivalents to be offered (and the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such Fair Market Value and the denominator of which
shall be the number of shares of Preferred Stock outstanding on such record
date, plus the number of additional shares of Preferred Stock and Preferred
Stock Equivalents 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 a Right be less than the aggregate par value of the shares of stock of the
Company issuable upon exercise of a 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 the Fair Market Value thereof
determined in accordance with Section 11(d). Shares of Preferred Stock or
Preferred Stock Equivalents owned by or held for the account of the Company
shall not be deemed outstanding for the purpose of any such computation. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such rights 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) If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), of evidences of indebtedness, cash (other
than a regular periodic cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
convertible securities, subscription rights or warrants (excluding those
referred to in Section 11(b)), 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 Fair Market Value (as determined pursuant to Section 11(d)) per one
ten-thousandth of a share of Preferred Stock on such record date, less the Fair
Market Value (as determined pursuant to Section 11(d)) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
convertible securities, subscription rights or warrants applicable to one
ten-thousandth of a share of Preferred Stock and the denominator of which shall
be the Fair Market Value (as determined pursuant to Section 11(d)) per one
ten-thousandth of a share of Preferred Stock (such calculation being made on an
"as-converted basis"); provided, however, that in no event shall the
consideration to be paid upon the exercise of a Right be less than the aggregate
par value of the shares of stock of the Company issuable upon exercise of a
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 again be adjusted to be the Exercise Price which would be in effect
if such record date had not been fixed.
(d) For the purpose of this Agreement, the "Fair Market Value" of
any share of Preferred Stock, Common Stock or any other stock or any Right or
other security or any other property shall be determined as follows:
(i) In the case of a publicly-traded stock or other security,
the Fair Market Value on any date shall be deemed to be the average of the daily
closing prices per share of such stock or per unit of such other security for
the 30 consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
Fair Market Value per share of any share of stock is determined during a period
following the announcement by the issuer of such stock of (x) a dividend or
distribution on such stock payable in shares of such stock or securities
convertible into shares of such stock or (y) any subdivision, combination or
reclassification of such stock, and prior to the expiration of the 30 Trading
17
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 Fair Market Value shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the closing
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 securities are 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 such security is listed or admitted to trading; or, if not listed or
admitted to trading on any national securities exchange, the last quoted price
(or, if not so quoted, the average of the last quoted 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 no bids for such security are 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 such security
selected by the Board of Directors. If on any such date no market maker is
making a market in such security, the Fair Market Value of such security on such
date shall be determined reasonably and with utmost good faith to the holders of
the Rights by the Board of Directors; provided, however, that if at the time of
such determination there is an Acquiring Person, the Fair Market Value of such
security on such date shall be determined by a nationally recognized investment
banking firm selected by the Board of Directors, which determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which such security
is listed or admitted to trading is open for the transaction of business or, if
such security is not listed or admitted to trading on any national securities
exchange, a Business Day.
(ii) If a security is not so listed or traded, "Fair Market
Value" shall mean the fair value per share of stock or per other unit of such
security, determined reasonably and with utmost good faith to the holders of the
Rights by the Board of Directors; provided, however, that if at the time of such
determination there is an Acquiring Person, the Fair Market Value of such
security on such date may, at the sole discretion of the Board of Directors, be
determined by a nationally recognized investment banking firm selected by the
Board of Directors, which determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights Agent and the holders
of the Rights; provided, however, that for the purposes of making any adjustment
provided for by Section 11(a)(ii), the Fair Market Value of a share of Preferred
Stock shall not be less than the product of the then Fair Market Value of a
share of Common Stock multiplied by the higher of the then Dividend Multiple or
Vote Multiple (as both of such terms are defined in the Certificate of
Designations attached as Exhibit A hereto) applicable to the Preferred Stock and
shall not exceed 105% of the product of the then Fair Market Value of a share of
Common Stock multiplied by the higher of the then Dividend Multiple or Vote
Multiple applicable to the Preferred Stock.
(iii) In the case of property other than securities, the Fair
Market Value thereof shall be determined reasonably and with utmost good faith
to the holders of Rights by the Board of Directors; provided, however, that if
at the time of such determination there is an Acquiring Person, the Fair Market
Value of such property on such date may, at the sole discretion of the Board of
Directors, be determined by a nationally recognized investment banking firm
selected by the Board of Directors, which determination shall be described in a
statement filed with the Rights Agent and shall be binding upon the Rights Agent
and the holders of the Rights.
18
(e) 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(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one-millionth of a share of Common Stock of the Company
or hundred-millionth of a share of Preferred Stock, as the case may be, or to
such other figure as the Board of Directors may deem appropriate. Subject to the
first sentence of this Section 11(e), 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 mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of any provision of Section 11(a) or Section
13(a), the holder of any Right thereafter exercised shall become entitled to
receive any shares of capital stock of the Company other than Preferred Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the
Preferred Stock contained in Sections 11(a) through (e), (g) through (k) and
(m), inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one ten-thousandths of a
share of Preferred Stock (or other securities or amount of cash or combination
thereof) purchasable from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the 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 one ten-thousandths of
a share of Preferred Stock (calculated to the nearest hundred-millionth) as the
Board of Directors determines is appropriate to preserve the economic value of
the Rights, including, by way of example, that number obtained by (i)
multiplying (x) the number of one ten-thousandths of a share of Preferred Stock
for which a Right may be exercisable 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.
(i) The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one ten-thousandths of a
share of Preferred Stock 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-millionth) 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
19
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 Right Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, the additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right 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 Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price
or the number of one ten-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed in the initial Right Certificates issued hereunder
without prejudice to any adjustment or change.
(k) Before taking any action that would cause an adjustment reducing
the Exercise Price below the then stated value, if any, of the number of one
ten-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Preferred Stock at such adjusted
Exercise Price.
(l) 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
the number of one ten-thousandths of a share of Preferred Stock or other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of one ten-thousandths of a share of Preferred Stock 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.
(m) Anything in this Section 11 to the contrary notwithstanding, 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 in its good faith, sole judgment the Board of Directors shall
determine to be advisable in order that any (i) consolidation or subdivision of
the Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Fair Market Value or (iii) issuance wholly for cash of
shares of Preferred Stock, Preferred Stock Equivalents or stock dividends or
issuance of rights, options or warrants referred to hereinabove in this Section
11, hereafter made by the Company to holders of its Preferred Stock, shall not
be taxable to such shareholders.
20
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been redeemed
pursuant to Section 23 or exchanged pursuant to Section 24, (i) consolidate with
(other than with a Subsidiary of the Company in a transaction that complies with
the proviso at the end of this sentence), (ii) merge with or into (other than
with a Subsidiary of the Company in a transaction that complies with the proviso
at the end of this sentence) or (iii) sell or transfer (or permit any Subsidiary
to sell or transfer), in one transaction or a series of related 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 and/or any of its Subsidiaries in one or more
transactions each of which complies with the proviso at the end of this
sentence) if (x) at the time of or immediately after such consolidation, merger
or sale there are any rights, warrants or other instruments outstanding or
agreements or arrangements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale, the shareholders of a Person who constitutes, or would constitute, the
"Principal Party" for the purposes of Section 13(a) shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates; provided, however, that this Section 11(n) shall not affect the
ability of any Subsidiary of the Company to consolidate with, or merge with or
into or sell or transfer assets or earning power to, any other Subsidiary of the
Company. The Company further covenants and agrees that after the Distribution
Date it will not, except as permitted by Section 23 or Section 27, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights.
(o) Notwithstanding anything in this Agreement to the contrary, in
the event the Company shall at any time after the date of this Agreement and
prior to the Distribution Date (i) declare or pay any dividend on the
outstanding Common Stock of the Company payable in shares of Common Stock of the
Company, (ii) effect a subdivision or consolidation of the outstanding shares of
Common Stock of the Company (by reclassification or otherwise than by the
payment of dividends payable in Common Stock of the Company) or (iii) combine
the outstanding Common Stock of the Company into a greater or lesser number of
Common Stock of the Company, then in any such case (A) the number of one
ten-thousandths of a share of Preferred Stock issuable pursuant to each Right
shall be determined by multiplying the number of one ten-thousandths of a share
of Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock of the Company
outstanding immediately prior to such event and the denominator of which is the
number of shares of Common Stock of the Company outstanding immediately after
such event, and (B) each share of Common Stock of the Company outstanding
immediately after such event shall have issued with it that number of Rights
which each share of Common Stock of the Company outstanding immediately prior to
such event had issued with it. The adjustments provided for in this Section
11(o) shall be made successively whenever such a dividend is declared or paid or
such a subdivision, combination or consolidation is effected with respect to the
Common Stock of the Company.
(p) The exercise of any Rights under Section 11(a)(ii) shall only
result in the loss of Rights under Section 11(a)(ii) to the extent so exercised
and shall not otherwise affect the Rights of holders of Right Certificates under
this Rights Agreement, including rights to purchase securities of the Principal
Party following a Section 13 Event which has occurred or may thereafter occur,
as set forth in Section 13. Upon exercise of a Right Certificate under Section
11(a)(ii), the Rights Agent shall return such Right Certificate duly marked to
indicate that such exercise has occurred.
21
Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section
13, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock of the Company a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Right Certificate (or,
if prior to the Distribution Date, to each holder of a certificate representing
shares of Common Stock of the Company) in accordance with Section 26. 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 any
such adjustment unless and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
In the event that, following the Stock Acquisition Date, directly or
indirectly: (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which is
not prohibited by Section 11(n)), and the Company shall not be the continuing or
surviving corporation of such consolidation or merger; (y) any Person (other
than a Subsidiary of the Company in a transaction which is not prohibited by the
proviso at the end of the first sentence of Section 11(n)) shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such merger and, in connection with
such merger, all or part of the shares of Common Stock of the Company shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property; or (z) the Company shall sell, exchange, mortgage or
otherwise transfer (or one or more of its Subsidiaries shall sell, mortgage or
otherwise transfer), in one transaction or a series of related 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 any Subsidiary of the Company in one or more
transactions, each of which is not prohibited by the proviso at the end of the
first sentence of Section 11(n)); then, and in each such case, proper provision
shall be made so that: (i) each holder of a Right, except as provided in Section
7(e), shall have the right to receive, upon the exercise thereof at the then
current Exercise Price in accordance with the terms of this Agreement and in
lieu of Preferred Shares, such number of validly authorized and issued, fully
paid and nonassessable shares of freely tradable Common Stock of the Principal
Party (as defined in Section 13(b)), free and clear of rights of call or first
refusal, preemptive rights, change of control rights, liens, encumbrances,
transfer restrictions or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Exercise Price by the number of one
ten-thousandths of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event, and dividing
that product by (2) 50% of the Fair Market Value (determined pursuant to Section
11(d)) per share of the Common Stock of such Principal Party on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale, mortgage or transfer, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
22
intended that the provisions of Section 11 shall apply to such Principal Party;
and (iv) such Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of shares of its Common Stock to
permit exercise of all outstanding Rights in accordance with this Section 13(a)
and the making of payments in cash and/or other securities in accordance with
Section 11(a)(iii)) in connection with such consummation as may be necessary to
assure that the provisions shall thereafter be applicable, as nearly as
reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights.
(a) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer of Common Stock that has the highest aggregate Fair Market Value
(determined pursuant to Section 11(d)), and if no securities are so issued, the
Person that is the other party to the merger or consolidation, or, if there is
more than one such Person, the Person the Common Stock of which has the highest
aggregate Fair Market Value (determined pursuant to Section 11(d)); and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest aggregate
Fair Market Value (determined pursuant to Section 11(d));
provided, however, that in any such case: (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act ("Registered Common
Stock") or such Person is not a corporation, and such Person is a direct or
indirect Subsidiary or Affiliate of another Person who has Registered Common
Stock outstanding, "Principal Party" shall refer to such other Person; (2) if
the Common Stock of such Person is not Registered Common Stock or such Person is
not a corporation, and such Person is a direct or indirect Subsidiary of another
Person but is not a direct or indirect Subsidiary of another Person which has
Registered Common Stock outstanding, "Principal Party" shall refer to the
ultimate parent entity of such first-mentioned Person; (3) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons is
the issuer of the Registered Common Stock having the highest aggregate Fair
Market Value (determined pursuant to Section 11(d)); and (4) if the Common Stock
of such Person is not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and none of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever ultimate parent entity
is the corporation having the greatest shareholders' equity or, if no such
ultimate parent entity is a corporation, "Principal Party" shall refer to
whichever ultimate parent entity is the entity having the greatest net assets.
(b) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto (x) the Principal Party shall have a
sufficient number of authorized shares of its Common Stock, which have not been
issued or reserved for issuance, to permit the exercise in full of the Rights in
23
accordance with this Section 13 and (y) the Company and each Principal Party and
each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section 13(a) and (b) and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
Section 13(a), the Principal Party at its own expense 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, cause such registration statement
to become effective as soon as practicable after such filing and cause such
registration statement to remain effective (with a prospectus that at all times
meets the requirements of the Securities Act) until the Expiration Date;
(ii) qualify or register the Rights and the securities
purchasable upon exercise of the Rights under the state securities or blue sky
laws of such jurisdictions as may be necessary or appropriate;
(iii) 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
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
(c) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its certificate of incorporation or By-laws or other
instrument governing its affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, shares of Common
Stock of such Principal Party at less than the then current Fair Market Value
(determined pursuant to Section 11(d)) or securities exercisable for, or
convertible into, Common Stock of such Principal Party at less than such Fair
Market Value, or (ii) providing for any special payment, tax or similar
provisions in connection with the issuance of the Common Stock of such Principal
Party pursuant to the provisions of this Section 13, then, in such event, the
Company shall not consummate any such transaction 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.
(d) Notwithstanding anything contained herein to the contrary, upon
the consummation of any merger or other acquisition transaction of the type
described in clause (x), (y) or (z) of Section 13(a) involving the Company
pursuant to a merger or other acquisition agreement between the Company and any
Person (or one or more of such Person's Affiliates or Associates) which
agreement has been approved by the Board of Directors prior to any Person
becoming an Acquiring Person, this Agreement and the rights of holders of Rights
hereunder shall be terminated.
24
(e) 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,
except prior to the Distribution Date as provided in Section 11(o) hereof, or to
distribute Right Certificates which evidence fractional Rights. If the Company
elects not to issue such fractional Rights, the Company shall pay, in lieu of
such fractional Rights, to the registered holders of the Right Certificates with
regard to which such fractional Rights would otherwise be issuable, an amount in
cash equal to the same fraction of the Fair Market Value of a whole Right, as
determined pursuant to Section 11(d).
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
ten-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one ten-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one ten-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Fair Market Value of one ten-thousandth of a share of Preferred
Stock. For purposes of this Section 14(b), the Fair Market Value of one
ten-thousandth of a share of Preferred Stock shall be determined pursuant to
Section 11(d) for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action.
All rights of action in respect of this Agreement, other than rights
of action vested in the Rights Agent pursuant to Sections 18 and 20, are vested
in the respective registered holders of the Right Certificates (or, prior to the
Distribution Date, the registered holders of the Common Stock of the Company);
and any registered holder of any Right Certificate (or, prior to the
Distribution Date, of the Common Stock of the Company), without the consent of
the Rights Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Stock of the Company), may, in such
registered holder's own behalf and for such registered holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Right evidenced by such Right Certificate in the manner provided in such
Right 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 shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Holders of Rights shall be entitled to recover the reasonable fees, costs and
expenses, including attorneys' fees, incurred by them in any action to enforce
the provisions of this Agreement.
25
Section 16. Agreement of Right Holders.
Every holder of a Right, by accepting the same, consents and agrees
with the Company and the Rights Agent and with every other holder of a Right
that:
(a) prior to the Distribution Date, each Right will be transferable
only simultaneously and together with the transfer of shares of Common Stock of
the Company;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purpose, duly
endorsed or accompanied by a proper instrument of transfer;
(c) subject to Sections 6(a) and 7(e), the Company and the Rights
Agent may deem and treat the person in whose name a Right Certificate (or, prior
to the Distribution Date, the associated certificate representing Common Stock
of the Company) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated certificate representing Common Stock of
the Company made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and, subject to the last sentence of Section 7(e), neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as the result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligations; provided, however, that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Right Certificate Holder Not Deemed a Shareholder.
No holder, as such, of any Right Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the shares of
Preferred Stock 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 Right Certificate be construed to confer upon the
holder of any Right Certificate, as such, any of the rights of a shareholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to shareholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting shareholders (except as provided in Section 25), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Right 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 such compensation
as shall be agreed to in writing between the Company and the Rights Agent 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 disbursements and
other disbursements incurred in the administration and execution of this
26
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 gross 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 arising therefrom, directly or indirectly. The provisions of this
Section 18(a) shall survive the expiration of the Rights and the termination of
this Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Right Certificate
or certificate representing Common Stock of the Company, Preferred Stock or
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it in good faith
and without negligence to be genuine and to be signed and executed by the proper
Person or Persons; provided, that the foregoing shall not apply to liabilities
that arise due to the gross negligence, willful misconduct or breach of this
Agreement by the Rights Agent.
(c) The Rights Agent shall not be liable for consequential damages
under any provision of this Agreement or for any consequential damages arising
out of any act or failure to act hereunder.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any company into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, any company resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party or any company succeeding to the corporate trust
or shareholder services 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, that such company would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21. In
case at the time such successor Rights Agent shall succeed to the agency created
by this Agreement, any of the Right Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
27
Section 20. Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations expressly
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Right Certificates, by their acceptance
thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel selected by it
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Fair Market Value") 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 shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President, a Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company and delivered to the Rights Agent. Any such certificate
shall be full authorization to the Rights Agent for any action taken or suffered
in good faith by it under the provisions of this Agreement in reliance upon such
certificate.
(c) The Rights Agent shall be liable hereunder only for its own
gross 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 Right
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 Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e)) or any adjustment
required under the provisions of Sections 11 or 13 or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of a
certificate describing any such adjustment furnished in accordance with Section
12), nor shall it be responsible for any determination by the Board of Directors
of the Fair Market Value of the Rights or Preferred Stock pursuant to the
provisions of Section 14; nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
shares of Common Stock of the Company or Preferred Stock to be issued pursuant
to this Agreement or any Right Certificate or as to whether or not any shares of
Common Stock of the Company or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
28
(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 and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board of Directors, any Vice
Chairman of the Board of Directors, the President, a Vice President, the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer of
the Company, and is authorized to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer. 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 Agreement and the date on 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 such application on or after the date specified in such
application (which date shall not be less than five 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) Except as otherwise set forth in this Agreement, the Rights
Agent and any shareholder, director, officer or employee of the Rights Agent may
buy, sell or deal in any of the Rights or other securities of the Company or
become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not the Rights Agent under this Agreement.
Nothing herein shall preclude the Rights Agent from acting in any other capacity
for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents.
(j) 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 Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause (1) or clause (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.
29
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 by first class mail. The Company may remove the
Rights Agent or any successor Rights Agent (with or without cause), effective
immediately or on a specified date, by written notice given to the Rights Agent
or successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock of the Company and Preferred Stock, and by giving notice to the
holders of the Right Certificates by any means reasonably determined by the
Company to inform such holders of such removal (including without limitation, by
including such information in one or more of the Company's reports to
shareholders or reports or filings with the Commission). 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
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company), then the incumbent Rights Agent or the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or of the State
of Delaware or the State of New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of Delaware or the State of New York), in good
standing, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $10,000,000 or (b) an Affiliate of a
Person described in clause (a) of this sentence. 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; provided, that the predecessor Rights Agent shall deliver
and transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock of the
Company and the Preferred Stock, and give notice to the holders of the Right
Certificates by any means reasonably determined by the Company to inform such
holders of such appointment (including without limitation, by including such
information in one or more of the Company's reports to shareholders or reports
or filings with the Commission). 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 Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Right
Certificates evidencing Rights in such form as may be approved by the Board of
Directors to reflect any adjustment or change in the Exercise Price per share
and the number or kind or class of shares of stock or other securities or
property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of shares of Common Stock of the Company following the Distribution Date
and prior to the redemption or expiration of the Rights, the Company (a) shall,
30
with respect to shares of Common Stock of the Company so issued or sold pursuant
to the exercise of stock options, under any employee plan or arrangement or upon
the exercise, conversion or exchange of securities hereafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors, issue Right Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Right Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Right Certificate would be issued, and (ii) no such Right
Certificate shall be issued if, and to the extent that, appropriate adjustments
shall otherwise have been made in lieu of the issuance thereof.
Section 23. Redemption.
(a) The Board of Directors may, at its sole option, redeem all, but
not less than all, of the then outstanding Rights at a redemption price of
$0.001 per Right, appropriately adjusted to reflect any dividend declared or
paid on the Common Stock of the Company in shares of Common Stock of the Company
or any subdivision or combination of the outstanding shares of Common Stock of
the Company or similar event in each case occurring after the date of this
Agreement (such redemption price, as adjusted from time to time, being
hereinafter referred to as the "Redemption Price"). The Rights may be redeemed
only until the earlier to occur of (i) the time at which any Person becomes an
Acquiring Person or (ii) the Final Expiration Date.
(b) Immediately upon the action of the Board of Directors ordering
the redemption of the Rights in accordance with Section 23, and without any
further action and without any notice, the right to exercise the Rights shall
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the action
of the Board of Directors ordering the redemption of the Rights in accordance
with Section 23, 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
the Rights Agent and 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 Stock 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. The Company promptly 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 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 Section 24 or in connection with
the purchase of shares of Common Stock of the Company prior to the Distribution
Date.
(c) The Company may, at its option, pay the Redemption Price in
cash, shares of Common Stock of the Company (based on the Fair Market Value of
the Common Stock of the Company as of the time of redemption) or any other form
of consideration deemed appropriate by the Board of Directors in its sole
discretion.
31
Section 24. Exchange.
(a)(i) The Board of Directors may, at its sole option and for any or
no reason, at any time on or after the occurrence of a Section 11(a)(ii) 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)) for shares of Common Stock of the Company at an exchange ratio of one
share of Common Stock of the Company 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
"Section 24(a)(i) Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Stock of the Company.
(ii) Notwithstanding the foregoing, the Board of Directors, at
its sole option and for any or no reason, at any time on or after the occurrence
of a Section 11(a)(ii) 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)) for shares of Common Stock of the
Company at an exchange ratio specified in the following sentence, as
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of this Agreement. Subject to the
adjustment described in the foregoing sentence, each Right may be exchanged for
that number of shares of Common Stock of the Company obtained by dividing the
Spread by the then Fair Market Value per one ten-thousandth of a share of
Preferred Stock on the earlier of (x) the date on which any person becomes an
Acquiring Person or (y) the date on which a tender or exchange offer by any
Person (other than an Exempt Person) is first published or sent or given within
the meaning of Rule 14d-4(a) or any successor rule, if upon consummation thereof
such Person could become an Acquiring Person (such exchange ratio being referred
to herein as the "Section 24(a)(ii) Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock of the Company.
(b) Immediately upon the action of the Board of Directors ordering
the exchange of any Rights pursuant to Section 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 shares of Common Stock of the Company equal to the number of such
Rights held by such holder multiplied by the Section 24(a)(i) Exchange Ratio or
the Section 24(a)(ii) Exchange Ratio, as applicable. The Company shall promptly
give notice of any such exchange in accordance with Section 26 and shall
promptly 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; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. Any notice which is
mailed in the manner 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 shares of Common Stock of the Company 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)) held by each holder of Rights.
32
(c) In any exchange pursuant to this Section 24, the Company, at its
sole option and for any or no reason, may substitute Preferred Stock or
Preferred Stock Equivalents for Common Stock of the Company exchangeable for
Rights, at the initial rate of one ten-thousandth of a share of Preferred Stock
(or Preferred Stock Equivalent) for each share of Common Stock of the Company,
as appropriately adjusted to reflect adjustments in the voting rights of the
Preferred Stock pursuant to the terms thereof, so that the fraction of a share
of Preferred Stock delivered in lieu of each share of Common Stock of the
Company shall have the same voting rights as one share of Common Stock of the
Company.
(d) In the event that there shall not be sufficient shares of Common
Stock of the Company or Preferred Stock (or Preferred Stock Equivalents) issued
but not outstanding, or authorized but unissued, to permit any exchange of
Rights as contemplated in accordance with this Section 24, the Company shall
take all such action as may be necessary to authorize additional shares of
Common Stock of the Company or Preferred Stock (or Preferred Stock Equivalent)
for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common
Stock of the Company or to distribute certificates which evidence fractional
shares of Common Stock of the Company. If the Company elects not to issue such
fractional shares of Common Stock of the Company, the Company shall pay, in lieu
of such fractional shares of Common Stock of the Company, to the registered
holders of the Right Certificates with regard to which such fractional shares of
Common Stock of the Company would otherwise be issuable, an amount in cash equal
to the same fraction of the Fair Market Value of a whole share of Common Stock
of the Company. For the purposes of this Section 24(e), the Fair Market Value of
a whole share of Common Stock of the Company shall be the closing price of a
share of Common Stock of the Company (as determined pursuant to the second
sentence of Section 11(d)(i)) for the Trading Day immediately prior to the date
of exchange pursuant to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date to: (i) pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company); (ii) offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options; (iii) effect any reclassification of its Preferred Stock (other than
a reclassification involving only the subdivision of outstanding shares of
Preferred Stock); (iv) effect any consolidation or merger into or with, or to
effect any sale, mortgage or other transfer (or to permit one or more of its
Subsidiaries to effect any sale, mortgage or other transfer), in one transaction
or a series of related transactions, of 50% or more of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to, any other
Person (other than a Subsidiary of the Company in one or more transactions each
of which is not prohibited by the proviso at the end of the first sentence of
Section 11(n)); (v) effect the liquidation, dissolution or winding up of the
Company; or (vi) declare or pay any dividend on the Common Stock of the Company
payable in shares of Common Stock of the Company or to effect a subdivision,
combination or consolidation of the Common Stock of the Company (by
reclassification or otherwise than by payment of dividends in Common Stock of
the Company); then in each such case, the Company shall give to each holder of a
Right Certificate and to the Rights Agent, in accordance with Section 26, a
notice of such proposed action, which shall specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
33
on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock of the
Company and/or Preferred Stock, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause (i) or (ii) above
at least twenty (20) days prior to the record date for determining holders of
the shares of Preferred Stock for purposes of such action, and in the case of
any such other action, at least twenty (20) days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
the shares of Common Stock of the Company and/or Preferred Stock, whichever
shall be the earlier; provided, however, no such notice shall be required
pursuant to this Section 25 as a result of any Subsidiary of the Company
effecting a consolidation or merger with or into, or effecting a sale or other
transfer of assets or earnings power to, any other Subsidiary of the Company in
a manner not inconsistent with the provisions of this Agreement.
(b) In case any Triggering Event shall occur, then, in any such
case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26, a notice of the occurrence of such event, which shall specify
the event and the consequences of the event to holders of Rights.
Section 26. Notices.
Notices or demands authorized by this Agreement to be given or made
by the Rights Agent or by the holder of any Right Certificate to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, by facsimile transmission or by nationally-recognized overnight courier
addressed (until another address is filed in writing with the Rights Agent) as
follows:
Discovery Laboratories, Inc.
350 South Main Street
Suite 307
Doylestown, PA 18901
Facsimile No.: (215) 340-3940
Attention: Controller
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, by facsimile transmission or by
nationally-recognized overnight courier addressed (until another address is
filed in writing with the Company) as follows:
Continental Stock Transfer & Trust Company
17 Battery Place, 8th Floor
New York, NY 10004
Facsimile No.: (212) 509-5150
Attention: Compliance Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate (or, prior to
the Distribution Date, to the holder of any certificate representing shares of
Common Stock of the Company) 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.
34
Section 27. Supplements and Amendments.
Prior to the occurrence of a Triggering Event, the Company and the
Rights Agent shall, if the Board of Directors so directs, supplement or amend
any provision of this Agreement as the Board of Directors may deem necessary or
desirable without the approval of any holders of certificates representing
shares of Common Stock of the Company or any other securities of the Company.
From and after the occurrence of a Triggering Event, the Company and the Rights
Agent shall, if the Board of Directors so directs, supplement or amend this
Agreement without the approval of any holder of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereof in any manner which the Board of Directors may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Right Certificates (other than an Acquiring Person or any
Affiliate or Associate of an Acquiring Person); provided, however, that from and
after the occurrence of a Triggering Event, 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 the benefits to, the holders of Rights (other than an Acquiring Person
or any Affiliate or Associate of an Acquiring Person). Without limiting the
foregoing, the Company may at any time prior to the occurrence of a Triggering
Event, amend this Agreement to lower the threshold set forth in Section 1(a) to
not less than the greater of (i) the sum of .001% and the largest percentage of
the outstanding Common Stock of the Company then known by the Company to be
Beneficially Owned by any Person (other than the Company, any Subsidiary of the
Company any employee benefit plan of the Company or any Subsidiary of the
Company or any entity holding Common Stock of the Company for or pursuant to the
terms of any such plan) and (ii) 10%. Upon the delivery of such certificate from
an appropriate officer of the Company which states that the proposed supplement
or amendment is in compliance with the terms and conditions of this Section 27,
the Rights Agent shall execute such supplement or amendment. Prior to the
occurrence of a Triggering Event, the interests of the holders of Rights shall
be deemed coincident with the interests of the holders of Common Stock of the
Company. Notwithstanding any other provision hereof, the Rights Agent's consent
must be obtained regarding any amendment or supplement pursuant to this Section
27 which alters the Rights Agent's rights or duties.
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.
The Board of Directors shall have the exclusive power and authority
to administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including without limitation,
the right and power to (i) interpret the provisions of this Agreement and (ii)
make all determinations deemed necessary or advisable for the administration of
35
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 of Directors in
good faith shall (x) be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights and all other parties, and (y) not subject any
member of the Board of Directors to any liability to the holders of the Rights
or to any other person.
Section 30. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person
or entity other than the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, holders of the
Common Stock of the Company) any legal or equitable right, remedy or claim under
this Agreement; provided, however, that this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates (and, prior to the Distribution Date, registered holders
of the Common Stock of the Company).
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, conditions, 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,
condition, provision, covenant or restriction is held by such court or authority
to be invalid, void or unenforceable and the Board of Directors determines in
its good faith judgment that severing the invalid language from the Agreement
would adversely affect the purpose or effect of the Agreement, the right of
redemption set forth in Section 23 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, each Right and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and to be
performed entirely within such State. The courts of the State of Delaware and of
the United States of America located in the State of Delaware (the "Delaware
Courts") shall have exclusive jurisdiction over any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby, and any
Person commencing or otherwise involved in any such litigation shall waive any
objection to the laying of venue of such litigation in the Delaware Courts and
shall not plead or claim in any Delaware Court that such litigation brought
therein has been brought in an inconvenient forum.
36
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.
37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first set forth above.
DISCOVERY LABORATORIES, INC.
By: /s/ Robert J. Capetola
-----------------------------------
Name: Robert J. Capetola, Ph. D.
Title: President and
Chief Executive Officer
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY., AS RIGHTS AGENT
By: /s/ William S. Seegraber
-----------------------------------
Name: William S. Seegraber
Title:
38
Exhibit A
VOTE OF DIRECTORS ESTABLISHING
SERIES A JUNIOR PARTICIPATING CUMULATIVE
PREFERRED STOCK
OF
DISCOVERY LABORATORIES, INC.
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware:
DISCOVERY LABORATORIES, INC., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), does hereby certify that,
pursuant to the authority conferred on the Board of Directors of the Corporation
by the Restated Certificate of Incorporation of the Corporation and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation adopted the following
resolution establishing a series of 50,000 shares of Preferred Stock of the
Corporation designated as "Series A Junior Participating Cumulative Preferred
Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors of the Corporation by the Restated Certificate of Incorporation, as
amended, a series of Preferred Stock, par value $.001 per share (as adjusted for
stock splits, stock dividends and reclassifications, if any), of the Corporation
is hereby established and created, and that the designation and number of shares
thereof and the voting and other powers, preferences and relative,
participating, optional or other rights of the shares of such series and the
qualifications, limitations and restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Junior Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares initially constituting
such series shall be 50,000; provided, however, that if more than a total of
50,000 shares of Series A Preferred Stock shall be issuable upon the exercise of
Rights (the "Rights") issued pursuant to the Shareholder Rights Agreement dated
as of February 6, 2004, between the Corporation and Continental Stock Transfer &
Trust Company, as Rights Agent (the "Rights Agreement"), the Board of Directors
of the Corporation, pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, may direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and recorded, in
accordance with the provisions of Section 103 thereof, providing for the total
number of shares of Series A Preferred Stock authorized to be issued to be
increased (to the extent that the Restated Certificate of Incorporation of the
Corporation then permits) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of such Rights.
Section 2. Dividends and Distributions.
(A)(i) Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and superior to
the Series A Preferred Stock with respect to dividends, if any, the holders of
shares of Series A Preferred Stock, in preference to the holders of shares of
Common Stock of the Corporation and of any other junior stock of the
Corporation, shall be entitled to receive, when, as and if declared by the Board
of Directors of the Corporation out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of March, June, September
and December 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 Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provisions for
adjustment hereinafter set forth, 10,000 times the aggregate per share amount of
all cash dividends distributed by the Corporation, and 10,000 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 of the
Corporation or a subdivision of the outstanding shares of Common Stock of the
Corporation (by reclassification or otherwise), declared on the Common Stock of
the Corporation since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Preferred Stock. The
multiple of cash and non-cash dividends declared on the Common Stock of the
Corporation of the Corporation to which holders of the Series A Preferred Stock
are entitled, which shall be 10,000 initially but which shall be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the
"Dividend Multiple." In the event that the Corporation shall at any time after
February 6, 2004 (the "Rights Declaration Date") (i) declare or pay any dividend
on the Common Stock of the Corporation of the Corporation payable in shares of
Common Stock of the Corporation of the Corporation, or (ii) effect a subdivision
or combination or consolidation of the outstanding shares of Common Stock of the
Corporation of the Corporation (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock of the Corporation) into a greater or
lesser number of shares of Common Stock of the Corporation, then in each such
case the Dividend Multiple thereafter applicable to the determination of the
amount of dividends which holders of shares of Series A Preferred Stock shall be
entitled to receive shall be the Dividend Multiple applicable immediately prior
to such event multiplied by a fraction, the numerator of which is the number of
shares of Common Stock of the Corporation outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock of
the Corporation that were outstanding immediately prior to such event.
(ii) Notwithstanding anything else contained in this Section
2(A), the Corporation shall, out of funds legally available for that purpose,
declare a dividend or distribution on the Series A Preferred Stock as provided
in this Section 2(A) immediately after it declares a dividend or distribution on
the Common Stock of the Corporation (other than a dividend payable in shares of
Common Stock of the Corporation); provided, that in the event no dividend or
distribution shall have been declared on the Common Stock of the Corporation
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
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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 of the
Corporation may fix in accordance with applicable law a record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than such number of days prior to the date fixed for the
payment thereof as may be allowed by applicable law.
Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to
10,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. The number of votes which a holder of a share of Series A Preferred
Stock is entitled to cast, which shall initially be 10,000 but which may be
adjusted from time to time as hereinafter provided, is hereinafter referred to
as the "Vote Multiple." In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare or pay any dividend on Common Stock of the
Corporation payable in shares of Common Stock of the Corporation or (ii) effect
a subdivision or combination or consolidation of the outstanding shares of
Common Stock of the Corporation (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock of the Corporation) into a
greater or lesser number of shares of Common Stock of the Corporation, then in
each such case the Vote Multiple thereafter applicable to the determination of
the number of votes per share to which holders of shares of Series A Preferred
Stock shall be entitled shall be the Vote Multiple immediately prior to such
event multiplied by a fraction, the numerator of which is the number of shares
of Common Stock of the Corporation outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock of the
Corporation that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock of
the Corporation and the holders of shares of any other capital stock of the
Corporation having general voting rights, shall vote together as one class on
all matters submitted to a vote of stockholders of the Corporation.
(C) Except as otherwise required by applicable law or as set forth
herein, holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are entitled
to vote with holders of Common Stock of the Corporation as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the Series A
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, 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 Preferred Stock;
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(ii) declare or pay dividends on or make any other
distributions on any shares of capital Stock of the Corporation ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) except as permitted in Section 4(A)(iv) below, redeem,
purchase or otherwise acquire for consideration shares of capital Stock of the
Corporation ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock; provided, that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such parity stock in exchange for shares of capital Stock of the Corporation of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of any stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors of
the Corporation) to all holders of such shares upon such terms as the Board of
Directors of the Corporation, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
capital stock of the Corporation unless the Corporation could, under subsection
(A) of this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and 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 of the
Corporation, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (1) $10,000 per share or
(2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 10,000 times the aggregate amount to be
distributed per share to holders of Common Stock of the Corporation or (y) to
A-4
the holders of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except distributions made ratably on the Series A Preferred Stock and all other
such parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare or pay any dividend on Common Stock of the Corporation payable in
shares of Common Stock of the Corporation or (ii) effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock of the
Corporation (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock of the Corporation) into a greater or lesser number of
shares of Common Stock of the Corporation, then in each such case the aggregate
amount per share to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (x) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock of the Corporation
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock of the Corporation that were outstanding
immediately prior to such event.
Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
Section 7. Consolidation, Merger, etc. In the event that the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock of the Corporation are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any such
case the shares of Series A Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 10,000 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 of the Corporation is
changed or exchanged, plus accrued and unpaid dividends, if any, payable with
respect to the Series A Preferred Stock. In the event that the Corporation shall
at any time after the Rights Declaration Date (i) declare or pay any dividend on
Common Stock of the Corporation payable in shares of Common Stock of the
Corporation or (ii) effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock of the Corporation (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock of the
Corporation) into a greater or lesser number of shares of Common Stock of the
Corporation, then in each such case, the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock of the Corporation outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock of the Corporation that were outstanding immediately
prior to such event.
Section 8. Redemption. The shares of Series A Preferred Stock shall not be
redeemable; provided, however, that the foregoing shall not limit the ability of
the Corporation to purchase or otherwise deal in such shares to the extent
otherwise permitted hereby and by law.
Section 9. Ranking. Unless otherwise expressly provided in the Restated
Certificate of Incorporation of the Corporation, as may be amended or restated
from time to time, or a Certificate of Designations relating to any other series
of preferred stock of the Corporation, the Series A Preferred Stock shall rank
junior to every other series of the Corporation's preferred stock previously or
hereafter authorized, as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and shall rank senior to the
Common Stock of the Corporation.
A-5
Section 10. Amendment. The Restated Certificate of Incorporation and this
Certificate of Designations shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of two-thirds or more of the outstanding shares of Series A
Preferred Stock, voting separately as a class.
Section 11. Fractional Shares. Series A Preferred Stock may be issued in
whole shares or in any fraction of a share that is one ten-thousandth
(1/10,000th) of a share or any integral multiple of such fraction, which shall
entitle the holder, in proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Preferred Stock. In
lieu of fractional shares, the Corporation may elect to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
ten-thousandth (1/10,000th) of a share or any integral multiple thereof.
A-6
Exhibit B
[Form of Right Certificate]
Certificate No. R-___ ____________ Rights
NOT EXERCISABLE AFTER JANUARY 27, 2014 OR EARLIER IF NOTICE OF REDEMPTION
IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF DISCOVERY
LABORATORIES, INC., AT $0.001 PER RIGHT, ON THE TERMS AND CONDITIONS SET FORTH
IN THE SHAREHOLDER RIGHTS AGREEMENT BETWEEN DISCOVERY LABORATORIES, INC., AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS RIGHTS AGENT, DATED AS OF
FEBRUARY 6, 2004 (THE "RIGHTS AGREEMENT"). UNDER CERTAIN CIRCUMSTANCES SPECIFIED
IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE 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.
RIGHT CERTIFICATE
DISCOVERY LABORATORIES, INC.
This certifies that ___________, or his, her or its 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 Shareholder Rights Agreement dated as of February 6, 2004 (the "Rights
Agreement") between Discovery Laboratories, Inc. (the "Company") and Continental
Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to the close of business on
January 27, 2014, at the office or offices of the Rights Agent designated for
such purpose, or its successors as Rights Agent, one ten-thousandth of a fully
paid, non-assessable share of the Series A Junior Participating Cumulative
Preferred Stock (the "Preferred Stock") of the Company, at a purchase price of
$50.00 per one ten-thousandth of a share (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and the related Certificate duly executed. The number of Rights
evidenced by this Right Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Exercise Price per
share set forth above, are the number and Exercise Price as of $50.00, based on
the Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person or Associate or Affiliate thereof or
(iii) under certain circumstances specified in the Rights Agreement, a
transferee of a Person who, after such transfer, became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person, such Rights shall become null
and void and no holder hereof shall have any rights with respect to such Rights
from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right 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 office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or
Certificates for the number of whole Rights not exercised. If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.
Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock, or other consideration at an exchange
ratio (subject to adjustment) specified in the Rights Agreement.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
sole option at a redemption price of $0.001 per Right (payable in cash, Common
Stock, Preferred Stock or other consideration deemed appropriate by the Board of
Directors of the Company in its sole discretion).
The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one ten-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts). If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock, Common Stock or 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 the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.
B-2
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by an authorized signatory of the Rights
Agent.
IN WITNESS WHEREOF, the Company has caused this Rights Certificate to be
executed: _________________________.
DISCOVERY LABORATORIES, INC.
By:________________________________
Name: Robert J. Capetola, Ph.D.
Title: President and
Chief Executive Officer
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: _______________________________
Authorized Officer
B-3
[Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED, _________________________ hereby sells, assigns and
transfers unto _________________________ this Right Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint _________________________ Attorney, to transfer the within Right
Certificate on the books of Discovery Laboratories, Inc., with full power of
substitution.
Date: ___________________________
_________________________________
Signature
Signature Guaranteed:
________________________________
ASSIGNMENT CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate ___ are ___ are not
being 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); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___ did ___ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ____________________________
___________________________________
Signature
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-4
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate.)
To DISCOVERY LABORATORIES, INC.:
The undersigned hereby irrevocably elects to exercise ________ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of:
_________________________________ ____________________________________
(social security or other taxpayer
identification number)
If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:
_________________________________ ____________________________________
(social security or other taxpayer
identification number)
(Please print name and address)
Dated: __________________________
_________________________________
Signature
Signature Guaranteed:
_________________________________
B-5
PURCHASE CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right 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); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned ___ did ___ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ________________________
_______________________________
Signature
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
B-6