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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) APRIL 15, 1999
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ENDOCARE, INC.
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(Exact name of registrant as specified in charter)
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DELAWARE 33-0618093
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(State of incorporation or organization) (Commission File Number) (IRS Employer Identification No.)
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7 STUDEBAKER, IRVINE, CALIFORNIA 92618
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 595-4770
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NONE
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
As previously reported in Item 5 of the Annual Report of Endocare,
Inc. (the "Company") on Form 10-K for the year ended December 31, 1998, on March
5, 1999, the Company's Board of Directors declared a dividend of one preferred
share purchase right (a "Right") for each outstanding share of Common Stock (the
"Common Stock"), par value $0.001 per share, of the Company. The Rights dividend
was described in greater detail in a letter dated May 11, 1999 sent by the
Company to its stockholders, which is included in this filing. This report on
Form 8-K reiterates the description of the Rights plan, and provides a copy of
the Rights Agreement governing the Plan, the Company's press release announcing
the Plan and the letter sent to stockholders describing the Plan.
The Rights were issued on April 15, 1999 (the "Record Date") to the
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-thousandth of a share (a "Unit") of Series
A Junior Participating Preferred Stock, par value $0.001 per share (the "Series
A Preferred Stock"), of the Company at a price of $25.00 per Unit (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement dated as of March 31, 1999 (the "Rights Agreement")
between the Company and U.S. Stock Transfer Corporation, as Rights Agent (the
"Rights Agent").
Until the earlier to occur of (i) the close of business on the first
date of a public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") have acquired beneficial ownership of 15% or
more of the outstanding Common Stock (subject to certain exceptions as provided
in the Rights Agreement) or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 15% or more of
such outstanding Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Stock, outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the Close of Business on the
Distribution Date and such separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on April 15, 2009 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, in each case as
described below.
The Purchase Price payable, and the number of Units of Series A
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Series A Preferred Stock, (ii) upon the grant to
holders of the Units of Series A Preferred Stock of certain rights or warrants
to subscribe for or purchase Units of Series A Preferred Stock at a price, or
securities convertible into Units of Series A Preferred Stock with a conversion
price, less than the then current market price of the Units of Series A
Preferred Stock or (iii) upon the distribution to holders of the Units of Series
A Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Units of Series A Preferred Stock) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of Units of Series A
Preferred Stock issuable upon exercise of each Rights are also subject to
adjustment in the event of a stock split of the Common Stock or a stock dividend
on the Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Units of Series A Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each Unit of Series A Preferred Stock will be
entitled to an aggregate dividend of 1,000 times the dividend declared per share
of Common Stock. In the event of liquidation, the holders of the Units of Series
A Preferred Stock will be entitled to an aggregate payment of 1,000 times the
payment made per share of Common Stock. Each Unit of Series
1.
<PAGE> 3
A Preferred Stock will have 1,000 votes, voting together with the Common Stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of Common Stock are exchanged, each Unit of Series A Preferred Stock will
be entitled to receive 1,000 times the amount received per share of Common
Stock. These rights are protected by customary anti-dilution provisions.
Because of the nature of the dividend, liquidation and voting rights,
the value of the Series A Preferred Stock and the Units of Series A Preferred
Stock purchasable upon exercise of each Right should approximate the value of
one share of Common Stock.
In the event that, after the Rights become exercisable, the Company
is acquired in a merger or other business combination transaction with an
Acquiring Person or an affiliate thereof, or 50% or more of its consolidated
assets or earning power are sold to an Acquiring Person or an affiliate thereof,
proper provision will be made so that each holder of Rights will thereafter have
the right to receive, upon exercise thereof at the then current exercise price
of the Rights, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Rights.
In the event that any person or group of affiliated or associated
persons becomes the beneficial owner of 15% or more of the outstanding shares of
Common Stock (subject to certain exceptions) or any person is an Adverse Person
(as such term is defined in the Rights Agreement), proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of Common Stock or Units of
Series A Preferred Stock (or cash, other securities or property) having a market
value of two times the exercise price of the Rights.
At any time after the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 15% or more of the outstanding
shares of Common Stock (subject to certain exceptions) and prior to the
acquisition by such person or group of 50% or more of the outstanding Common
Stock, the Board of Directors of the Company may exchange the Rights (other than
Rights owned by such person or group which have become void), in whole or in
part, at an exchange ratio of one Unit of Series A Preferred Stock (subject to
adjustment) which shall equal, subject to adjustment to reflect stock splits,
stock dividends and similar transactions occurring after the date hereof, that
number obtained by dividing the Purchase Price by the then current per share
market price per Unit of Series A Preferred Stock on the earlier of (i) the date
on which any Person becomes an Acquiring Person and (ii) the date on which a
tender or exchange offer is announced by any Person, if upon consummation
thereof such Person would be the Beneficial Owner of 15% or more of the shares
of Company Common Stock then outstanding.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Series A Preferred Stock will be
issued (other than fractions which are integral multiples of one one-thousandth
of a share of Series A Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts) and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Units of Series
A Preferred Stock on the last trading day prior to the date of exercise.
At any time on or prior to the close of business on the first date of
a public announcement that a person or group of affiliated or associated persons
acquires beneficial ownership of 15% or more of the outstanding Common Stock
(subject to certain exceptions) (unless the Board of Directors extends such
period), the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price). The
redemption of the rights may be made effective at such time on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price. The Rights are also redeemable under other
circumstances as specified in the Rights Agreement.
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights except that from
and after a Distribution Date no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
2.
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The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors, except pursuant to an
offer conditioned on a substantial number of Rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors since the Rights may be redeemed by the Company at the
Redemption Price prior to the occurrence of a Distribution Date.
The Rights Agreement, dated as of March 31, 1999, between the Company
and the Rights Agent, specifying the terms of the Rights, is attached hereto as
an exhibit and is incorporated herein by reference. The foregoing description of
the Rights is qualified in its entirety by reference to such exhibit. The
Certificate of Designation for the Series A Junior Participating Preferred Stock
is attached hereto as an exhibit. The foregoing description of the Series A
Junior Participating Preferred Stock is qualified in its entirety by reference
to such exhibit.
Item 7. Financial Statements and Exhibits.
Exhibit 4 Rights Agreement, dated as of March 31, 1999, between the
Company and U.S. Stock Transfer Corporation, which includes
the form of Certificate of Designation for the Series A
Junior Participating Preferred Stock as Exhibit A, the form
of Rights Certificate as Exhibit B and the Summary of
Rights to Purchase Series A Preferred Shares as Exhibit C.
Pursuant to the Rights Agreement, printed Right
Certificates will not be mailed until as soon as
practicable after the earlier of (i) the close of business
on the first date of a public announcement that a person or
group has acquired beneficial ownership of 15% or more of
the shares of Common Stock or (ii) the tenth (10th)
business day (or such later date as may be determined by
action of the Board of Directors) after a person commences,
or announces its intention to commence, a tender offer or
exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or
more of the shares of Common Stock.
Exhibit 20(a) Press Release dated March 22, 1999.
Exhibit 20(b) Form of Letter to Stockholders of Endocare, Inc. regarding
the adoption of the Rights Plan pursuant to the Rights
Agreement.
3.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ENDOCARE, INC.
DATE: June 2, 1999 By: /s/ Paul Mikus
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Name: Paul Mikus
Title: Chief Executive Officer
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EXHIBIT INDEX
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EXHIBIT
NUMBER DOCUMENT DESCRIPTION
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4 Rights Agreement, dated as of March 31, 1999, between the
Company and U.S. Stock Transfer Corporation, which includes
the form of Certificate of Designation for the Series A
Junior Participating Preferred Stock as Exhibit A, the form
of Rights Certificate as Exhibit B and the Summary of
Rights to Purchase Series A Preferred Shares as Exhibit C.
Pursuant to the Rights Agreement, printed Right
Certificates will not be mailed until as soon as
practicable after the earlier of (i) the close of business
on the first date of a public announcement that a person or
group has acquired beneficial ownership of 15% or more of
the shares of Common Stock or (ii) the tenth (10th)
business day (or such later date as may be determined by
action of the Board of Directors) after a person commences,
or announces its intention to commence, a tender offer or
exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or
more of the shares of Common Stock.
20(a) Press Release dated March 22, 1999.
21(b) Form of Letter to Stockholders of Endocare, Inc. regarding
the adoption of the Rights Plan pursuant to the Rights
Agreement.
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EXHIBIT 4
ENDOCARE, INC.
AND
U.S. STOCK TRANSFER CORPORATION
(RIGHTS AGENT)
RIGHTS AGREEMENT
DATED AS OF MARCH 31, 1999
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TABLE OF CONTENTS
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PAGE
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Section 1. Certain Definitions.................................................................................1
Section 2. Appointment of Rights Agent.........................................................................5
Section 3. Issue of Rights Certificates........................................................................5
Section 4. Form of Rights Certificates.........................................................................7
Section 5. Countersignature and Registration...................................................................8
Section 6. Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates.......................................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.......................................9
Section 8. Cancellation and Destruction of Rights Certificates................................................11
Section 9. Reservation and Availability of Preferred Stock....................................................11
Section 10. Preferred Stock Record Date........................................................................12
Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights.................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.........................................20
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...............................21
Section 14. Fractional Rights and Fractional Shares............................................................23
Section 15. Rights of Action...................................................................................24
Section 16. Agreement of Rights Holders........................................................................25
Section 17. Rights Certificate Holder Not Deemed a Stockholder.................................................25
Section 18. Concerning the Rights Agent........................................................................26
Section 19. Merger or Consolidation or Change of Name of Rights Agent..........................................26
Section 20. Duties of Rights Agent.............................................................................27
Section 21. Change of Rights Agent.............................................................................29
Section 22. Issuance of New Rights Certificates................................................................30
Section 23. Redemption and Termination.........................................................................30
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i.
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Section 24. Exchange...........................................................................................31
Section 25. Notice of Certain Events...........................................................................32
Section 26. Notices............................................................................................33
Section 27. Supplements and Amendments.........................................................................33
Section 28. Successors.........................................................................................34
Section 29. Determinations and Actions by the Board of Directors...............................................34
Section 30. Benefits of This Agreement.........................................................................34
Section 31. Severability.......................................................................................35
Section 32. Governing Law......................................................................................35
Section 33. Counterparts.......................................................................................35
Section 34. Descriptive Headings...............................................................................35
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EXHIBITS
Exhibit A Form of Certificate of Designation of Series A Junior
Participating Preferred Stock
Exhibit B Form of Rights Certificate
Exhibit C Summary of Rights to Purchase Shares of Series A Preferred
Stock
ii.
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RIGHTS AGREEMENT
RIGHTS AGREEMENT (the "Agreement"), dated as of March 31,
1999, between ENDOCARE, INC., a Delaware corporation (the "Company"), and U.S.
STOCK TRANSFER CORPORATION (the "Rights Agent").
WHEREAS, effective March 5, 1999 (the "Rights Dividend
Declaration Date"), the Board of Directors authorized and declared a
distribution of one Right (each, a "Right") for each share of Common Stock (as
hereinafter defined) of the Company outstanding as of the Close of Business (as
hereinafter defined) on April 15, 1999 (the "Record Date"), each Right initially
representing the right to purchase one one-thousandth of a share (a "Unit") of
Preferred Stock (as hereinafter defined) upon the terms and subject to the
conditions herein set forth, and has further authorized and directed the
issuance of one Right with respect to each share of Common Stock that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date or the Final Expiration Date (as such terms are
hereinafter defined).
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:
"Acquiring Person" shall mean (i) any Person (as such term
is hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are 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 or (ii) any Person who is
an Adverse Person (as such term is hereinafter defined), but shall not include
(1) the Company, any Subsidiary (as such term is hereinafter defined) of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, or any entity holding shares of Common Stock for or pursuant to the
terms of any such plan, (2) The Kaufmann Fund, Inc. ("Kaufmann"), or any of its
Affiliates or Associates (collectively with Kaufmann, the "Kaufmann Investor
Group"), (3) Pequot Private Equity Fund, L.P. and Pequot Offshore Private Equity
Fund, Inc. (together, "Pequot"), or any of their Affiliates or Associates
(collectively with Pequot, the "Pequot Investor Group") or (4) Technology
Funding Venture Partners IV, an Aggressive Growth Fund, L.P., Technology Funding
Venture Partners V, an Aggressive Growth Fund, L.P. and Technology Funding
Partners III, L.P. (collectively, "Tech Funding"), or any of their Affiliates or
Associates (collectively with Tech Funding, the "Tech Funding Investor Group").
Notwithstanding the foregoing:
(i) no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Common Stock by the Company which,
by reducing the number of shares outstanding, increases the proportionate
number of shares beneficially owned by such Person to 15% 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
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
1.
<PAGE> 5
Company, become the Beneficial Owner of any additional shares of Common
Stock of the Company, then such Person shall be deemed to be an
"Acquiring Person" hereunder; and
(ii) if the Board of Directors of the Company determines in
good faith that a Person who would otherwise be an "Acquiring Person" as
defined pursuant to the foregoing provisions of this paragraph (a), has
become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of shares of Common Stock so that such
Person would no longer be an "Acquiring Person" (as defined pursuant to
the foregoing provisions of this paragraph (a)), then such Person shall
not be deemed to be an "Acquiring Person" for any purpose of this
Agreement.
"Adjustment Shares" has the meaning set forth in Section
11(a)(ii).
"Adverse Person" shall mean any Person declared to be an
Adverse Person by the Board of Directors of the Company upon a determination
that such Person, alone or together with its Affiliates and Associates, has
become the Beneficial Owner of a number of shares of Common Stock that the Board
of Directors determine to be substantial (which amount shall in no event be less
than 10% of the shares of Common Stock then outstanding) and a determination by
the Board of Directors after reasonable inquiry and investigation that (i) such
Beneficial Ownership by such Person is intended to cause the Company to
repurchase the shares of Common Stock beneficially owned by the Person or to
cause pressure on the Company to take action or enter into a transaction or
series of transactions intended to provide such Person with short-term financial
gain under circumstances where the Board of Directors determines that the best
long-term interest of the Company, its Subsidiaries and its stockholders would
not be served by taking such action or entering into such transaction or series
of transactions at that time or (ii) such Beneficial Ownership is causing or
reasonably likely to cause a material adverse impact on the business or
properties of the Company and its stockholders.
"Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act (as such term is hereinafter defined).
A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of
Section 13(d) of the Exchange Act and Rule 13d-3 thereunder (or any
comparable or successor law or regulation); or
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has (A) the right to acquire
(whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding (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
otherwise; provided, however, that a
2.
<PAGE> 6
Person shall not be deemed the Beneficial Owner of, or to beneficially
own, securities tendered pursuant to a tender or exchange offer made by
or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any agreement, arrangement
or understanding; provided further, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," any security
under this subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (x) arises solely from a revocable proxy given in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the Exchange Act and the
Exchange Act Regulations, and (y) is not reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding, (whether or not in writing,
other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities),
for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to (B) of subparagraph (ii) above) or
disposing of any securities of the Company; provided, however, that in no
case shall an officer or director of the Company be deemed (A) the
Beneficial Owner of any securities beneficially owned by another officer
or director of the Company solely by reason of actions undertaken by such
persons in their capacity as officers or directors of the Company or (B)
the Beneficial Owner of securities held of record by the trustee of any
employee benefit plan of the Company or any Subsidiary of the Company for
the benefit of any employee of the Company or any Subsidiary of the
Company, other than the officer or director, by reason of any influence
that such officer or director may have over the voting of the securities
held in the plan;
Notwithstanding anything in this definition of "Beneficial Owner" and
"beneficially own" to the contrary, the phrase "then outstanding," when used
with reference to a Person who is the Beneficial Owner of securities of the
Company, shall mean the number of such 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.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which banking institutions in the State of California are
authorized or obligated by law or executive order to close.
"Close of Business" on any given date shall mean 5:00 P.M.,
California time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., California time, on the next succeeding
Business Day.
"Common Stock" when used with reference to the Company
shall mean the shares of common stock, par value $0.001, of the Company. "Common
Stock" when used with reference to any Person other than the Company shall mean
the capital stock (or other equity interest) with the greatest voting power of
such other Person or, if such other Person is a
3.
<PAGE> 7
Subsidiary of another Person, the Person or Persons which ultimately control
such first-mentioned Person.
"Company" shall have the meaning set forth in the recitals
to this Agreement.
"current per share market price" shall have the meaning set
forth in Section 11(d)(i) hereof.
"Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
"equivalent preferred shares" shall have the meaning set
forth in Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Exchange Act Regulations" shall mean the General Rules and
Regulations under the Exchange Act.
"Exchange Ratio" shall have the meaning set forth in
Section 24 hereof.
"Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
"Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
"NASDAQ" shall have the meaning set forth in Section 11(d)
hereof.
"Person" shall mean any individual, firm, corporation or
other entity, and shall include any successor (by merger or otherwise) of such
entity.
"Preferred Stock" shall mean shares of Series A Preferred
Stock, par value $0.001, of the Company having the rights and preferences set
forth in the Form of Certificate of Designation attached to this Agreement as
Exhibit A.
"preferred stock equivalents" shall have the meaning set
forth in Section 11(a)(iii) hereof.
"Purchase Price" shall have the meaning set forth in
Section 7(b) hereof.
"Record Date" shall have the meaning set forth in the
recitals to this Agreement.
"Redemption Date" shall have the meaning set forth in
Section 7(a) hereof.
"Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
"Right" shall have the meaning set forth in the recitals to
this Agreement.
"Rights Agent" shall have the meaning set forth in the
recitals to this Agreement.
4.
<PAGE> 8
"Rights Certificate" shall have the meaning set forth in
Section 3(a) hereof.
"Rights Dividend Declaration Date" shall have the meaning
set forth in the recitals to this Agreement.
"Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii)(A), (B) or (C) hereof.
"Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof.
"Section 13 Event" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof.
"Section 24(a) Exchange Ratio" has the meaning set forth in
Section 24(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
"Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
"Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
"Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
"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 in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the Close of Business on the
Shares Acquisition Date and (ii) the Close of Business on the tenth Business Day
(or such later date as may be determined by action of the Company's Board of
Directors prior to such time as any Person becomes an Acquiring Person and of
which the Company will give the Rights Agent prompt written notice) after the
date that a tender or exchange offer by any Person (other than the
5.
<PAGE> 9
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company or any entity holding shares of Common Stock
for or pursuant to the terms of any such plan) is first published or sent or
given within the meaning of Rule 14d-4(a) of the Exchange Act Regulations or any
successor rule or of the first public announcement of the intention of any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding shares of Common Stock for or pursuant to the terms of any such plan) to
commence a tender or exchange offer, if upon consummation thereof such Person
would be the Beneficial Owner of 15% or more of the shares of Company Common
Stock then outstanding (the earlier of (i) and (ii) above being the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for shares of Common
Stock registered in the names of the holders thereof (which certificates shall
also be deemed to be Rights Certificates) and not by separate Rights
Certificates, and (y) the right to receive Rights Certificates will be
transferable only in connection with the transfer of shares of Common Stock. As
soon as practicable after the Distribution Date, the Company will notify the
Rights Agent thereof and the Company will prepare and execute, the Rights Agent
will countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of shares of Common Stock as of the Close of Business on
the Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate, in substantially the form of Exhibit B hereto (a
"Rights Certificate"), evidencing one Right for each share of Common Stock so
held. As of the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) On the Record Date, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Preferred Stock, in substantially the form of Exhibit C hereto (the "Summary of
Rights"), by first-class, postage-prepaid mail, to each record holder of shares
of Common Stock as of the Close of Business on the Record Date, at the address
of such holder shown on the records of the Company. With respect to certificates
for shares of Common Stock outstanding as of the Record Date, until the
Distribution Date, the Rights will be evidenced by such certificates registered
in the names of the holders thereof together with a copy of the Summary of
Rights attached thereto. Until the Distribution Date (or the Expiration Date),
the surrender for transfer of any certificate for shares of Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the shares of Common Stock represented thereby.
(c) Certificates for shares of Common Stock which become
outstanding (including, without limitation, reacquired shares of Common Stock
referred to in the last sentence of this paragraph (c)) after the Record Date
but prior to the earlier of the Distribution Date and the Expiration Date shall
have impressed on, printed on, written on or otherwise affixed to them the
following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between Endocare, Inc., and U.S. Stock Transfer
Corporation, dated as of March 31, 1999 (the "Rights
Agreement"), the terms of which are hereby incorporated
herein by reference and a copy of which is on
6.
<PAGE> 10
file at the principal executive offices of Endocare, Inc.
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. Endocare, Inc. will mail to the holder of this
certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, Rights
issued to any Person who becomes an Acquiring Person (as
defined in the Rights Agreement), whether currently held by
or on behalf of such person or by any subsequent holder,
may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of the Distribution Date and the Expiration Date, the Rights associated
with the shares of Common Stock represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any such
certificate shall also constitute the transfer of the Rights associated with the
shares of Common Stock represented thereby. In the event that the Company
purchases or acquires any shares of Common Stock after the Record Date but prior
to the Distribution Date, any Rights associated with such shares of Common Stock
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the shares of Common Stock which are no
longer outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase Units of Preferred Stock and of assignment to be printed on the reverse
thereof) shall be substantially the same as Exhibit B hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or transaction
reporting system on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates shall entitle the holders thereof to purchase the number
of Units of Preferred Stock as shall be set forth therein at the price per Unit
of Preferred Stock set forth therein, but the number of such Units of Preferred
Stock and the Purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that
represents Rights beneficially owned by: (i) an Acquiring Person or any
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
7.
<PAGE> 11
arrangement or understanding which has as a primary purpose or effect avoidance
of Section 7(e) hereof shall contain (to the extent feasible) the following
legend:
The Rights represented by this Rights Certificate are or
were beneficially owned by a Person who was or became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights
Agreement between Endocare, Inc., and U.S. Stock Transfer
Corporation, as Rights Agent, dated as of March 31, 1999
(the "Rights Agreement"). Accordingly, this Rights
Certificate and the Rights represented hereby may become
null and void in the circumstances specified in Section
7(e) of the Rights Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its Chief Executive Officer, its
President, any of its Vice Presidents, or its Treasurer or Chief Financial
Officer, either manually or by facsimile signature, shall have affixed thereto
the Company's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any Rights Certificate may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its office designated for such purpose, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split-Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Sections 4(b), 7(e) and 14
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate
or Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of Units of Preferred Stock (or, following a
Triggering Event, other securities, cash or other assets, as the case may be) as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any
8.
<PAGE> 12
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at the office of
the Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Sections
4(b), 7(e) and 14 hereof, countersign and deliver to the person entitled thereto
a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will make and
deliver a new Rights Certificate of like tenor to the Rights Agent for delivery
to the registered holder in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) Except as provided in Sections 23(c) and 7(e), the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date upon surrender of the Rights Certificate, with the
form of election to purchase and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the Purchase Price for each Unit of
Preferred Stock as to which the Rights are exercised, at or prior to the
earliest of (i) the Close of Business on the tenth anniversary hereof (the
"Final Expiration Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or (iii) the time at
which such Rights are exchanged as provided in Section 24 hereof (the earlier of
(i), (ii) and (iii) being the "Expiration Date").
(b) The Purchase Price for each Unit of Preferred Stock
pursuant to the exercise of a Right shall initially be $25.00, shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the number of Units of
Preferred Stock (or other securities or property, as the case may be) to be
purchased and an amount equal to any applicable transfer tax required to be paid
by the holder
9.
<PAGE> 13
of such Rights Certificate in accordance with Section 9 hereof in cash, or by
certified check or cashier's check payable to the order of the Company, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the Preferred Stock (or make available,
if the Rights Agent is the transfer agent for the Preferred Stock) a certificate
or certificates for the number of Units of Preferred Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
such requests or (B) if the Company shall have elected to deposit the total
number of Units of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent of a
depositary receipt or depositary receipts representing such number of Units of
Preferred Stock as are to be purchased (in which case certificates for the Units
of Preferred Stock represented by such receipt or receipts shall be deposited by
the transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be delivered to or upon
the order of the registered holder of such Rights Certificate, registered in
such name or names as may be designated by such holder and (iv) when
appropriate, after receipt thereof, deliver such cash to or upon the order of
the registered holder of such Rights Certificate. The payment of the Purchase
Price (as such amount may be reduced (including to zero) pursuant to Section
11(a)(iii) hereof) may be made in cash or by certified bank check or bank draft
payable to the order of the Company. In the event that the Company is obligated
to issue other securities of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash and/or other property
are available for distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing a number of Rights equivalent to the number of Rights
remaining unexercised shall be issued by the Rights Agent to the registered
holder of such Rights Certificate or to such registered holder's duly authorized
assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e) or
(iv) any subsequent transferee shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
10.
<PAGE> 14
shall have no liability to any holder of Rights Certificates or to any other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or any of such Acquiring Person's Affiliates, Associates or
transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights
Certificates. All Rights Certificates surrendered for the purpose of exercise,
transfer, split up, combination or exchange shall, if surrendered to the Company
or to any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at 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.
Section 9. Reservation and Availability of Preferred Stock.
(a) The Company covenants and agrees that it will use its
best efforts to cause to be reserved and kept available out of and to the extent
of its authorized and unissued Units of Preferred Stock not reserved for another
purpose that will be sufficient to permit the exercise in full of all
outstanding Rights. Upon the occurrence of any events resulting in an increase
in the aggregate number of shares of Preferred Stock (or other equity securities
of the Company) issuable upon exercise of all outstanding Rights above the
number then reserved, the Company shall make appropriate increases in the number
of shares so reserved.
(b) If the Units of Preferred Stock to be issued and
delivered upon the exercise of the Rights are at any time listed on a national
securities exchange or included for quotation on any transaction reporting
system, the Company shall during the period from the Distribution Date to the
Expiration Date use its best efforts to cause all shares reserved for such
issuance to be listed on such exchange or included for quotation on any such
transaction reporting system upon official notice of issuance upon such
exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event in which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act, with
11.
<PAGE> 15
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction, unless the requisite qualification
in such jurisdiction shall have been obtained, or an exemption therefrom shall
be available and until a registration statement has been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all Units of Preferred Stock
(and, following the occurrence of a Triggering Event, any other securities that
may be delivered upon exercise of Rights) shall, at the time of delivery of the
certificates for such Units of Preferred Stock (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
non-assessable.
(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
Rights Certificates or of any Units of Preferred Stock upon the exercise of
Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Rights
Certificates to a person other than, or the issuance or delivery of certificates
or depositary receipts for Units of Preferred Stock in a name other than that
of, the registered holder of the Rights Certificate evidencing Rights
surrendered for exercise or to issue or to deliver any certificates or
depositary receipts for Units of Preferred Stock upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Rights Certificate at the time of surrender) or until it has been
established to the Company's reasonable satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in
whose name any certificate for Units of Preferred Stock (or, following the
occurrence of a Triggering Event, other securities) is issued upon the exercise
of Rights shall for all purposes be deemed to have become the holder of record
of the Units of Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) represented thereby on, and such certificate shall be
dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) 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, however, that if delivery of Units of Preferred Stock is delayed
pursuant to Section 9(c), such Persons shall be deemed to have become the record
holders of such Units of Preferred Stock only when such Units first become
deliverable. Prior to the exercise of the Rights evidenced thereby, the holder
of a Rights Certificate shall not be entitled to any rights of a stockholder of
the Company with respect to securities for which the Rights shall be
exercisable, including, without limitation, the right to
12.
<PAGE> 16
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. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a holder of a Unit of Preferred Stock 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 Purchase Price, Number of Shares
or Number of Rights. The Purchase Price, the number and kinds of securities
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) 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
shares of Preferred Stock, (C) combine the outstanding Preferred Stock
into a smaller number of shares Preferred Stock 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), the
Purchase 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 kind of shares of capital stock
issuable on such date, shall be proportionately adjusted so that the
holder of any Rights exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which,
if such Rights 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 one Right be less than the
aggregate par value of the shares of capital stock of the Company
issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior, to any adjustment required
pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, in the event
that (A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement, directly
or indirectly, shall (1) merge into the Company or otherwise combine with
the Company and the Company shall be the continuing or surviving
corporation of such merger or combination and shares of Company Common
Stock shall remain outstanding and unchanged, (2) in one transaction or a
series of transactions, transfer any assets to the Company or any of its
Subsidiaries in exchange (in whole or in part) for shares of Company
Common Stock, for other equity securities of the Company or any such
Subsidiary, or for securities exercisable for or convertible into shares
of equity securities of the Company or any of its Subsidiaries (whether
shares of Company Common Stock or otherwise) or otherwise obtain from the
Company or any of its Subsidiaries, with or without consideration, any
additional shares of such equity
13.
<PAGE> 17
securities or securities exercisable for or convertible into such equity
securities other than pursuant to a pro rata distribution to all holders
of shares of Company Common Stock, (3) sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire or dispose of, in one
transaction or a series of transactions, to, from or with the Company or
any of its Subsidiaries or any employee benefit plan maintained by the
Company or any of its Subsidiaries or any trustee or fiduciary with
respect to such plan acting in such capacity, assets (including
securities) on terms and conditions less favorable to the Company or such
Subsidiary or plan than those that could have been obtained in
arm's-length negotiations with an unaffiliated third party, other than
pursuant to a transaction set forth in Section 13(a) hereof, (4) sell,
purchase, lease, exchange, mortgage, pledge, transfer or otherwise
acquire or dispose of, in one transaction or a series of transactions,
to, from or with the Company or any of its Subsidiaries or any employee
benefit plan maintained by the Company or any of its Subsidiaries or any
trustee or fiduciary with respect to such plan acting in such capacity
(other than transactions, if any, consistent with those engaged in, as of
the date hereof, by the Company and such Acquiring Person or such
Associate or Affiliate), assets (including securities or intangible
assets) having an aggregate fair market value of more than $5,000,000,
other than pursuant to a transaction set forth in Section 13(a) hereof,
(5) receive, or any designee, agent or representative of such Acquiring
Person or any Affiliate or Associate of such Acquiring Person shall
receive, any compensation from the Company or any of its Subsidiaries
other than compensation for full-time employment as a regular employee at
rates in accordance with the Company's (or its Subsidiaries') past
practices, or (6) receive the benefit, directly or indirectly (except
proportionately as a holder of shares of Company Common Stock or as
required by law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or
other tax advantages provided by the Company or any of its Subsidiaries
or any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee or fiduciary with respect to such plan acting
in such capacity; or (B) any Person shall become an Acquiring Person,
unless the event causing the Person to become an Acquiring Person is a
transaction set forth in Section 13(a); or (C) during such time as there
is an Acquiring Person, there shall be any reclassification of securities
(including any reverse stock split), or recapitalization of the Company,
or any merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions involving
the Company or any of its Subsidiaries, other than a transaction or
transactions to which the provisions of Section 13(a) apply (whether or
not with or into or otherwise involving an Acquiring Person), which has
the effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries that is directly or
indirectly beneficially owned by any Acquiring Person or any Person or
any Associate or Affiliate of any Acquiring Person;
then promptly following the occurrence of an event described in Section
11(a)(ii)(A), (B) or (C) (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)
hereof, shall thereafter have the right to receive for each Right, upon exercise
thereof in accordance with the terms of this Agreement and payment of the
then-current Purchase Price, in lieu of the number of Units of Preferred Stock
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event, such
14.
<PAGE> 18
number of Units of Preferred Stock as shall equal the result obtained by
multiplying the then-current Purchase Price by the then number of Units of
Preferred Stock for which a Right was exercisable (or would have been
exercisable if the Distribution Date had occurred) immediately prior to the
first occurrence of a Triggering Event, and dividing that product by 50% of the
current per share market price (determined pursuant to Section 11(d) hereof) for
shares of Common Stock on the date of occurrence of the Triggering Event (such
number of Units of Preferred Stock being hereinafter referred to as the
"Adjustment Shares").
(iii) In the event that the number of Units of Preferred
Stock which are authorized by the Company's Restated Certificate of
Incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit the
exercise in full of the Rights, or if any necessary regulatory approval
for such issuance has not been obtained by the Company, the Company
shall, in lieu of issuing Units of Preferred Stock in accordance with
Section 11(a)(ii) hereof: (A) determine the excess of (1) the value of
the Units of Preferred Stock issuable upon the exercise of a Right (the
"Current Value") over (2) the Purchase Price (such excess being referred
to as the "Spread") and (B) with respect to each Right, make adequate
provision to substitute for such Units of Preferred Stock, upon exercise
of the Rights, (1) cash, (2) a reduction in the Purchase Price, (3) other
equity securities of the Company (including, without limitation, Common
Stock or shares or units of shares of any series of preferred stock which
the Board of Directors of the Company has deemed to have the same value
as the Units of Preferred Stock (such shares or units of preferred stock
are herein called "preferred stock equivalents")), except to the extent
that the Company has not obtained any necessary regulatory approval for
such issuance, (4) debt securities of the Company, except to the extent
that the Company has not obtained any necessary regulatory approval for
such issuance, (5) other assets or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company; provided,
however, if the Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within thirty (30) days following the
later of (x) 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)(iii) Trigger Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, Units of Preferred Stock (to the extent
available), except to the extent that the Company has not obtained any
necessary regulatory approval for such issuance, and then, if necessary,
cash, which Units and/or cash have an aggregate value equal to the
Spread.
(b) In the event that the Company shall fix a record date
for the issuance of rights, options or warrants to all holders of Units of
Preferred Stock entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Units of Preferred Stock
(or shares having the same rights, privileges and preferences as the Preferred
Stock ("equivalent preferred stock")) or securities convertible into Units of
Preferred Stock or equivalent preferred stock at a price per Unit of Preferred
Stock or equivalent preferred share (or having a conversion price per share, if
a security convertible into Units of Preferred Stock or
15.
<PAGE> 19
equivalent preferred stock) less than the then current per share market price of
a Unit of Preferred Stock (as determined pursuant to Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of Units
of Preferred Stock outstanding on such record date plus the number of Units of
Preferred Stock which the aggregate offering price of the total number of Units
of Preferred Stock and/or equivalent preferred stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of Units of Preferred Stock outstanding on such record
date plus the number of additional Units of Preferred Stock and/or equivalent
preferred stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In case such
subscription price may be paid in a consideration part or all of which shall be
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, 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. Units of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Units 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 quarterly cash dividend), assets (other
than a dividend payable in Units of Preferred Stock but including any dividend
payable in equity securities other than Preferred Stock) or subscription rights
or warrants (excluding those referred to in Section 11(d) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price (as determined pursuant to Section 11(d)) of the Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holder of rights) of the cash, assets or evidences of indebtedness to be
distributed or of such subscription rights or warrants distributable in respect
of a share of Preferred Stock and the denominator of which shall be such current
per share market price (as determined pursuant to Section 11(d)) of a share of
Preferred Stock. 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 Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the
purpose of this Section 11(d)(i)) on any date shall be deemed to be the
average of the daily closing prices per share of such Security for the
thirty (30) consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, that in the
event that the "current per
16.
<PAGE> 20
share market price" of the Security is determined during a period
following the announcement by the issuer of such Security of (A) a
dividend or distribution on such Security payable in shares of such
Security or securities convertible into such shares, or (B) any
subdivision, combination or reclassification of such Security and prior
to the expiration of thirty (30) Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such
case, the "current per share market price" shall be appropriately
adjusted to reflect the "current market price" per share equivalent of
such Security. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the Nasdaq
National Market System ("NASDAQ") or, if the Security is not listed or
admitted to trading on the NASDAQ, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported by the
NASDAQ or such other system then in use, or, if on any such date the
Security is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in the Security selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the
Security, the "current per share market price" of such Security on such
date as determined in good faith by the Board of Directors of the Company
as provided for above shall be used. The term "Trading Day" shall mean a
day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Stock shall be
determined in accordance with the method set forth in Section 11(d)(i).
If the "current per share market price" of the Preferred Stock cannot be
determined in the manner provided above or if the Preferred Stock is not
publicly held or listed or traded in a manner described in clause (i) of
this Section 11(d), the "current per share market price" of the Preferred
Stock shall be conclusively deemed to be an amount equal to $1,000 (as
such amount may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to shares of
Company Common Stock occurring after the date of this Agreement)
multiplied by the current market price per share of Company Common Stock.
If shares of neither the Company Common Stock nor Preferred Stock is
publicly held or so listed or traded, "current per share market price" of
the Preferred Stock shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall
be binding on the Rights Agent and the holders of the Rights. For all
purposes of this Agreement, the "current market price" of a Unit of
Preferred Stock shall be equal to the "current market price" of one share
of Preferred Stock divided by 100.
17.
<PAGE> 21
(e) No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments which by reason of
this Section 11(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
one-thousandth of a share of Preferred Stock or one one-hundredth of any other
share or security as the case may be. Notwithstanding 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 years from the date of the transaction which
requires such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) hereof, the holder of any Rights thereafter exercised shall
become entitled to receive any shares of capital stock of the Company other than
Units of Preferred Stock, thereafter the number of such other shares so
receivable upon exercise of any Rights and the Purchase Price thereof shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Section 11(a), (b), (c), (d), (e), (g), (h), (i), (j), (k), (l) and
(m), and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of Units of Preferred
Stock 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 Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
Units of Preferred Stock (calculated to the nearest one-millionth of a share of
Preferred Stock) obtained by dividing (i) the product obtained by multiplying
(x) the number of Units of Preferred Stock covered by a Right immediately prior
to this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by, (ii) the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in substitution
for any adjustment in the number of Units of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of Units 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 one-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten days later than the
18.
<PAGE> 22
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates to be so
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Rights Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of Units of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per Unit and the number of
Units of Preferred Stock which were expressed in the initial Rights Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value of the number of Units 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
number of Units of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Rights exercised after such record date
of that number of Units of Preferred Stock and other capital stock or securities
of the Company, if any, issuable upon such exercise over and above the Units of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares (fractional or otherwise) upon the occurrence
of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any Unit of Preferred Stock at
less than the current market price, (iii) issuance wholly for cash of Preferred
Stock or securities which by their terms are convertible into or exchangeable
for Preferred Stock, (iv) dividends on Preferred Stock payable in Preferred
Stock or (v) issuance of rights, options or warrants referred to in this Section
11, hereafter made by the Company to holders of Units of its Preferred Stock
shall not be taxable to such stockholders.
19.
<PAGE> 23
(n) The Company shall not, at any time after the
Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
(ii) merge with or into any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)), or (iii) sell or transfer
(or permit any Subsidiary to sell or transfer), in one transaction, or a series
of transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company and/or any of its Subsidiaries
in one or more transactions each of which complies with Section 11(o)), if (x)
at the time of or immediately after such consolidation, merger or sale there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or sale, the
Person which constitutes, or would constitute the "Principal Party" for purposes
of Section 13(a) shall have distributed or otherwise transferred to its
stockholders or other persons holding an equity interest in such Person Rights
previously owned by such Person or any of its Affiliates and Associates;
provided, however, this Section 11(n) shall not affect the ability of any
Subsidiary of the Company to consolidate with, merge with or into, or sell or
transfer assets or earning power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not,
except as permitted by Section 23 or Section 26, 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 diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) In the event that, at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on outstanding shares of Common Stock payable in shares of
Common Stock or (ii) effect a subdivision, combination or consolidation of the
Common Stock (by reclassification or otherwise than by payment of dividends in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in any such case the number of Units of Preferred Stock purchasable
after such event upon proper exercise of each Right shall be determined by
multiplying the number of Units 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 outstanding immediately before such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event. The adjustments provided for in this Section 11(p)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price or
Number of Shares. Whenever an adjustment is made as provided in Sections 11 and
13 hereof, the Company shall promptly (a) prepare a certificate setting forth
such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
shares of Common Stock or Units of Preferred Stock a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 25 hereof. Notwithstanding the foregoing sentence, the
failure by the Company to make such certification or give such notice shall not
affect the validity of or the force or effect of the requirement for such
adjustment. The Rights Agent shall be fully protected in relying on any
20.
<PAGE> 24
such certificate and on any adjustment contained therein and shall not be deemed
to have knowledge of such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) Except as provided in Section 13(b) hereof, in the
event that, following a Shares 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 complies with Section
11(o)), 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 complies with Section 11(o)) shall consolidate
with the Company, or merge with and into the Company and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the shares of
Common Stock 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 or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer) to any Person or Persons (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), in one or more transactions,
directly or indirectly, assets or earning power aggregating 50% or more of the
assets or earning power of the Company and its Subsidiaries (taken as a whole),
(any such event being a "Section 13 Event"), 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 thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price, such number of validly authorized
and issued, fully paid and non-assessable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), which shares shall not be
subject to any liens, encumbrances, rights of first refusal, transfer
restrictions or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Purchase Price by the number of Units of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such Units of Preferred Stock for which a Right would be exercisable hereunder
but for the occurrence of such Section 11(a)(ii) Event by the Purchase Price
which would be in effect hereunder but for such first occurrence) and (2)
dividing that product (which, following the direct occurrence of a Section 13
Event, shall be the "Purchase Price" for all purposes of this Agreement) by 50%
of the current per share market price (determined pursuant to Section 11(d)) of
the shares of Common Stock of such Principal Party on the date of consummation
of such Section 13 Event; (ii) such Principal Party shall thereafter be liable
for, and shall assume, by virtue of such Section 13 Event, all the obligations
and duties of the Company pursuant to this Agreement; (iii) the term "Company"
shall, for all purposes of this Agreement, thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (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) in connection with the consummation of any such transaction as may
be necessary to ensure that the provisions of this Agreement shall thereafter be
applicable to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) shall be of
no further effect following the first occurrence of any Section 13 Event.
21.
<PAGE> 25
(b) "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), (A) the Person that is
the issuer of any securities into which shares of Company Common Stock
are converted in such merger or consolidation, or, if there is more than
one such issuer, the issuer of shares of Common Stock that has the
highest aggregate current market price (determined pursuant to Section
11(d)) and (B) if no securities are so issued, the Person that is the
other party to such merger or consolidation, or, if there is more than
one such Person, the Person the Common Stock of which has the highest
aggregate current market price (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 largest 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 current market price (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 twelve-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 of another Person that 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 current per share market price (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 stockholders' equity or, if no such ultimate parent
entity is a corporation, shall refer to whichever ultimate parent entity
is the entity having the greatest net assets.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless the Principal Party shall have a
sufficient number of authorized shares of Common Stock which have not been
issued or reserved for issuance to permit the exercise in full of the Rights in
accordance with this Section 13, and unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement
22.
<PAGE> 26
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable
following the execution of such agreement, a registration statement under
the Securities Act with respect to the shares of Common Stock that may be
acquired upon exercise of the Rights, (B) cause such registration
statement to remain effective (and to include a prospectus complying with
the requirements of the Securities Act) until the Expiration Date, and
(C) as soon as practicable following the execution of such agreement take
such action as may be required to ensure that any acquisition of such
shares of Common Stock upon the exercise of the Rights complies with any
applicable state securities or "blue sky" laws; and
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10
under the Exchange Act.
(d) 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 Bylaws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, 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
market price per share (determined pursuant to Section 11(d)) or securities
exercisable for, or convertible into, shares of Common Stock of such Principal
Party at less than such then current marker price (other than to holders of
Rights pursuant to this Section 13) or (ii) providing for any special payment,
tax or similar provisions in connection with the issuance of the shares of
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 cancelled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional Rights. In lieu
of such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of
23.
<PAGE> 27
the current market value of a whole Right. For the purposes of this Section
14(a), the current market value of a whole Right shall be the closing price of
the Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable. The closing price for any
day shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the NASDAQ
or, if the Rights are not listed or admitted to trading on the NASDAQ, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Directors. If on any
such date no such market maker is making a market in the Rights, the fair value
of the Rights on such date as determined in good faith by the Board of Directors
of the Company shall be used.
(b) The Company shall not be required to issue fractions of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional Preferred Stock (other than
fractions which are integral multiples of one one-thousandth of a share of
Preferred Stock). Fractions of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it; provided,
however, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-thousandth of a share of Preferred Stock, the
Company shall pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one a share of Preferred Stock as
determined pursuant to Section 11(d).
(c) The holder of a Right by the acceptance of the Right
expressly waives such holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in
respect of this Agreement, excepting the rights of action given to the Rights
Agent under Section 18 hereof, are vested in the respective registered holders
of the Rights Certificates (and, prior to the Distribution Date, the registered
holders of certificates representing shares of Common Stock); and any registered
holder of any Rights Certificate (or, prior to the Distribution Date, a
certificate representing shares of Common Stock), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of a certificate representing shares of Common Stock), may,
in such holder's own behalf and for such holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or
24.
<PAGE> 28
otherwise act in respect of, such holder's right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations hereunder, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right, by accepting the same, consents and agrees with the Company and the
Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of shares of the Company's
Common Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the office 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(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Rights Certificate shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of the Units of
Preferred Stock or any other securities of the Company which may at any time be
issuable upon the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in Section 25 hereof), or to
receive
25.
<PAGE> 29
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by such Rights Certificate shall have been exercised in accordance
with the provisions hereof.
Section 18. Concerning the Rights Agent. The Company agrees
to pay to the Rights Agent reasonable compensation for all services rendered by
it hereunder and, from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of this Agreement and the exercise and performance
of its duties hereunder. The Company also agrees to indemnify the Rights Agent
for, and to hold it harmless against, any loss, liability, or expense, incurred
without gross negligence, or willful misconduct on the part of the Rights Agent,
for any action taken, suffered or omitted by the Rights Agent in connection with
the execution, acceptance and administration of this Agreement and the exercise
and performance hereunder of its duties, including the costs and expenses of
defending against and appealing any claim of liability in the premises. The
indemnity provided herein shall survive the termination of this Agreement and
the expiration of the Rights. The costs and expenses incurred in enforcing this
right of indemnification shall be paid by the Company.
The Rights Agent may conclusively rely upon and 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 and the exercise and performance of its duties hereunder in reliance
upon any Rights Certificate or certificate for Units of Preferred Stock or
shares of Common Stock or for other securities of the Company, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper person or persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of Name of
Rights Agent.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the stock transfer or corporate trust business of the Rights Agent
or any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of the predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
26.
<PAGE> 30
(b) In case at any time the name of the Rights Agent shall
be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions and no implied duties or obligations shall be
read into this Agreement against the Rights Agent, by all of which the Company
and the holders of Rights Certificates, by their acceptance thereof, shall be
bound:
(a) Before the Rights Agent acts or refrains from acting,
it may consult with legal counsel of its choice (who may be legal counsel for
the Company), and the advice or opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted by it in good faith and in accordance with such
advice or opinion.
(b) Whenever in the administration, exercise and
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking, suffering or omitting any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer or the
Secretary of the Company and delivered to the Rights Agent; and such certificate
shall be full authorization to the Rights Agent for any action taken, suffered
or omitted in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the
Company and any other Person only for its own gross negligence or willful
misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the Rights Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any liability or
responsibility in respect of the legality, validity or enforceability of this
Agreement or the execution and delivery hereof (except the due execution hereof
by the Rights Agent) or in respect of the legality, validity or enforceability
or the execution of any Rights Certificate (except its countersignature thereof
and has actual knowledge of such change or adjustment); nor shall it be liable
or responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor shall it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii)
27.
<PAGE> 31
hereof) or any adjustment in the terms of the Rights (including the manner,
method or amount thereof) provided for in Section 3, 11, 13, 23 or 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt of the certificate described in Section 12 hereof or
has actual knowledge of such change or adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Units of Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
Preferred Stock will, when issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the administration, exercise and performance
of its duties hereunder from any one of the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Secretary or the Chief
Financial Officer of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be responsible or
liable for any action taken, suffered or omitted by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions. Any application by the Rights Agent for
written instructions from the Company may, at the option of the Rights Agent,
set forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Agreement and the date on and/or after which such action shall
be taken or such omission shall be effective. The Rights Agent shall not be
liable for any action taken by, or omission of, the Rights Agent in accordance
with a proposal included in any such application on or after the date specified
in such application (which date shall not be less than five (5) Business Days
after the date any officer of the Company actually received such application,
unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct, provided reasonable care was exercised in
the selection and continued employment thereof.
28.
<PAGE> 32
(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 the Rights Agent in good faith believes that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise, transfer, split up, combination or exchange,
the certification on the form of assignment or form of election to purchase, as
the case may be, that the Rights evidenced by the Rights Certificate are not
owned by an Acquiring Person, or an Affiliate or Associate thereof, has either
not been completed or in any manner indicates any other response thereto, the
Rights Agent shall not take any further action with respect to such requested
exercise, transfer, split up, combination or exchange, without first consulting
with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company and to
each transfer agent of the Common Stock or Preferred Stock (as to which the
Rights Agent has received prior written notice) by registered or certified mail,
and the Company shall mail notice thereof to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock or Preferred Stock (as to which the Rights Agent has
received prior written notice) by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the Company shall fail
to make such appointment within a period of thirty (30) days after giving notice
of such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then the registered holder of any
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of any state of the United
States, in good standing, authorized under such laws to exercise corporate trust
or stock transfer powers, and subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock or Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
29.
<PAGE> 33
Section 22. Issuance of New Rights Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the Expiration Date, the Company
(a) shall, with respect to shares of Common Stock so issued or sold pursuant to
the exercise of stock options or under any employee benefit plan or arrangement
or upon the exercise, conversion or exchange of securities of the Company
currently outstanding or issued at any time in the future by the Company and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued and this sentence shall be
null and void ab initio if, and to the extent that, such issuance or this
sentence would create a significant risk of or result in material adverse tax
consequences to the Company or the Person to whom such Rights Certificate would
be issued or would create a significant risk of or result in such options' or
employee plans' or arrangements' failing to qualify for otherwise available
special tax treatment and (ii) no such Rights Certificate shall be issued if,
and to the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Company may, at its option, upon approval by the
Board of Directors, at any time on or prior to the close of business (or such
later date as may be determined by the Board of Directors) on the earlier of (i)
the Shares Acquisition Date or (ii) the Final Expiration Date redeem all but not
less than all the then outstanding Rights at a redemption price of $0.01 per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"), and the Company may, at its
option, pay the Redemption Price either in cash, shares of Common Stock (based
on the current per share market price thereof (as determined pursuant to Section
11(d) hereof) at the time of redemption), or any other form of consideration
deemed appropriate by the Board of Directors. The redemption of the Rights by
the Board of Directors may be made effective at such time on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the redemption of the Rights pursuant to paragraph (a)
of this Section 23, and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company shall
promptly give public notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after such action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and shall mail a notice of redemption to all the
holders of the then outstanding Rights at their last addresses as they appear
upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Stock. Any notice
which is mailed in the manner
30.
<PAGE> 34
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the purchase of
shares of Common Stock prior to the Distribution Date.
(c) Notwithstanding anything contained in this Agreement to
the contrary, the Rights shall not be exercisable pursuant to Section 7(a) at
any time when the Rights are redeemable hereunder.
Section 24. Exchange.
(a) The Company, at its option, upon approval by the Board
of Directors, at any time after any Person becomes an Acquiring Person, may
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
7(e) hereof) for Units of Preferred Stock at an exchange ratio equal to, subject
to adjustment to reflect stock splits, stock dividends and similar transactions
occurring after the date hereof, that number obtained by dividing the Purchase
Price by the then current per share market price per Unit of Preferred Stock on
the earlier of (i) the date on which any Person becomes an Acquiring Person and
(ii) the date on which a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan maintained by
the Company or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity) is first published or sent or given within
the meaning of Rule 14d-4(a) of the Exchange Act Regulations or any successor
rule, if upon consummation thereof such Person would be the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding (such exchange ratio
being hereinafter referred to as the "Section 24(a) Exchange Ratio").
Notwithstanding the foregoing, the Company may not effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan maintained by the Company or any of its Subsidiaries,
or any trustee or fiduciary with respect to such plan acting in such capacity),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of 50% or more of the shares of Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors
of the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Units of Preferred
Stock equal to the number of such Rights held by such holder multiplied by the
Section 24(a) Exchange Ratio. The Company shall promptly give public notice of
any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
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
exchange will state the method by which the exchange of Units of Preferred Stock
for Rights will be
31.
<PAGE> 35
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that the number of shares of Preferred
Stock which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit 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 Preferred Stock for issuance
upon exchange of the Rights or make adequate provision to substitute (1) cash,
(2) Company Common Stock or other equity securities of the Company, (3) debt
securities of the Company, (4) other assets, or (5) any combination of the
foregoing, having an aggregate value equal to the Adjustment Spread, where such
aggregate value has been determined by the Board of Directors. To the extent
that the Company determines that some action need be taken pursuant to
subsection (a) of this Section 24, the Board of Directors may temporarily
suspend the exercisability of the Rights for a period of up to sixty (60) days
following the date on which the event described in Section 24(a) shall have
occurred, in order to seek any authorization of additional shares of Preferred
Stock and/or to decide the appropriate form of distribution to be made pursuant
to the above provision 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.
(d) The Company shall not be required to issue fractions
smaller than or to distribute certificates which evidence fractions smaller than
one one-thousandth of a share of Preferred Stock. In lieu thereof, the Company
shall pay to the registered holders of the Rights Certificates with regard to
which such fractional Units would otherwise be issuable an amount in cash equal
to the same fraction of the current market value (as determined pursuant to
Section 11(d)(i) hereof) of one Unit of Preferred Stock.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose (i) to pay any
dividend payable in stock of any class to the holders of its Preferred Stock or
to make any other distribution to the holders of its Preferred Stock (other than
a regular quarterly cash dividend), (ii) to offer to the holders of its
Preferred Stock rights or warrants to subscribe for or to purchase any
additional Units of Preferred Stock or shares of stock of any class or any other
securities, rights or options, (iii) to effect any reclassification of its
Preferred Stock (other than a reclassification involving only the subdivision of
outstanding Preferred Stock), (iv) to effect any consolidation or merger into or
with any other Person (other than a Subsidiary of the Company in a transaction
which complies with Section 11(o)), or to effect any sale or other transfer (or
to permit one or more of its Subsidiaries to effect any sale or other transfer),
in one or more 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, (v) to
effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Stock payable in shares of Common
Stock or to effect a subdivision, combination or consolidation of the shares of
Common Stock (by reclassification or otherwise than by payment of dividends in
shares of Common Stock), then, in each such case, the Company shall give to each
holder of a Rights Certificate, in accordance with
32.
<PAGE> 36
Section 26 hereof, a notice of such proposed action, which shall specify the
record date for the purposes of such stock dividend, or distribution of rights
or warrants, or the date 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
and/or shares of Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least ten (10) 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 ten (10) 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 and/or shares of Preferred Stock, whichever shall be the
earlier.
(b) In case any of the events set forth in Section
11(a)(ii) hereof shall occur, then the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate, in accordance with
Section 26 hereof, a notice of the occurrence of such event, which notice shall
describe such event and the consequences of such event to holders of Rights
under Section 11(a)(ii) hereof. In the event any Person becomes an Acquiring
Person, the Company will promptly notify the Rights Agent thereof.
Section 26. Notices. Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
U.S. Stock Transfer Corporation
1745 Gardena Avenue, 2nd Floor
Glendale, California 91204
Attention: William Garza
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to or on the Rights Agent shall be sent by registered or
certified mail and shall be deemed given upon receipt and addressed (until
another address is filed in writing with the Company) as follows:
Endocare, Inc.
7 Studebaker
Irvine, California 92618
Attention: President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Section 27. Supplements and Amendments. Prior to the
Distribution Date, the Company may supplement or amend this Agreement in any
respect, without the approval of any holders of Rights, by action of its Board
of Directors, and the Rights Agent shall, if the Company so directs, execute
such supplement or amendment. From and after the Distribution Date, the
33.
<PAGE> 37
Company may from time to time supplement or amend this Agreement without the
approval of any holders of Rights, by action of its Board of Directors 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 hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person), including, without limitation, to change
the Purchase Price, the Redemption Price, any time periods herein specified, and
any other term hereof, any such supplement or amendment to be evidenced by a
writing signed by the Company and the Rights Agent; provided, however, that from
and after such time as any Person becomes an Acquiring Person, this Agreement
shall not be amended in any manner which would adversely affect the interests of
the holders of Rights. Upon receipt of a certificate from an appropriate officer
of the Company that the proposed supplement or amendment is consistent with this
Section 27 and, after such time as any Person has become an Acquiring Person,
that the proposed supplement or amendment does not adversely affect the
interests of the holders of Rights, the Rights Agent shall execute such
supplement or amendment.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 29. Determinations and Actions by the Board of
Directors. For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act.
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board of Directors, or the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing), which are done or made by the
Board of Directors in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights Certificates and all
other parties and (y) not subject the Board of Directors to any liability to the
holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Rights Agent and the registered holders of the Rights Certificates
(and, prior to the Distribution Date, shares of Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, shares of Common Stock).
34.
<PAGE> 38
Section 31. Severability. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the tenth Business Day following
the date of such determination by the Board of Directors of the Company.
Section 32. Governing Law. This Agreement and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of
the several sections of this Agreement are inserted or convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
35.
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.
ATTEST: ENDOCARE, INC.
By: /s/ Marie Duhart By: /s/ William R. Hughes
-------------------------------------- ---------------------------
Name: Marie Duhart Name: William R. Hughes
------------------------------ ------------------------
Title: Investor Relations Title: Senior Vice President and
----------------------------- ------------------------
Chief Financial Officer
------------------------
ATTEST: U.S. STOCK TRANSFER CORPORATION
By: /s/ Richard Brown By: /s/ William Garza
-------------------------------------- ---------------------------
Name: Richard Brown Name: William Garza
------------------------------- ------------------------
Title: Vice President Title: Assistant Vice President
------------------------------ ------------------------
36.
<PAGE> 40
EXHIBIT A
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
ENDOCARE, INC.,
(Pursuant to Section 151 of the
Delaware General Corporation Law)
----------------------------------
ENDOCARE, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies that the following resolution was adopted by
the Board of Directors of the Corporation as required by Section 151 of the
General Corporation Law at a meeting duly called and held on March 5, 1999;
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of the Corporation (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Certificate
of Incorporation, the Board of Directors hereby creates a series of Preferred
Stock, par value $0.001 per share (the "Preferred Stock"), of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting the Series A Preferred
Stock shall be Two Hundred Fifty thousand (250,000). Such number of shares may
be increased or decreased by resolution of the Board of Directors; provided,
that no decrease shall reduce the number of shares of Series A Preferred Stock
to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) 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, each holder of a share of
Series A Preferred Stock, in preference to the holders of shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of the Corporation,
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<PAGE> 41
and of any other junior stock, shall be entitled to receive, when declared by
the Board of Directors 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 Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to, subject to
the provision for adjustment hereinafter set forth, One Thousand (1,000) times
the aggregate per share amount of all cash dividends, and One Thousand (1,000)
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of a share or fraction of Series A
Preferred Stock. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the
shares of Series A Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided, however,
that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Distribution Date and the
next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share
of Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on each
outstanding share of Series A Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such share of Series A
Participating Preferred Stock, unless the date of issue of such share is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such share shall begin to accrue from the date of issue of such
share, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the
shares of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such shares shall be allocated
pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to
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<PAGE> 42
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to One
Thousand (1,000) votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Designations creating a series of Preferred Stock or any similar stock, or by
law, the holders of shares of Series A Preferred Stock and the holders of shares
of Common Stock and 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 set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the shares of 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;
A-3
<PAGE> 43
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that the
Corporation may at any time redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, or in any other Certificate of Designations
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received One Thousand Dollars
($1,000) per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"), provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock (the "Common Adjustment"), or (2) to the holders of
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all 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 declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
A-4
<PAGE> 44
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the proviso in clause (1) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event
("Adjustment Number").
(B) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference and
the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.
(C) In the event the Corporation shall at any time after December
15, 1998 (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case each share of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to One Thousand (1,000) times the aggregate amount
of stock, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series A Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
A-5
<PAGE> 45
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior to
all series of any other class of the Corporation's Preferred Stock.
Section 10. Amendment. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least a majority of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
A-6
<PAGE> 46
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation by its President this ___ day of March, 1999.
ENDOCARE, INC.
By: _____________________________________
Paul Mikus, Chief Executive Officer
A-7
<PAGE> 47
EXHIBIT B
Rights Certificate
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER APRIL 15, 2009 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT THE OPTION OF THE COMPANY AT $.01 PER RIGHT
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE
OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SUCH AGREEMENT.]*
Rights Certificate
ENDOCARE, INC.
This certifies that ______________________, or registered assigns,
is the registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of March 31, 1999 (the "Rights Agreement"),
between ENDOCARE, INC., a Delaware corporation (the "Company"), and U.S. STOCK
TRANSFER CORPORATION (the "Rights Agent"), to purchase from the Company at any
time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., California time, on April 15, 2009 at the
office of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one one-thousandth (a "Unit") of a fully paid
non-assessable share of Series A Junior Participating Preferred Stock, par value
$.001 per share (the "Series A Preferred Stock") of the Company, at a purchase
price of $25.00 per Unit of Series A Preferred Stock (the "Purchase Price"),
upon presentation and surrender of this Rights Certificate with the Form of
Election to Purchase duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of Units of Series A Preferred Stock which
may be purchased upon exercise hereof) set forth above, and the Purchase Price
set forth above, are the number and Purchase Price as of April 15, 1999 based on
the Series A Preferred Stock as constituted at such date. As provided in the
Rights Agreement, the Purchase Price and the number of Units of Series A
Preferred Stock
- -----------------------
* The portion of the legend in bracket shall be inserted only if
applicable and shall replace the preceding sentence.
B-1
<PAGE> 48
which may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
This Rights Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of Series A Preferred Stock as the Rights evidenced by the
Rights Certificate or Rights Certificates surrendered shall have entitled such
holder to purchase. If this Rights Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at a redemption
price of $.01 per Right.
No fractional shares of Series A Preferred Stock will be issued upon
the exercise of any Rights or Rights evidenced hereby (other than fractions
which are integral multiples of one one-thousandth of a share of Series A
Preferred Stock, which may, at the election of the Company, be evidenced by
depositary receipts), but in lieu thereof a cash payment will be made, as
provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Units of
Series A Preferred Stock or of any other securities of the Company which may at
any time be issuable on the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the holder hereof, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Rights or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
B-2
<PAGE> 49
WITNESS the signature of the proper officers of the Company and its
corporate seal. Dated as of _______________.
ATTEST: ENDOCARE, INC.
_________________________________ _________________________________
Name: __________________________ Name: __________________________
Title: __________________________ Title: __________________________
Countersigned:
U.S. STOCK TRANSFER CORPORATION
as Rights Agent
_________________________________
Name: __________________________
Title: __________________________
B-3
<PAGE> 50
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate.)
FOR VALUE RECEIVED __________________ hereby sells, assigns and
transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
DATED:_______________,____
___________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities
Transfer Association Inc. recognized signature guarantee medallion program.
B-4
<PAGE> 51
CERTIFICATE
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
_____________________________
Signature
_________________________________
NOTICE
The signature in the foregoing Form of Assignment must conform to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Assignment is not completed, the Company and the Rights Agent will deem the
beneficial owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights
Agreement) and such Assignment will not be honored.
B-5
<PAGE> 52
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Rights Certificate.)
To ENDOCARE, INC.
The undersigned hereby irrevocably elects to exercise
_________________ Rights represented by this Rights Certificate to purchase the
Units of Series A Preferred Stock issuable upon the exercise of such Rights and
requests that certificates for such Series A Preferred Stock be issued in the
name of:
Please insert social security
or other identifying number_____________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number_____________________________________________________
(Please print name and address)
DATED:________________,_____
_____________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a participant in a Securities
Transfer Association Inc. recognized signature guarantee medallion program.
B-6
<PAGE> 53
CERTIFICATE
The undersigned hereby certifies that the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).
_____________________________
Signature
_________________________________
NOTICE
The signature in the foregoing Form of Election to Purchase must
conform to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of
Election to Purchase, as the case may be, is not completed, the Company and the
Rights Agent will deem the beneficial owner of the Rights evidenced by this
Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and such Election to Purchase will
not be honored.
B-7
<PAGE> 54
EXHIBIT C
ENDOCARE, INC.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF SERIES A PREFERRED STOCK
On March 5, 1999 the Board of Directors of ENDOCARE, INC. (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of Common Stock (the "Common Stock"), par value
$0.001 per share, of the Company. The dividend is payable on April 15, 1999 (the
"Record Date") to the stockholders of record on that date. Each Right entitles
the registered holder to purchase from the Company one one-thousandth of a share
(a "Unit") of Series A Junior Participating Preferred Stock, par value $0.001
per share (the "Series A Preferred Stock"), of the Company at a price of $25.00
per Unit (the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement dated as of March 31,
1999 (the "Rights Agreement") between the Company and U.S. STOCK TRANSFER
CORPORATION, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the first
date of a public announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired beneficial ownership of 15% or more
of the outstanding Common Stock (subject to certain exceptions as provided in
the Rights Agreement) and (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any Person
becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 15% or more of
such outstanding Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate with a copy of this Summary of Rights attached thereto.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Stock, outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the Close of Business on the
Distribution Date and such separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on April 15, 2009 (the "Final
Expiration Date"), unless the Final
C-1
<PAGE> 55
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case as described below.
The Purchase Price payable, and the number of Units of Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Units of Preferred Stock
of certain rights or warrants to subscribe for or purchase Units of Preferred
Stock at a price, or securities convertible into Units of Preferred Stock with a
conversion price, less than the then current market price of the Units of
Preferred Stock or (iii) upon the distribution to holders of the Units of
Preferred Stock of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Units of Preferred Stock) or of subscription rights or warrants
(other than those referred to above).
The number of outstanding Rights and the number of Units of
Preferred Stock issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a stock dividend
on the Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Units of Preferred Stock purchasable upon exercise of the Rights
will not be redeemable. Each Unit of Preferred Stock will be entitled to a
dividend equal to any dividend declared per share of Common Stock. In the event
of liquidation, each Unit of Preferred Stock will be entitled to a payment equal
to any payment made per share of Common Stock. Each Unit of Preferred Stock will
have one vote, voting together with the Common Stock. Finally, in the event of
any merger, consolidation or other transaction in which shares of Common Stock
are exchanged, each Unit of Preferred Stock will be entitled to receive an
amount equal to the amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.
Because of the nature of the dividend, liquidation and voting
rights, the value of each Unit of Preferred Stock purchasable upon exercise of
the Rights should approximate the value of one share of Common Stock.
In the event that, after the Rights become exercisable, the Company
is acquired in a merger or other business combination transaction with an
Acquiring Person or an affiliate thereof, or 50% or more of its consolidated
assets or earning power are sold to an Acquiring Person or an affiliate thereof,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon exercise thereof at the then current exercise
price of the Rights, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the exercise price of the Rights.
In the event that any person or group of affiliated or associated
persons becomes the beneficial owner of 15% or more of the outstanding shares of
Common Stock (subject to certain exceptions) proper provision shall be made so
that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of Common Stock or
C-2
<PAGE> 56
Units of Preferred Stock (or cash, other securities or property) having a market
value of two times the exercise price of the Rights.
At any time after the acquisition by a person or group of affiliated
or associated persons of beneficial ownership of 15% or more (subject to certain
exceptions) of the outstanding shares of Common Stock and prior to the
acquisition by such person or group of 50% or more of the outstanding Common
Stock, the Board of Directors of the Company may exchange all or part of the
Rights (other than Rights owned by such person or group which have become void)
for Units of Preferred Stock at an exchange ratio (subject to adjustment) which
shall equal, subject to adjustment to reflect stock splits, stock dividends and
similar transactions occurring after the date hereof, that number obtained by
dividing the Purchase Price by the then current per share market price per Unit
of Preferred Stock on the earlier of (i) the date on which any Person becomes an
Acquiring Person and (ii) the date on which a tender or exchange offer is
announced by any Person, if upon consummation thereof such Person would be the
Beneficial Owner of 15% or more (subject to certain exceptions) of the shares of
Company Common Stock then outstanding.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred Stock will be issued
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts) and, in lieu thereof, an adjustment in cash
will be made based on the market price of the Units of Preferred Stock on the
last trading day prior to the date of exercise.
At any time before the close of business on the date a person or
group of affiliated or associated persons acquires beneficial ownership of 15%
or more (subject to certain exceptions) of the outstanding Common Stock or
within ten (10) business days after the announcement of a tender or exchange
offer (unless the Board of Directors extends such ten-day period), the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (the "Redemption Price"). The redemption of the rights
may be made effective at such time on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
The Rights are also redeemable under other circumstances as specified in the
Agreement.
The terms of the Rights may be amended by the Board of Directors of
the Company without the consent of the holders of the Rights except that from
and after a Distribution Date no such amendment may adversely affect the
interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.
C-3
<PAGE> 57
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors, except pursuant to an
offer conditioned on a substantial number of rights being acquired. The Rights
should not interfere with any merger or other business combination approved by
the Board of Directors because the Rights may be redeemed by the Company at the
Redemption Price prior to the occurrence of a Distribution Date.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is hereby
incorporated herein by reference.
C-4
<PAGE> 1
EXHIBIT 20(a)
Contacts: Paul Williams FOR IMMEDIATE RELEASE
310/937-2009
Endocare, Inc. Adopts Stockholder Rights Plan
IRVINE, Calif., March 22 -- Endocare, Inc. (Nasdaq: ENDO) announced today that
its Board of Directors adopted a Stockholder Rights Plan in which preferred
stock purchase rights will be distributed as a dividend at the rate of one Right
for each share of Common Stock held as of the close of business on April 15,
1999.
Each Right will entitle Stockholders to buy one one-thousandth of a share of
Series A Preferred Stock of the Company at an Exercise Price of $25. The Rights
are designed to guard against partial tender offers and other abusive and
coercive tactics that might be used in an attempt to gain control of the Company
or to deprive Stockholders of their interest in the long-term value of the
Company.
The Rights will be exercisable only if a person or group acquires 15% or more of
the Company's Common Stock (subject to certain exceptions stated in the Plan) or
announces a tender offer the consummation of which would result in ownership by
a person or group of 15% or more of the Company's Common Stock. Each Right will
entitle stockholders to buy one one-thousandth of a share of a new series of
junior participating preferred stock at an exercise price of $25 upon certain
events.
If a person or group acquires 15% or more of the Company's outstanding Common
Stock (subject to certain exceptions stated in the Plan), or a holder of 15% or
more of the Company's Common Stock engages in certain self-dealing transactions
or a merger transaction in which the Company is the surviving corporation and
its Common Stock remains outstanding, then each Right not owned by such person
or certain related parties will entitle its holder to purchase, at the Right's
then-current exercise price, units of the Company's Series A Preferred Stock
(or, in certain circumstances, Company Common Stock, cash, property or other
securities of the Company) having a market value equal to twice the then-current
exercise price. In addition, if, after the Rights become exercisable, Endocare,
Inc. is acquired in a merger or other business combination transaction, or sells
50% or more of its assets or earnings power, each Right will entitle its holder
to purchase, at the Right's then-current price, a number of the acquiring
company's common shares having a market value at the time of twice the Right's
exercise price. At any time on or prior to the close of business on the first
date of a public announcement that a person or group has acquired beneficial
ownership of 15% or more of the Company's Common Stock (subject to certain
exceptions stated in the Plan), the Rights are redeemable for one cent per Right
at the option of the Board of Directors.
The Rights are intended to enable all stockholders to realize the long-term
value of their investment in the Company. The Rights will not prevent a takeover
attempt, but should encourage anyone seeking to acquire the Company to negotiate
with the Board prior to attempting a takeover.
<PAGE> 2
The dividend distribution will be made on April 15, 1999 payable to stockholders
of record on that date. The Rights will expire on April 15, 2009. The initial
distribution of Rights is not taxable to stockholders.
Endocare (www.ecare.org) develops, manufactures, and markets an array of
innovative, temperature-based surgical devices and technologies, including those
used in targeted cryoablation for treatment of prostate cancer. The Company is
also developing innovative stent technologies for prostate obstruction.
2
<PAGE> 1
EXHIBIT 21(b)
[Letterhead of Endocare, Inc.]
May 11, 1999
To Our Stockholders:
On March 5, 1999, your Board of Directors declared a dividend
distribution of Preferred Stock Purchase Rights (the "Rights"). The Rights were
issued on April 15, 1999 to holders of Endocare Common Stock of record on that
date and will expire in ten years. The Rights automatically transfer with
shares of Common Stock if the shares are sold. If you purchased shares of
Common Stock after April 15, 1999, you automatically received Rights with the
Common Stock you purchased. The rights attach to the stock whether you hold
stock certificates or hold your shares through a brokerage or similar account.
This letter and the more detailed summary which is enclosed
describe certain key features of the Stockholder Rights Plan and the Board of
Directors' reasons for adopting it.
The Rights contain provisions that should, along with certain
charter and by-law provisions and certain provisions of the Delaware General
Corporation Law, help protect the stockholders of Endocare, Inc. (the "Company")
in the event of an unsolicited attempt to acquire the Company, including a
gradual accumulation of shares in the open market, a partial or two-tier tender
offer that does not treat all stockholders equally, a squeeze-out merger and
other coercive or unfair takeover tactics. These tactics can unfairly pressure
stockholders, squeeze them out of their investment without giving them any real
choice and deprive them of the full value of their shares, and the Board of
Directors does not believe they are in the best interests of the Company's
stockholders.
Over 1,700 companies, including approximately half the Fortune 500
companies and two-thirds of the Fortune 200 companies, have issued similar
rights to protect their stockholders against these tactics. We consider the
Rights to be very valuable in protecting both your right to retain your equity
investment in the Company and the full value of that investment, while not
foreclosing a fair acquisition bid for the Company.
Your Board of Directors was aware when it acted that some people
have advanced arguments that securities of the sort we are issuing deter
legitimate acquisition proposals. We carefully considered these views and
concluded that the arguments are speculative and do not justify leaving
stockholders without any protection during the next year. Your Board of
Directors believes that these Rights represent a sound and reasonable means of
addressing the complex issues of corporate policy.
The Rights are not intended to prevent an acquisition of the Company
and will not do so. However, they should deter any attempt to acquire the
Company in a manner or on terms not approved by the Board of Directors. The
Rights may be redeemed by the Board of Directors at a price of $0.01 per Right
prior to the first public announcement of the accumulation, through open-market
purchases, a tender offer or otherwise, of 15% or more of the combined number of
the Company's shares of Common Stock by a single acquiror (subject to certain
exceptions as provided in the Rights Agreement) or and thereafter in certain
circumstances. Thus, the Rights should not interfere with any merger or business
combination approved by the Board of Directors prior to that time.
<PAGE> 2
To Our Stockholders Page 2
May 11, 1999
Issuance of the Rights does not in any way weaken the financial
strength of the Company or interfere with its business plans. The issuance of
the Rights has no dilutive effect, will not affect reported earnings per share
and will not change the way in which you can presently trade the Company's
shares.
The Rights will expire April 15, 2009, which should give the Company
adequate time to determine whether any further protection is required.
The Board of Directors has been advised by legal counsel for the
Company that the distribution of the Rights will not be taxable to you or to the
Company. However, stockholders may recognize taxable income upon the occurrence
of certain subsequent taxable events.
In declaring the Rights dividend, we have expressed our confidence
in the future of the Company and our determination that you, our stockholders,
be given every opportunity to participate in that future.
On behalf of the
Board of Directors
/s/ Paul Mikus
Paul Mikus
Chief Executive Officer
<PAGE> 3
ENDOCARE, INC.
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF SERIES A PREFERRED STOCK
On March 5, 1999 the Board of Directors of ENDOCARE, INC. (the
"Company") declared a dividend of one preferred share purchase right (a "Right")
for each outstanding share of Common Stock (the "Common Stock"), par value
$0.001 per share, of the Company. The dividend was issued on April 15, 1999 (the
"Record Date") to the stockholders of record on that date. Each Right entitles
the registered holder to purchase from the Company one one-thousandth of a share
(a "Unit") of Series A Junior Participating Preferred Stock, par value $0.001
per share (the "Series A Preferred Stock"), of the Company at a price of $25.00
per Unit (the "Purchase Price"), subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement dated as of March 31,
1999 (the "Rights Agreement") between the Company and U.S. STOCK TRANSFER
CORPORATION, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) the close of business on the
first date of a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired beneficial ownership of
15% or more of the outstanding Common Stock (subject to certain exceptions as
provided in the Rights Agreement) and (ii) 10 business days (or such later date
as may be determined by action of the Board of Directors prior to such time as
any Person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of 15% or more of such outstanding Common Stock (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Stock certificates outstanding as of the Record
Date, by such Common Stock certificate with a copy of this Summary of Rights
attached thereto.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with the Common Stock. Until
the Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Stock, outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the Close of Business on the
Distribution Date and such separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire at the close of business on April 15, 2009 (the "Final
Expiration Date"), unless the Final Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, in each case as
described below.
1
<PAGE> 4
The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) upon the grant to holders of the
Units of Preferred Stock of certain rights or warrants to subscribe for or
purchase Units of Preferred Stock at a price, or securities convertible into
Units of Preferred Stock with a conversion price, less than the then current
market price of the Units of Preferred Stock or (iii) upon the distribution to
holders of the Units of Preferred Stock of evidences of indebtedness or assets
(excluding regular periodic cash dividends paid out of earnings or retained
earnings or dividends payable in Units of Preferred Stock) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of Units of
Preferred Stock issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Stock or a stock dividend
on the Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Units of Preferred Stock purchasable upon exercise of the
Rights will not be redeemable. Each Unit of Preferred Stock will be entitled to
a dividend equal to any dividend declared per share of Common Stock. In the
event of liquidation, each Unit of Preferred Stock will be entitled to a payment
equal to any payment made per share of Common Stock. Each Unit of Preferred
Stock will have one vote, voting together with the Common Stock. Finally, in the
event of any merger, consolidation or other transaction in which shares of
Common Stock are exchanged, each Unit of Preferred Stock will be entitled to
receive an amount equal to the amount received per share of Common Stock. These
rights are protected by customary antidilution provisions.
Because of the nature of the dividend, liquidation and voting
rights, the value of each Unit of Preferred Stock purchasable upon exercise of
the Rights should approximate the value of one share of Common Stock.
In the event that, after the Rights become exercisable, the
Company is acquired in a merger or other business combination transaction with
an Acquiring Person or an affiliate thereof, or 50% or more of its consolidated
assets or earning power are sold to an Acquiring Person or an affiliate thereof,
proper provision will be made so that each holder of a Right will thereafter
have the right to receive, upon exercise thereof at the then current exercise
price of the Rights, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market value of two
times the exercise price of the Rights.
In the event that any person or group of affiliated or
associated persons becomes the beneficial owner of 15% or more of the
outstanding shares of Common Stock (subject to certain exceptions) proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of shares of
Common Stock or Units of Preferred Stock (or cash, other securities or property)
having a market value of two times the exercise price of the Rights.
2
<PAGE> 5
At any time after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or more (subject
to certain exceptions) of the outstanding shares of Common Stock and prior to
the acquisition by such person or group of 50% or more of the outstanding Common
Stock, the Board of Directors of the Company may exchange all or part of the
Rights (other than Rights owned by such person or group which have become void)
for Units of Preferred Stock at an exchange ratio (subject to adjustment) which
shall equal, subject to adjustment to reflect stock splits, stock dividends and
similar transactions occurring after the date hereof, that number obtained by
dividing the Purchase Price by the then current per share market price per Unit
of Preferred Stock on the earlier of (i) the date on which any Person becomes an
Acquiring Person and (ii) the date on which a tender or exchange offer is
announced by any Person, if upon consummation thereof such Person would be the
Beneficial Owner of 15% or more (subject to certain exceptions) of the shares of
Company Common Stock then outstanding.
With certain exceptions, no adjustment in the Purchase Price
will be required until cumulative adjustments require an adjustment of at least
1% in such Purchase Price. No fractional shares of Preferred Stock will be
issued (other than fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depository receipts) and, in lieu thereof, an adjustment in cash
will be made based on the market price of the Units of Preferred Stock on the
last trading day prior to the date of exercise.
At any time before the close of business on the date a person
or group of affiliated or associated persons acquires beneficial ownership of
15% or more (subject to certain exceptions) of the outstanding Common Stock or
within ten (10) business days after the announcement of a tender or exchange
offer (unless the Board of Directors extends such ten-day period), the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $.01 per Right (the "Redemption Price"). The redemption of the rights
may be made effective at such time on such basis and with such conditions as the
Board of Directors in its sole discretion may establish. Immediately upon any
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
The Rights are also redeemable under other circumstances as specified in the
Agreement.
The terms of the Rights may be amended by the Board of
Directors of the Company without the consent of the holders of the Rights except
that from and after a Distribution Date no such amendment may adversely affect
the interests of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors, except
pursuant to an offer conditioned on a substantial number of rights being
acquired. The Rights should not interfere with any merger or other business
3
<PAGE> 6
combination approved by the Board of Directors because the Rights may be
redeemed by the Company at the Redemption Price prior to the occurrence of a
Distribution Date.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form 8-A. A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
4
