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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
CHAD THERAPEUTICS, INC.
(Exact name of the Registrant as specified in its charter)
California 95-3792700
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
21622 Plummer Street, Chatsworth, California 91311
(Address of the Registrant's principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934, as amended (the "Act"):
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Rights to Purchase Common Stock American Stock Exchange
If this Form relates to the registration of a class of debt securities and
is effective upon filing pursuant to General Instruction A(c)(1), please check
the following box. [ ]
If this Form relates to the registration of a class of debt securities and
is to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A(c)(2), please check the following box [ ]
Securities to be registered pursuant to Section 12(g) of the Act:
NONE
(Title of class)
(Title of class)
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Item 1. DESCRIPTION OF SECURITIES TO BE REGISTERED
Under a Rights Agreement dated as of March 24, 1997 (the "Rights
Agreement") between Chad Therapeutics, Inc. (the "Company") and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent"), the Company's
Board of Directors has declared a dividend of one right ("Right") for each
outstanding share of Common Stock, $.01 par value (the "Common Shares"). The
dividend is payable on May 5, 1997 to shareholders of record as of the close
business on May 5, 1997. Each Right entitles the registered holder to purchase
from the Company one Common Share at an exercise price of $25 (the "Purchase
Price"), subject to adjustment.
The following summary of the principal terms of the Rights Agreement is a
general description only and is subject to the detailed terms and conditions of
the Rights Agreement. A copy of the Rights Agreement, including the form of
Rights Certificate and the Summary of Rights attached to the Rights Agreement
as Exhibits A and B, is filed as Exhibit 1 to this Registration Statement and
is incorporated herein by reference. A copy of the Rights Agreement is
available to shareholders free of charge from the Company.
Rights Evidenced by Common Share Certificates
The Rights will not be exercisable until the Distribution Date (defined
below). Until the Distribution Date, certificates for the Rights ("Rights
Certificates") will not be sent to shareholders and the Rights will attach to
and trade only together with the Common Shares. Accordingly, Common Share
certificates outstanding on May 5, 1997 will evidence the Rights related
thereto, and Common Share certificates issued after that date will contain a
notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender or transfer of any certificates for Common Shares, outstanding as of
May 5, 1997, even without notation or a copy of the Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Shares represented by such certificate.
Distribution Date
The Rights will separate from the Common Shares, Rights Certificates will
be issued and the Rights will become exercisable upon the earlier of: (i) ten
days after the first date of public announcement (the "Stock Acquisition Date")
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding Common Shares in a transaction not approved
by the Continuing Disinterested Board, or (ii) ten days 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 the outstanding Common Shares
in a transaction not approved by the Continuing Disinterested Board. The first
to occur of such dates is referred to as the "Distribution Date." The term
"Continuing Disinterested Board," as used in this Registration Statement, means
a majority of the members of the Company's Board of Directors who are not
affiliated or associated with an Acquiring Person (or, if there is no Acquiring
Person, not affiliated or associated with a person or group that proposes to
become an Acquiring Person), who are not officers or employees of the Company,
and who either served as directors on March 24, 1997 or were subsequently
nominated by a majority of those directors and others so nominated.
Issuance of Rights Certificates
As soon as practicable following the Distribution Date, separate Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and such separate Rights
Certificates alone will then evidence the Rights from and after the
Distribution Date. All Common Shares issued before the Distribution Date will
be issued with Rights. Common Shares issued after the Distribution Date will
be issued with Rights if such shares are issued (i) upon the conversion of any
convertible securities issued after adoption of the Rights Agreement or (ii)
pursuant to the exercise of stock options or under employee benefit plans
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or arrangements unless such issuance would result in (or create a risk that)
such options, plans or arrangements would not qualify for otherwise available
special tax treatment. Except as otherwise determined by the Board of
Directors, no other Common Shares issued after the Distribution Date will be
issued with Rights.
Expiration of Rights
The Rights will expire on the earliest of (i) May 5, 2007 (the "Final
Expiration Date"), or (ii) redemption or exchange of the Rights as described
below.
Initial Right to Buy Shares
Following the Distribution Date and until one of the further events
described below, holders of the Rights will be entitled to receive, upon
exercise and the payment of $25 per Right, one Common Share. If the Company
does not have sufficient Common Shares available for all Rights to be exercised
or the Board of Directors decides that such action is necessary and not
contrary to the interest of Rights holders, the Company may instead substitute
cash, assets or other securities for the Common Shares for which the Rights
would have been exercisable.
Right to Buy Additional Common Shares
Unless the Rights are earlier redeemed or expire, if a person or group of
associated or affiliated persons becomes the beneficial owner of 15% or more of
the Common Shares then outstanding (other than pursuant to a transaction
approved by the Continuing Disinterested Board), then proper provision will be
made so that each holder of a Right which has not theretofore been exercised
(other than Rights beneficially owned by the Acquiring Person or an affiliated
or associate of the Acquiring Person, which will thereafter be void) will
thereafter have the right to receive, upon exercise of the Rights, Common
Shares (or, in certain circumstances as determined by the Board of Directors,
cash, other property or other securities) having a value equal to two times the
Purchase Price. Rights are not exercisable following the occurrence of an
event as described above until such time as the Rights are no longer redeemable
by the Company as set forth below.
The Rights will not become exercisable upon the acquisition of 15% or more
of the Company's outstanding Common Shares by a person or group of associated
or affiliated persons if the Continuing Disinterested Board approves that
acquisition.
Right to Buy Acquiring Company Shares
Similarly, unless the Rights are earlier redeemed or expire, if, after a
Stock Acquisition Date, (i) the Company is acquired in a merger or other
business combination transaction, or (ii) 50% or more of the Company's assets
or earning power is sold (other than in transactions in the ordinary course of
business), proper provision must have been made so that each holder of a Right
which has not theretofore been exercised (other than Rights beneficially owned
by the Acquiring Person or an affiliated or associate of the Acquiring Person,
which will thereafter be void) will thereafter have the right to receive, upon
exercise of the Rights, shares of common stock of the acquiring company (or the
equity securities or other equity interest having power to control or direct
the management of the acquiring company) having a value equal to two times the
Purchase Price.
Exchange Provision
At any time after any Person becomes an Acquiring Person, the Continuing
Disinterested Board may cause the Company to exchange the Rights (other than
Rights owned by the Acquiring Person), in whole or in part, for Common Shares
at an exchange ratio of one Common Share per Right, appropriately adjusted to
reflect any stock split, reverse stock split, reclassification, stock dividend
or similar transaction occurring after the date of the Rights Agreement.
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Redemption
At any time on or before the close of business on the earlier of (i) the
tenth day after the Stock Acquisition Date, or (ii) the Final Expiration Date,
the Company may redeem the Rights in whole, but not in part, at a price of
$.001 per Right.
Adjustments to Prevent Dilution
The Purchase Price payable, the number of Rights, and the number of Common
Shares or other securities issuable upon exercise of the Rights are subject to
adjustment from time to time in connection with dilutive issuances by the
Company as set forth in the Rights Agreement.
Cash Paid for Fractional Shares
No fractional portion less than integral multiples of one Common Share will
be issued upon exercise of a Right. In lieu of fractional shares, an
adjustment in cash will be made based on the market price of the Common Shares
on the last trading date before the date of exercise.
No Rights as Shareholder Before Exercise
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
Amendment of Rights Agreement
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Continuing Disinterested Board before the Distribution Date. After the
Distribution Date, the Rights Agreement may only be amended by the Continuing
Disinterested Board, and then only in order to cure any ambiguity, to correct
or supplement any provision of the Rights Agreement which may be defective or
inconsistent with any other provision of the Rights Agreement, to make changes
which do not adversely affect the interest of holders of Rights (excluding the
interest of any Acquiring Person or an affiliate or associate of an Acquiring
Person), to shorten or lengthen any time period under the Rights Agreement or
to lower to 10% the threshold of beneficial ownership of Common Shares that
will trigger a Distribution Date and will cause a person or group to become an
Acquiring Person. However, no amendment to lengthen the time period governing
redemption shall be made at such time as the Rights are not redeemable, and no
amendment to lengthen any other time period shall be made unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than any
Acquiring Person or an affiliate or associate of an Acquiring Person).
Certain Anti-Takeover Effects
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on a substantial number of Rights being
acquired. The Rights, however, should not interfere with any merger or
business combination approved by the Continuing Disinterested Board because the
Rights may be redeemed by the Company within ten days (or such later date as
may be determined by the Continuing Disinterested Board) after the accumulation
of 15% or more of the Company's shares by a single acquiror or group. In
addition, the Continuing Disinterested Board may approve such an accumulation
in advance, without redeeming the Rights.
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The form of Rights Agreement between the Company and the Rights Agent
specifying the terms of the Rights is attached hereto as an exhibit and is
incorporated herein by this reference. The foregoing description of the Rights
does not purport to be complete and is qualified in its entirety by reference
to the Rights Agreement.
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Item 2. EXHIBITS
1. Rights Agreement, dated as of March 24, 1997, between Chad
Therapeutics, Inc. and American Stock Transfer & Trust Company, as
Rights Agent, including the form of Rights Certificate and the Summary
of Rights attached thereto as Exhibits A and B, respectively.
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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 Registration Statement to be
signed on its behalf by the undersigned, hereunto duly authorized.
CHAD THERAPEUTICS, INC.
(Registrant)
Date: April 25, 1997 /s/ Charles R. Adams
------------------------------
Charles R. Adams
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
No. Exhibit Page No.
------- ------- ----------
<S> <C> <C>
1. Rights Agreement, dated as of March 24, 1997, between Chad 9
Therapeutics, Inc. and American Stock Transfer & Trust Company, as
Rights Agent, including the form of Rights Certificate and the
Summary of Rights attached thereto as Exhibits A and B,
respectively.
</TABLE>
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<PAGE> 1
RIGHTS AGREEMENT
BETWEEN
CHAD THERAPEUTICS, INC.,
A CALIFORNIA CORPORATION
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY,
A NEW YORK CORPORATION
DATED AS OF
MARCH 24, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
-------
<S> <C> <C>
SECTION 1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. APPOINTMENT OF RIGHTS AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4. FORM OF RIGHTS CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5. COUNTERSIGNATURE AND REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND
EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN
RIGHTS CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 8. CANCELLATION AND DESTRUCTION OF
RIGHTS CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 9. RESERVATION AND AVAILABILITY OF
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 10. COMMON STOCK RECORD DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER
AND KIND OF SHARES OR NUMBER OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE
PRICE OR NUMBER OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 13. CONSOLIDATION, MERGER OR SALE OR
TRANSFER OF ASSETS OR EARNING POWER . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
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<TABLE>
<S> <C> <C>
SECTION 15. RIGHTS OF ACTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 16. AGREEMENT OF RIGHTS HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED
A SHAREHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 18. CONCERNING THE RIGHTS AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE
OF NAME OF RIGHTS AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 20. DUTIES OF RIGHTS AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 21. CHANGE OF RIGHTS AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 23. EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 24. REDEMPTION AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 25. NOTICE OF CERTAIN EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 26. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 27. SUPPLEMENTS AND AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 28. SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 29. DETERMINATION AND ACTIONS BY THE
BOARD, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 30. BENEFITS OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 31. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 32. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 33. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 34. DESCRIPTIVE HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
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<TABLE>
<CAPTION>
Page of
Exhibit First Reference
- ------- ---------------
<S> <C> <C>
A - Form of Rights Certificate 5
B - Summary of Rights to Purchase Common Stock 6
</TABLE>
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RIGHTS AGREEMENT
THIS IS A RIGHTS AGREEMENT, dated as of March 24, 1997 (the
"Agreement") between Chad Therapeutics, Inc., a California corporation (the
"Company"), and American Stock Transfer & Trust Company, a New York corporation
(the "Rights Agent").
B A C K G R O U N D
On March 24, 1997 (the "Rights Dividend Declaration Date"), the Board
of Directors of the Company authorized and declared a dividend distribution of
one Right for each share of Common Stock (as hereinafter defined) of the
Company outstanding at the Close of Business (as hereinafter defined) on May 5,
1997 (the "Record Date"), and authorized the issuance of one Right (as such
number may hereafter be adjusted pursuant to the provisions of Section 11(p)
hereof) for each share of Common Stock of the Company issued between May 5,
1997 and the Distribution Date (as hereinafter defined), each Right initially
representing the right to purchase one share of Common Stock, upon the terms
and subject to the conditions hereinafter set forth (the "Rights")
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have these meanings:
(a) "Acquiring Person" shall mean any Person who, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding, but shall
not include:
(i) the Company,
(ii) any Subsidiary of the Company,
(iii) any employee benefit plan of the Company or
of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or
pursuant to the terms of any such plan, or
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(iv) any Person who becomes an Acquiring Person
solely as a result of a reduction in the number of shares of
Common Stock outstanding due to the repurchase of shares of
Common Stock by the Company, unless and until such Person
shall thereafter purchase or otherwise become the Beneficial
Owner of additional shares of Common Stock constituting 1% or
more of the shares of Common Stock outstanding at the time
that such Person becomes the Beneficial Owner of 15% or more
of the then outstanding shares of Common Stock.
Notwithstanding the foregoing, "Acquiring Person" shall not include any Person
whose ownership of 15% or more of the shares of Common Stock then outstanding
results from any action, transaction or series of transactions approved in
advance by a majority of the Continuing Disinterested Directors who are not
Affiliates or Associates of such Person or representatives of such Person or of
any such Affiliate or Associate (provided that such Person shall become an
Acquiring Person if such Person shall thereafter purchase or otherwise become
the Beneficial Owner of additional shares of Common Stock constituting 1% or
more of the then outstanding shares of Common Stock unless otherwise approved
in advance by a majority of the Continuing Disinterested Directors who are not
Affiliates or Associates of such Person or representatives of such Person or of
any such Affiliate or Associate); provided, however, that any transfer of
shares of Common Stock by such Person to a third party (other than the Company,
any subsidiary of the Company, any employee benefit plan of the Company or any
trustee in respect thereof acting in such capacity) who after such transfer
owns 15% or more of the shares of Common Stock then outstanding will cause the
Rights to become exercisable at the time and in the manner provided for herein,
unless such transferee's ownership of 15% or more of the Shares of Common Stock
is approved in advance by a majority of the Continuing Disinterested Directors
who are not Affiliates or Associates of such transferee or representatives of
such transferee or of any such Affiliate or Associate.
(b) "Adjustment Shares" shall have the meaning set forth
in Section 11(a)(ii) hereof.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner" of,
and shall be deemed to "Beneficially Own," any securities:
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(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has 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) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "Beneficially Own," (A) securities tendered
pursuant to a tender or exchange offer made by such Person or
any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (B)
securities issuable upon exercise of Rights at any time before
the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence
of a Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates before
the Distribution Date or pursuant to Section 3(a) or Section
22 hereof (the "Original Rights") or pursuant to Section
11(a)(i) hereof in connection with an adjustment made with
respect to any Original Rights;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the
right to vote or dispose of or has "beneficial ownership" of
(as determined pursuant to Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), including pursuant to any
agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed
the "Beneficial Owner" of, or to "Beneficially Own," 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: (A) 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 General
Rules and Regulations under the Exchange Act, and (B) is not
also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate
thereof) with which such Person (or any of such Person's
Affiliates or Associates) has any agreement, arrangement or
understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable
proxy as described in the proviso to subparagraph (ii) of this
paragraph (c)) or disposing of any voting securities of the
Company;
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provided, however, that nothing in this paragraph (c) shall
cause a Person engaged in the business as an underwriter of
securities to be deemed the "Beneficial Owner" of, or to
"Beneficially Own," any securities acquired through such
Person's participation in good faith in a firm commitment
underwriting until the expiration of 40 days after the date of
such acquisition.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the State of New
York or California are authorized or obligated by law or executive order to
close.
(g) "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.
(h) "Common Stock" shall mean the common stock, $.01 par
value, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(i) "Continuing Disinterested Director" shall mean (i) any
member of the Board, while such Person is a member of the Board, who is not (A)
an Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate or
(B) an officer or employee of the Company, and who was a member of the Board on
the date that the Board initially approved this Agreement, or (ii) any Person
who subsequently becomes a member of the Board, while such Person is a member
of the Board, who is not (A) an Acquiring Person, or an Affiliate or Associate
of an Acquiring Person, or a representative of an Acquiring Person or of any
such Affiliate or Associate or (B) an officer or employee of the Company, if
such Person's nomination for election or election to the Board is recommended
or approved by a majority of the Continuing Disinterested Directors. If there
are no Continuing Disinterested Directors at the time that any determination
under this Agreement is to be made by a majority of the Continuing
Disinterested Directors, that determination shall be made by the Board in
accordance with applicable law and the Company's Articles of Incorporation and
Bylaws.
(j) "Distribution Date" shall mean the earlier of (i) the
Close of Business on the tenth day after the Stock Acquisition Date and (ii)
the Close of
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Business on the tenth day after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company, or any Person
or entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan) is first published, sent or given within the
meaning of Rule 14d-2(a) of the General Rules and Regulations under the
Exchange Act, if upon consummation thereof, such Person could be the Beneficial
Owner of 15% or more of the shares of Common Stock then outstanding.
(k) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(l) "Exchange Ratio" shall have the meaning set forth in
Section 23 hereof.
(m) "Expiration Date" shall mean the earlier of (i) the
Final Expiration Date, or (ii) the time at which the Rights are redeemed as
provided in Section 24 hereof.
(n) "Final Expiration Date" shall mean the Close of
Business on May 5, 2007.
(o) "Person" shall mean any individual or entity.
(p) "Original Rights" shall have the meaning set forth in
Section 1(d) hereof.
(q) "Principal Party" shall have the meaning set forth in
Section 13 hereof.
(r) "Purchase Price" shall have the meaning set forth in
Section 4 or Section 11 hereof, as the case may be.
(s) "Record Date" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(t) "Rights" shall have the meaning set forth in the
recitals at the beginning of this Agreement.
(u) "Rights Certificates" shall mean one or more rights
certificates, in substantially the form of Exhibit A hereto.
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<PAGE> 10
(v) "Rights Dividend Declaration Date" shall have the
meaning set forth in the recitals at the beginning of this Agreement.
(w) "Section 11(a)(ii) Event" shall mean the event
described in Section 11(a)(ii) hereof.
(x) "Section 11(a)(ii) Trigger Date" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(y) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(z) "Securities Act" shall mean the Securities Act of
1933, as amended.
(AA) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such; provided, however, if such Person has first been determined not to have
become an Acquiring Person pursuant to Section l(a) hereof, then no Stock
Acquisition Date shall be deemed to have occurred.
(BB) "Subsidiary" of any Person shall mean any entity of
which a majority of the voting power of the voting equity securities or equity
interest is Beneficially Owned, directly or indirectly, by such Person.
(CC) "Summary of Rights" shall mean the summary of rights
to purchase Common Stock, in substantially the form of Exhibit B hereto.
(DD) "Trading Day" shall have the meaning set forth in
Section 11(d) hereof.
(EE) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(who, in accordance with Section 3 hereof, shall before the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions hereof. The Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
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<PAGE> 11
necessary or desirable. Contemporaneously with any such appointment the
Company shall notify the Rights Agent thereof.
SECTION 3. ISSUANCE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (i) the Rights will be
evidenced (subject to the provisions of 3(b) hereof) by the certificates for
the Common Stock registered in the names of the holders of the Common Stock
(which certificates for Common Stock shall be deemed also to be certificates
for Rights) and not by separate certificates, and (ii) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first class,
insured, postage prepaid mail, to each record holder of the Common Stock as of
the Close of Business on the Distribution Date, at the address of such holder
shown on the records of the Company, one or more Rights Certificates,
evidencing one Right for each share of Common Stock so held, subject to
adjustment as provided herein. If an adjustment in the number of Rights per
share of Common Stock has been made pursuant to Section 11(p) hereof, at the
time of distribution of the Right Certificates, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section
14(a) hereof) so that Rights Certificates representing only whole numbers of
Rights are distributed and an amount in cash calculated in accordance with
Section 14(a) hereof is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) On May 5, 1997 or as soon as practicable thereafter,
the Company will send a copy of a 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 Common Stock
outstanding as of the Close of Business on May 5, 1997 until the Distribution
Date, the Rights will be evidenced by such certificates for shares of Common
Stock registered in the names of the holders thereof (together with a copy of
the Summary of Rights). Until the Distribution Date (or the earlier Redemption
Date or Final Expiration Date), the surrender for transfer of any certificate
for shares of Common Stock outstanding at the Close of Business 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 issued for shares of Common Stock
(including, without limitation, certificates issued upon transfer, exchange or
replacement of shares of Common Stock) after May 5, 1997 but before the
earliest of the
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Distribution Date, the Redemption Date and the Final Expiration Date shall bear
the following legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in the
Rights Agreement between Chad Therapeutics, Inc. and
American Stock Transfer & Trust Company, as Rights
Agent, dated as of March 24, 1997 (the "Rights
Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which
is on file at the principal offices of Chad
Therapeutics, 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. Chad Therapeutics,
Inc. will mail to the holder of this certificate a
copy of the Rights Agreement, as in effect on the date
of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to,
or held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof
(as such terms are defined in the Rights Agreement),
whether held by or on behalf of such Person or by any
subsequent holder, may become null and void. If the
Company purchases or acquires any Common Stock after
May 5, 1997 but before the Distribution Date, and such
Common Stock is thereafter retired by the Company, any
Rights associated with such Common Stock shall be
deemed cancelled effective as of the date that such
Common Stock is retired so that the Company shall not
be entitled to exercise any Rights associated with the
Common Stock which are no longer outstanding.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date and (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates. If the
Company purchases or acquires any Common Stock after May 5, 1997 but before the
Distribution Date, and
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<PAGE> 13
such Common Stock is thereafter retired by the Company, any Rights associated
with such Common Stock shall be deemed cancelled effective as of the date that
such Common Stock is retired so that the Company shall not be entitled to
exercise any Rights associated with the Common Stock which are no longer
outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the form of election to
purchase and of assignment to be printed on the reverse thereof) 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 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,
whenever distributed, shall be dated as of May 5, 1997 and on their face shall
entitle the holders thereof to purchase such number of shares of Common Stock
as shall be set forth therein at the price set forth therein (such exercise
price per share, the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof
shall be subject to adjustment as provided herein.
(b) Any Rights Certificates issued pursuant to Section
3(a) or Section 22 hereof that represent 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 before 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 Persons with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which a majority of the Continuing Disinterested
Directors has determined is part of a plan, arrangement or understanding which
has as a primary purpose or effect avoidance of Section 7(e) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
The Rights represented by this Rights Certificate are
or were beneficially owned by a Person who was or
became an
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<PAGE> 14
Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the
Rights Agreement between Chad Therapeutics, Inc. and
American Stock Transfer & Trust Company, as Rights
Agent, dated as of March 24, 1997 (the "Rights
Agreement"). Accordingly, this Rights Certificate and
the Rights represented hereby have become or 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 signed on behalf of
the Company by its Chairman of the Board or its President, either manually or
by facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or an Assistant
Secretary of the Company, either manually or by facsimile signature. The
Rights Certificates shall be countersigned by the Rights Agent, either manually
or by facsimile signature, and shall not be valid for any purpose unless so
countersigned. If 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, may nevertheless 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 bad not ceased to be such
officer of the Company. Any Rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the signing of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the signing of this Agreement such person
was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at one of its offices in California, books for the
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective record holders of
the Rights Certificates, the number of Rights evidenced by each Rights
Certificate and the date of each Rights Certificate.
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 before the
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<PAGE> 15
Close of Business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder to purchase
a like number of shares of Common Stock as the Rights Certificate or
Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate 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) and Affiliates or
Associates thereof as the Company shall request. Subject to Sections 4(b),
7(e) and 14 hereof, the Rights Agent shall then 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 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 sign and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Sections 9(c), 11(a)(iii) and 24(a) hereof) 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 the certificate
on the reverse side thereof duly signed, to the Rights Agent at the principal
office or offices of the Rights Agent designated for
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<PAGE> 16
such purpose, together with payment of the Purchase Price for each share of
Common Stock as to which such surrendered Rights are then exercisable, at or
before the earlier of (i) the Final Expiration Date, or (ii) the Expiration
Date.
(b) The Purchase Price for each share of Common Stock
purchasable under each Right shall initially be $25, subject to adjustment from
time to time as provided in Sections 11 and 13(a) 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 and the certificate
duly signed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per share of Common Stock to be purchased as set forth
below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Common Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates for the
total number of shares of Common 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 shares of
Common Stock issuable upon exercise of the Rights hereunder with a depository
agent, requisition from the depository agent depository receipts representing
such number of shares of Common Stock as are to be purchased (in which case
certificates for the shares of Common Stock represented by such receipts shall
be deposited by the transfer agent with the depository agent) and the Company
shall direct the depository agent to comply with such request, (ii) requisition
from the Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of such
certificates or depository 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) after receipt
thereof, deliver such cash, if any, 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 pursuant to Section 11(a)(iii) hereof) may be made (x) in
cash or by check or bank draft payable to the order of the Company, or (y) by
delivery of a certificate or certificates (with appropriate stock powers signed
in blank attached thereto) evidencing a number of shares of Common Stock equal
to the then Purchase Price divided by the closing price (as determined pursuant
to Section 11(d) hereof) per share of Common Stock on the Trading Day
immediately preceding the date of such exercise. If 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 shall make all
arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate.
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<PAGE> 17
The Company reserves the right to require before the occurrence of a Triggering
Event that upon any exercise of Rights, a number of Rights be exercised so that
only whole shares of Common Stock would be issued.
(d) If the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to, or upon the order of, the registered holder of
such Rights Certificates, registered in such name or names as may be designated
by such holder, 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 Section 11(a)(ii) 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, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee before 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 a majority of the Continuing Disinterested Directors has determined is
part of a plan, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall 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 insure
that the provisions of this Section 7(e) and Section 4(b) hereof are complied
with, but shall have no liability to any holder of Rights Certificates or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to 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)
and Affiliates or Associates thereof as the Company shall reasonably request.
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<PAGE> 18
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 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 COMMON STOCK.
(a) The Company shall cause to be reserved and kept
available out of its Authorized and unissued shares of Common Stock, the number
of shares of Common Stock that, as provided in this Agreement including Section
11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Common Stock issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the
Securities Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the date as of which the
Rights are no longer exercisable for such securities. 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. A majority of the Continuing Disinterested
Directors may cause the
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Company temporarily to suspend, for a period of time not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to enable the Company to
prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well
as a public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law or a registration statement shall not have
been declared effective.
(d) The Company shall take all such actions as may be
necessary to ensure that all shares of Common Stock delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
(e) The Company shall 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 and of certificates for
shares of Common 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 shares of Common Stock in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for shares of
Common Stock in a name other than that of the registered holder upon the
exercise of any Rights until such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificates at the time of surrender) or
until it has been established to the Company's satisfaction that no such tax is
due.
SECTION 10. COMMON STOCK RECORD DATE.
Each Person in whose name any certificate for shares of Common Stock is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of such shares of Common Stock 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 all applicable transfer taxes) was made; provided, however,
that if the date of such surrender and payment is a date upon which the Common
Stock transfer books of the Company are closed, such Person shall be deemed to
have become the record holder
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<PAGE> 20
of such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Common Stock transfer books of the Company are open.
Before the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a shareholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions, 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 AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) If the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Stock payable in shares of
Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller number of shares, or (D) issue any
shares of capital stock in a reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof, 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 Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in effect, the
aggregate number and kind of shares of capital stock which, if such Right had
been exercised immediately before such date and at a time when the Common Stock
transfer books of the Company were open, the holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made before, any adjustment required by Section 11(a)(ii) hereof.
(ii) If, subject to the right of redemption
granted in Section 24 hereof, any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or, by the terms of any such plan), alone or together with its
Affiliates and Associates, at any time after March 25, 1997, is an Acquiring
Person, other than a Person that became an Acquiring Person pursuant to any
transaction set forth in Section 13(a) hereof, then, promptly after a Section
11(a)(ii) Event, the Company and, to the extent necessary
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<PAGE> 21
or appropriate, the Acquiring Person and its Affiliates and Associates, shall
make proper provision so that each holder of a Right (except as provided below
and in Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, in lieu of any shares of Common Stock purchasable
under Section 7(b) hereof, such number of shares of Common Stock of the Company
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of shares of Common Stock for which a Right was
exercisable immediately before the first occurrence of a Section 11(a)(ii)
Event, and (y) dividing that product (which, following such first occurrence,
shall thereafter be referred to as the "Purchase Price" for each Right and for
all purposes of this Agreement) by 50% of the current market price (determined
pursuant to Section 11(d) hereof) per share of Common Stock on the date of such
first occurrence (such number of shares, the "Adjustment Shares").
(iii) If the number of shares of Common Stock which
are authorized by the Company's Articles of Incorporation but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights
are not sufficient to permit the exercise in full of the Rights in accordance
with the foregoing subparagraph (ii) of this Section 11(a), the Company shall:
(A) determine the excess of (1) the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value") over (2) the Purchase Price
(such excess, the "Spread"), and (B) with respect to each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the Adjustment
Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity securities of
the Company (including, without limitation, shares of preferred stock which the
Board has deemed to have the same value as shares of Common Stock (such shares
of preferred stock, "common stock equivalents"), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing, having a
total value equal to the Current Value, where such total value has been
determined by the Board based upon the advice of a recognized investment
banking firm selected by the Board; provided, however, if the Company shall not
have made adequate provision to deliver the value pursuant to clause (B) above
within 30 days after the later of (x) the first occurrence of a Section
11(a)(ii) Event and (y) the date on which the Company's right of redemption
pursuant to Section 24(a) expires (the later of (x) and (y) being referred to
as the "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without requiring
payment of the Purchase Price, shares of Common Stock (to the extent available)
and then, if necessary, cash, which shares and/or cash have a total value equal
to the Spread. If the Board determines in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for issuance
upon exercise in full of the Rights, the 30 day period set
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<PAGE> 22
forth above may be extended to the extent necessary, but not more than 90 days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek
shareholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
the Company determines that some action need be taken pursuant to the first
and/or second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply uniformly
to all outstanding Rights, and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on the Section
11(a)(ii) Trigger Date and the value of any "common stock equivalent" shall be
deemed to have the same value as the Common Stock on such date.
(b) If the Company fixes a record date for the issuance of
rights, options or warrants to all holders of Common Stock entitling them to
subscribe for or purchase (for a period expiring within 45 calendar days after
such record date) Common Stock or securities convertible into Common Stock at a
price per share of Common Stock (or having a conversion price per share, if a
security convertible into Common Stock) less than the current market price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately before such
record date by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding on such record date, plus the number of shares of
Common Stock which the total offering price of the total number of shares of
Common Stock so to be offered (and/or the total 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 shares of Common
Stock outstanding on such record date, plus the number of additional shares of
Common Stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). If such
subscription price may be paid by delivery of consideration part or all of
which may be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board, 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 Rights. Shares of Common Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose
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<PAGE> 23
of any such computation. Such adjustment shall be made successively whenever
such a record date is fixed, and if such rights 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) If the Company fixes a record date for a distribution
to all holders of Common 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, or assets
(other than a regular periodic cash dividend at a rate not in excess of 125% of
the rate of the last regular periodic cash dividend theretofore paid or a
dividend payable in shares of Common Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately before such record date by a fraction, the
numerator, of which shall be the current market price (as determined pursuant
to Section 11(d) hereof) per share of Common Stock on such record date, less
the fair market value (as determined in good faith by the Board, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants applicable to a share of Common Stock
and the denominator of which shall be such current market price (as determined
pursuant to Section 11(d) hereof) per share of Common Stock. Such adjustments
shall be made successively whenever such a record date is fixed, and if such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the 30
consecutive Trading Days (as such term is hereinafter defined) immediately
before such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the ten consecutive Trading Days immediately following
such date; provided, however, that if the current market price per share of the
Common Stock is determined during a period following the announcement of (i) a
dividend or distribution on such Common Stock payable in shares of such Common
Stock or securities convertible into shares of such Common Stock (other than
the Rights), or (ii) any subdivision, combination or reclassification of such
Common Stock, and before the expiration of the requisite 30 Trading Day or ten
Trading Day period, as set forth above, after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
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<PAGE> 24
combination or reclassification, then, and in each such case, the "current
market price" shall be properly adjusted to take into account ex- dividend
trading. The closing price for each day shall be the last sale price, or, if
no such sale takes place on such day, the average of the closing bid and asked
prices, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the American Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the American Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any 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
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board. (If on any such date no
market maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board of Directors of
the Company shall be used.) The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or,
if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "current market price" per share
shall mean the fair value per share as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such Adjustment would
require an increase or decrease of at least one percent 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-ten-thousandth of a share.
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 after the date of the transaction which mandates such adjustment,
or (ii) or the Expiration Date.
(f) If, as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall
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<PAGE> 25
become entitled to receive any shares of capital stock other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Common Stock shall apply on like terms
to any such other shares.
(g) All Rights originally issued by the Company after any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common 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 before the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
shares of Common Stock (calculated to the nearest one-ten-thousandth) obtained
by (i) multiplying (x) the number of shares covered by a Right immediately
before this adjustment, by (y) the Purchase Price in effect immediately before
such adjustment of the Purchase Price, and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of shares of Common Stock issuable upon the exercise
of a Right. Each of the Rights outstanding after the adjustment in the number
of Rights shall be exercisable for the number of shares of Common Stock for
which a Right was exercisable immediately before such adjustment. Each Right
held of record before such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one-ten-thousandth) obtained by
dividing the Purchase Price in effect immediately before 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 tho 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 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,
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<PAGE> 26
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 before the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, and
countersigned in the manner provided for herein (and may bear, at the option of
the Company, the adjusted Purchase Price) and shall be registered in the names
of the holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of shares of Common Stock issuable upon the
exercise of the Rights, the Rights Certificates issued may continue to express
the Purchase Price per share and the number of shares which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated value, if any, of
the Common 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 Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require
that an adjustment in the Purchase Price be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such record
date the shares of Common Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Common 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 before
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) or securities
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 in its good faith judgment the Board and
a majority of the Continuing Disinterested
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<PAGE> 27
Directors shall determine to be advisable in order that any (i) consolidation
or subdivision of the Common Stock, (ii) issuance wholly for cash of any shares
of Common Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Common Stock or securities which by their terms are
convertible into or exchangeable for shares of Common Stock, (iv) stock
dividends, or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Common Stock shall
not be taxable to such shareholders.
(n) The Company shall not, at any time during the period
commencing on the Distribution Date and ending on the expiration of the right
of redemption granted in Section 24 hereof, (i) consolidate with any other
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), or (iii) sell or transfer (or permit any subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power totalling 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) hereof), 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) before, simultaneously
with or immediately after such consolidation, merger or sale, the shareholders
of the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) After the Distribution Date, the Company shall not,
except as permitted by Section 24 or Section 27 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action would diminish substantially or
otherwise eliminate any of the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, if the Company shall at any time after the Rights Dividend
Declaration Date and before the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number of shares, the number
of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but before the Distribution Date, shall be
proportionately adjusted so that the number of Rights
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<PAGE> 28
thereafter associated with each share of Common Stock following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each share of Common Stock immediately before such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately before the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately after the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 and Section
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Common Stock, a copy of such certificate, and (c) mail or cause
the Rights Agent to mail a brief summary thereof to each holder of a Rights
Certificate (or, if before the Distribution Date, to each holder of a
certificate representing shares of Common Stock) in accordance with Section 26
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.
(a) If, after the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person, and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person shall consolidate
with, or merge with or 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 outstanding
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), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons, then, and in each such case, the Company and the Principal
Party (as such term is hereinafter defined) and its Affiliates and Associates
shall make proper provision so that: (i) each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized and issued,
fully paid, nonassessable and freely tradeable shares of Common Stock of the
Principal Party, not subject to
24
<PAGE> 29
any liens, encumbrances, rights of first refusal or other adverse claims, as
shall be equal to the result obtained by (1) multiplying the then current
Purchase Price by the number of shares of Common Stock for which a Right is
exercisable immediately before the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred before the first occurrence of a
Section 13 Event, multiplying the number of shares of Common Stock for which a
Right was exercisable immediately before the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately before such first
occurrence), and dividing that product (which, following the first occurrence
of a Section 13 Event, shall be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by (2) 50% of the current market
price (determined pursuant to Section 11(d)(i) hereof) per share of the 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
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares or units of its Common Stock) in
connection with the consummation of any such transactions as may be necessary
to assure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its shares or units of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(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), the Person that is
the issuer of any securities into which shares of Common Stock of the Company
are converted in such merger or consolidation, and if no securities are so
issued, the Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in any
such case, (1) if the Common Stock of such Person is not at such time and has
not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, "Principal Party" shall refer to such other Person; and (2) if
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<PAGE> 30
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest total market value.
(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 its 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 signed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and further providing that, as soon as practicable after
the date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party shall:
(i) prepare and file a registration statement
under the Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and shall use
its best efforts to cause such registration statement to (A) become effective
as soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
This Section 13 shall similarly apply to successive mergers or consolidations
or sales or other transfers. If a Section 13 Event shall occur at any time
after the occurrence of a Section 11(a)(ii) Event, the Rights which have not
been exercised shall thereafter become exercisable in the manner described in
Section 13(a).
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions
of Rights, except before the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of a whole Right. For 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 before the date on which such fractional
Rights would have been otherwise issuable. The
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<PAGE> 31
closing price of the Rights for any day shall be the last sale price, or, if no
such sale takes place on such day, the average of the closing bid and asked
prices, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the American Stock Exchange or, if the Rights are not listed or admitted to
trading on the American Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the 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 Board. 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 shall be used.
(b) The Company shall not be required to issue fractions
of shares of Common Stock upon exercise of the Rights or upon any exchange of
Rights pursuant to Section 23 hereof, or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of fractional shares of
Common Stock, the Company may pay to the registered holders of Rights
Certificates, at the time such Rights are exercised as herein provided (or at
the time such Rights are exchanged as provided in Section 23 hereof, as the
case may be) an amount in cash equal to the same fraction of the current market
value of one share of Common Stock. For purposes of this Section 14(b), the
current market value of a share of Common Stock shall be the closing price of
one share of Common Stock (as determined pursuant to Section 11(d) hereof) for
the Trading Day immediately before the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights
expressly waives the holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
SECTION 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, except 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, before the Distribution Date, the registered holders of the
Common Stock). Any registered holder of any Rights Certificate (or, before the
Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, before the
Distribution Date, of the Common Stock), may, in the holder's own behalf and
for the holder's own benefit, enforce this
27
<PAGE> 32
Agreement, and may institute and maintain any suit, action or proceeding
against the Company to enforce this Agreement, or otherwise enforce or act in
respect of, the 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
shall be entitled to specific performance of obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person (including, without limitation, the Company) 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) before the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully signed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose name a
Rights Certificate (or, before 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, subject to the last sentence of
Section 7(e) hereof, shall be required to 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;
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provided, however, that the Company shall use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT.
(a) The Company shall pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder in accordance with a fee
schedule to be mutually agreed upon and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The
Company shall indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the reasonable costs and expenses
of defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any
Rights Certificate or certificate for Common Stock, or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, instruction, direction, consent,
certificate, statement, or other paper or document believed in good faith by it
to be genuine and to be signed and, where necessary, verified or acknowledged,
by the proper Person or Persons.
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<PAGE> 34
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust or stock transfer business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Agreement without the signature or filing of any paper or any
further act on the part of any of the parties hereto; provided, however, that
such corporation would be eligible for appointment as a successor Rights Agent
under the provisions of Section 21 hereof. If 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 such predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and if 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 or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) If 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 if 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, it being understood that all
such terms and conditions shall bind the Company and the holders of Rights
Certificates:
(a) The Rights Agent may consult with legal counsel and
the opinion of such counsel shall be full and complete authorization and
protection to the Rights Agent as to any action taken or omitted by it in good
faith and in accordance with such opinion.
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<PAGE> 35
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring Person
and the determination of "current market price") be proved or established by
the Company before taking or suffering 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, 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 or suffered in good
faith by it under this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason
of any of the statements of fact or recitals contained in this Agreement or in
the Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates). All such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility
in respect of the validity of this Agreement or the signature and delivery
hereof (except the due signature hereof by the Rights Agent) or in respect of
the validity or signature of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or ascertaining the existence
of facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock will, when so issued,
be validly authorized and issued, fully paid and nonassessable.
(f) The Company shall perform, sign, acknowledge and
deliver or cause to be performed, signed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the performance by the Rights Agent of this
Agreement.
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<PAGE> 36
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer, or the General Counsel of the Company,
and to apply to such officers for advice or instructions in connection with its
duties under this Agreement, and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with instructions of any
such officer.
(h) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not the Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may sign 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, however, that reasonable care
was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the
Rights Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1 or 2
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
(l) At any time and from time to time after the
Distribution Date, upon the request of the Company, the Rights Agent shall
promptly deliver to the Company a list, as of the most recent practicable date
(or as of such earlier date as may be specified by the Company), of the holders
of record of Rights.
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SECTION 21. CHANGE OF RIGHTS AGENT.
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon 30 days' notice in writing
mailed to the Company, and to each transfer agent of the Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon ten 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, 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 resigning, removed,
or incapacitated Rights Agent shall remit to the Company, or to any successor
Rights Agent designated by the Company, all books, records, funds, certificates
and other documents and instruments of any kind then in its possession which
were acquired or created by such resigning, removed or incapacitated Rights
Agent in connection with its services as Rights Agent hereunder, and shall
thereafter be discharged from all further duties and obligations hereunder.
Following notice of such removal, resignation or incapacity, the Company shall
appoint a successor to such Rights Agent. If the Company shall fail to make
such appointment within a period of 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 any registered holder of any
Rights Certificate may apply to any court competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be a corporation organized
and doing business under the laws of the United States or of the State of
California (or of any other state of the United States so long as such
corporation is authorized to do business in the State of California), in good
standing, having an office or an affiliate with an office in the State of New
York, which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or
state authority and which either has or is an affiliate of a corporation which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $10,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and sign and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock, and mail a
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<PAGE> 38
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board to reflect any adjustment or change
in the Purchase Price or 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 after the Distribution Date
and before the redemption or expiration of the Rights, the Company (a) shall,
with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or warrants or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board, 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 if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (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. EXCHANGE.
(a) A majority of the Continuing Disinterested Directors
may, at their option, at any time after any Person becomes an Acquiring Person,
cause the Company to 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 11(a)(ii) hereof) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock spit, reverse stock split,
reclassification, stock dividend or similar transaction occurring after the
date hereof (such exchange ratio being hereinafter referred to as the "Exchange
Ratio"). Notwithstanding the foregoing, a majority of the Continuing
Disinterested Directors shall not be empowered to effect such exchange at any
time after any person (other than the Company, any Subsidiary of the Company,
an employee benefit plan of the Company or any such subsidiary or any entity
holding shares of Common Stock for or pursuant to any such plan), together with
all Affiliates and Associates of such Person, becomes the Beneficial Owner of
Shares of
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<PAGE> 39
Common Stock totalling 50% or more of the shares of Common Stock then
outstanding.
(b) Immediately upon the action of a majority of the
Continuing Disinterested Directors ordering the exchange of any Rights pursuant
to Section 23(a) hereof and without any further action and without any notice,
the right to exercise such rights shall terminate and the only right thereafter
of a holder of such Rights shall be to receive that number of shares of Common
Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; provided, however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The Company shall
promptly mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear on the registry books of the
Rights Agent. Any notice mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
exchange shall state the method by which the exchange of the shares of Common
Stock for Rights will be affected and, in the event of any partial exchange,
the number of Rights that 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) If there shall not be a sufficient number of shares of
Common Stock authorized but unissued and unreserved to permit any exchange of
rights as contemplated by this Section 23, the Company shall take all such
action as may be necessary to authorize additional shares of Common Stock for
issuance upon the exchange of the Rights. If the Company shall, after good
faith effort, be unable to take all such action as may be necessary to
authorize such additional shares of Common Stock, the Company shall substitute
for each share of Common Stock that would otherwise be issuable upon exchange
of a Right, a number of shares of preferred stock or fraction thereof such that
the current per share market price of one share of preferred stock multiplied
by such number or fraction is equal to the current per share market price of
one share of Common Stock as of the date of issuance of such share of preferred
stock or fraction thereof.
SECTION 24. REDEMPTION AND TERMINATION.
(a) A majority of the Continuing Disinterested Directors
may, at their option, at any time before the earlier of (i) the Close of
Business on the tenth day following the Stock Acquisition Date or (ii) the
Final Expiration Date, cause the Company to redeem all but not less than all
the then outstanding Rights at a redemption price of $.001 per Right, as such
amount may be appropriately adjusted
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<PAGE> 40
to reflect any stock split, reverse stock split, reclassification, stock
dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price");
provided, however, that if, after the Stock Acquisition Date and after the
expiration of the right of redemption hereunder but before any Triggering
Event, (i) a Person who is an Acquiring Person shall have transferred or
otherwise disposed of a number of shares of Common Stock in one transaction or
a series of transactions, not directly or indirectly involving the Company or
any of its Subsidiaries, which did not result in the occurrence of a Triggering
Event such that such Person is thereafter a Beneficial Owner of 10% or less of
the outstanding shares of Common Stock, and (ii) there are no other Persons,
immediately after the occurrence of the event described in clause (i), who are
Acquiring Persons, then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 24. Notwithstanding
anything contained in this Agreement to the contrary, subject to Section 27
hereof, the Rights shall not be exercisable after the first occurrence of a
Section 11(a)(ii) Event until such time as the Company's right of redemption
hereunder has expired. The Company may, at its option, pay the Redemption
Price in cash, shares of Common Stock (based on the "current market price," as
defined in Section 11(d)(i) hereof, of the Common Stock at the time of
redemption) or any other form of consideration deemed appropriate by a majority
of the Continuing Disinterested Directors.
(b) Immediately upon the action of a majority of the
Continuing Disinterested Directors ordering the redemption of the Rights,
evidence of which shall have been filed with the Rights Agent and without any
further action and without any notice, the right to exercise the Rights shall
terminate and the only right thereafter of the holders of Rights, as such,
shall be to receive the Redemption Price for each Right so held. Promptly
after the action of a majority of the Continuing Disinterested Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights
by mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent, or, before the
Distribution Date, on the registry books of the Transfer Agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption
Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 24, and other
than in connection with the purchase of Common Stock before the Distribution
Date.
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SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) If the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Common Stock or to make any other distribution to the holders of
Common Stock (other than a regular periodic cash dividend at a rate not in
excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid), or (ii) to offer to the holders of Common Stock rights or
warrants to subscribe for or to purchase any additional shares of Common Stock
or shares of stock of any class or any other securities, rights, options, or
(iii) to effect any reclassification of its Common Stock (other than a
reclassification involving only the subdivision of outstanding shares of Common
Stock), or (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) hereof), 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 transaction or a series of related transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to the Rights
Agent and to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date 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, if any, such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 20 days before the record date for determining holders of the shares of
Common Stock for purposes of such action, and in the case of any such other
action, at least 20 days before the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Common
Stock, whichever shall be the earlier.
(b) If any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, the Company shall as soon as
practicable thereafter give to the Rights Agent and to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under Section 11(a)(ii) hereof.
SECTION 26. NOTICES. Notices or demands authorized by this Agreement
be given or made by the Rights Agent or by the holder of any Rights
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Certificate to 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:
Chad Therapeutics, Inc.
21622 Plummer Street
Chatsworth, California 91311
Attention: Chief Financial Officer
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any
Rights Certificate to the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attention: Executive Vice 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 (or, if
before the Distribution Date, to the holder of certificates representing shares
of Common Stock) 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. Before the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. From and after the Distribution Date and
subject to the penultimate sentence of this Section 27, the Company and the
Rights Agent shall, if a majority of the Continuing Disinterested Directors so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder for any or all purposes (for example, the Company may
shorten or lengthen the period during which the Rights may be redeemed without
changing the Distribution Date), (iv) to change or supplement the provisions
hereunder in any manner which the Company may deem necessary or desirable, or
(v) lower the threshold set forth in Section 1(a)
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to 10%. Notwithstanding the previous two sentences, in no event shall any such
supplement or amendment adversely affect the interests of the holders of Rights
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person). In addition, this Agreement may not be supplemented or amended to
lengthen, pursuant to clause (iii) of the second sentence of this Section 27,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person). Upon
the delivery of a certificate from an appropriate officer of the Company which
states that the proposed supplement or amendment is in compliance with this
Section 27, the Rights Agent shall sign such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Final Expiration Date, the Purchase Price or the number of shares of Common
Stock for which a Right is exercisable; provided, however, that at any time
before the Distribution Date, the Board, together with a majority of the
Continuing Disinterested Directors, may amend this Agreement to increase the
Purchase Price or to extend the Final Expiration Date. Before the Distribution
Date, the interests of the holders of Rights shall be deemed coincident with
the interests of the holders of Common Stock.
SECTION 28. SUCCESSORS. All of the 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. DETERMINATION AND ACTIONS BY THE BOARD, ETC. 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 General Rules and Regulations under the
Exchange Act. The Board (with, where specifically provided for herein, the
concurrence of the Continuing Disinterested Directors) or, when specifically
provided for herein, a majority of the Continuing Disinterested Directors
acting alone shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board (with, where specifically provided for herein, the concurrence of the
Continuing Disinterested Directors) or, when specifically provided for herein,
a majority of the Continuing Disinterested Directors acting alone, or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
this Agreement, and (ii) make all determinations
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deemed necessary or advisable for the administration of this Agreement
(including a determination to redeem or not to redeem the Rights or to amend
this Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board (with, where
specifically provided for herein, the concurrence of the Continuing
Disinterested Directors) in good faith, or, when specifically provided for
herein, a majority of the Continuing Disinterested Directors acting alone,
shall (x) be final, conclusive and binding on the Company, the Rights Agent,
the holders of the Rights and all other parties, and (y) not subject the Board
(including the Continuing Disinterested Directors) to any liability to the
holders of Rights or to any other party.
SECTION 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, before the
Distribution Date, the registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement. 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, before the Distribution
Date, the registered holders of the Common Stock).
SECTION 31. SEVERABILITY. If any provision of this Agreement is held
by court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the provisions 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 provision is held by such court or authority to be
invalid, void or unenforceable and the Board and a majority of the Continuing
Disinterested Directors determine in their 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 24
hereof shall be reinstated and shall not expire until the Close of Business on
the tenth day after the date of such determination by the Board and a majority
of the Continuing Disinterested Directors. Without limiting the foregoing, if
any provision requiring the approval of a majority of the Continuing
Disinterested Directors in order for the Company to act is held by any court of
competent jurisdiction or other authority to be invalid, void or unenforceable,
or if a majority of the Continuing Disinterested Directors, after consultation
with counsel, concludes that any such provision is invalid, void or
unenforceable, such determination shall then be made by the Board and a
majority of the Continuing Disinterested Directors.
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SECTION 32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California and for all purposes shall be governed, by a
construed in accordance with the laws of such State applicable to contracts to
be performed entirely within such State.
SECTION 33. COUNTERPARTS. This Agreement may be signed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or Affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly signed as of the date that appears in its first paragraph.
CHAD THERAPEUTICS, INC.
By: /s/ Charles R. Adams
--------------------------------
Name: Charles R. Adams
Title: Chief Executive Officer
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By: /s/ Herbert J. Lemmer
--------------------------------
Name: Herbert J. Lemmer
Title: Vice President
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[Form of Rights Certificate] Exhibit A
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER MAY 5, 2007, OR EARLIER IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY
AN ACQUIRING PERSON (OR AN ASSOCIATE OR AFFILIATE OF AN ACQUIRING
PERSON) (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED
BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.]1/
Rights Certificate
CHAD THERAPEUTICS, 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 24, 1997 (the "Agreement") between Chad
Therapeutics, Inc., a California corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Rights Agent"), to purchase from the
Company at any time before 5:00 p.m. (California time) on May 5, 2007, at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one fully paid, nonassessable share of Common Stock
(the "Common Stock") of the Company, at a purchase price of $25 per share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and
__________________________________
1 The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
<PAGE> 47
related certificate duly signed. The Purchase Price shall be paid, at the
election of the holder, in cash or shares of Common Stock of the Company having
an equivalent value. The number of Rights evidenced by this Rights certificate
(and the number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are the number
and Purchase Price as of May 5, 1997 based on the Common Stock as constituted
at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate
or Associate of any such Acquiring Person (as such terms are defined in the
Rights Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right
with respect to such Rights from and after the occurrence of such Section
11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Common Stock 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, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices 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 shares of Common 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
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<PAGE> 48
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 its option at a
redemption price of $.001 per Right at any time before the earlier of the Close
of Business on (i) the tenth day following the Stock Acquisition Date (as such
time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. After the expiration of the redemption period, the
Company's right of redemption may be reinstated if an Acquiring Person reduces
such holder's beneficial ownership to 10% or less of the outstanding shares of
Common Stock in a transaction or series of transactions not involving the
Company.
Subject to the provisions of the Rights Agreement, the Company may
elect to exchange the Rights evidenced by this Certificate in whole or in part
for shares of the Company's Common Stock (or shares of preferred stock of the
Company equal in market value to one share of Common Stock) at an exchange
ratio of one share of Common Stock per Right, subject to adjustment.
The Company is not required to issue fractional shares of Common Stock
upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof
a cash payment may 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 shares of
Common 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 shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this 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.
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<PAGE> 49
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of the _____ day of __________, ____.
CHAD THERAPEUTICS, INC.
By:
___________________________________
Name:
Title:
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:
_______________________________ Date:______________________________
Authorized Signature
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<PAGE> 50
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be signed 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 this Rights Certificate on the books of Chad Therapeutics, Inc., with
full power of substitution.
Date:_______________________ ___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, broker, dealer, credit union or
savings association or other entity that is a member in good standing of a
signature guarantee medallion program approved by the Securities Transfer
Association, Inc.
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<PAGE> 51
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate
[ ] is
[ ] is not
being sold, assigned and transferred by or on behalf of a Person who is
or was an Acquiring Person or an Affiliate or associate of any such
Acquiring person (as such terms are defined in the Rights Agreement);
and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an
Acquiring Person or an affiliate or Associate of an Acquiring Person.
Date: ______________________ ___________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, broker, dealer, credit union or
savings association or other entity that is a member in good standing of a
signature guarantee medallion program approved by the Securities Transfer
Association, Inc.
NOTICE
The signature to the foregoing Assignment and Certificate must correspond to
the name as written upon the face of this Rights Certificate in every
particular, without alternation or enlargement or any change whatsoever.
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<PAGE> 52
FORM OF ELECTION TO PURCHASE
To: CHAD THERAPEUTICS, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Common Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
Please insert social security or other identifying number:_____________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number:_____________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
________________________________________________________________________________
Date: ______________________ _________________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, broker, dealer, credit union or
savings association or other entity that is a member in good standing of a
signature guarantee medallion program approved by the Securities Transfer
Association, Inc.
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<PAGE> 53
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate
[ ] are
[ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring
person or an affiliate or Associate or any such Acquiring Person (as
such terms are defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person
or an affiliate or Associate of an Acquiring Person.
Date: _____________________ ____________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, broker, dealer, credit union or
savings association or other entity that is a member in good standing of a
signature guarantee medallion program approved by the Securities Transfer
Association, Inc.
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change
whatsoever.
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<PAGE> 54
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK Exhibit B
On March 24, 1997, the Board of Directors of Chad Therapeutics, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of the Company's Common Stock. The distribution was made to shareholders
of record at the close of business on May 5, 1997. Each Right entitles its
registered holder to purchase from the Company one share of Common Stock
("Common Stock"), at a purchase price of $25 per share, subject to adjustment.
The description and terms of the Rights are set forth in a Rights Agreement
(the "Rights Agreement") between the Company and American Stock Transfer &
Trust Company, as Rights Agent.
Initially, the Rights will be attached to and trade with all the Common
Stock. No separate Rights certificates will initially be distributed. The
Rights will separate from the Common Stock and a "Distribution Date" will occur
upon the earlier of (i) ten days after a public announcement that a person or
group or affiliated or associated persons (in any such case, an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), except under certain circumstances, or (ii) ten days after
the commencement of a tender or exchange offer that would result in a person or
group beneficially owning 15% or more of such outstanding share of Common
Stock. Until the Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and only with such
Common Stock certificates, (ii) new Common Stock certificates issued after May
5, 1997 will contain a notation incorporating the Rights Agreement by
reference, and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates. Under the Rights
Agreement, before the occurrence of a Triggering Event (defined below), the
Company may require that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Common Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on May 5, 2007 unless earlier redeemed by the Company
as described below.
As soon as practicable after the Distribution Date, Rights certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date. Thereafter, the separate Rights
certificates will represent the Rights. Except as otherwise determined by the
Company's Board of Directors (the "Board"), only shares of Common Stock issued
before the Distribution Date will be issued with Rights.
If any person acquires beneficial ownership of 15% or more of the
outstanding shares of Common Stock without the prior approval of a majority of
the Continuing Disinterested Directors (defined below), except pursuant to
certain consolidations or mergers involving the Company or certain sales or
transfers of assets, each holder of a Right (other than the
<PAGE> 55
Acquiring Person and certain related parties) will thereafter have the right to
receive, upon exercise of the Right, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company such as
preferred stock) having a value equal to two times the exercise price of the
Right. However, Rights are not exercisable following the occurrence of the
event described above until such time as the Rights are no longer redeemable by
the Company as described below. After the occurrence of the event described in
this paragraph, all Rights that are (or under certain circumstances specified
in the Rights Agreement, were) beneficially owned by any Acquiring Person (or
an affiliated or associated person) will be null and void.
For example, at an exercise price of $25 per Right, each Right not owned
by an Acquiring Person (or by certain related parties or transferees) after an
event set forth in the preceding paragraph would entitle its holder to purchase
$50 worth of Common Stock (or other consideration, as noted above) for $25. If
the Common Stock had a per share market price of $12.50, the holder of each
exercisable Right would be entitled to purchase 4 shares of Common Stock for
$25.
If at any time after the Stock Acquisition Date, (i) the Company is
acquired in a merger or other business combination in which the Company is not
the surviving corporation, (ii) the Company is the surviving corporation in a
consolidation or merger pursuant to which all or part of the outstanding shares
of Common Stock are changed into or exchanged for stock or other securities of
any other person or cash or any other property or (iii) more than 50% of the
combined assets or earning power of the Company and its subsidiaries is sold or
transferred (in each case other than certain consolidations with, mergers with
and into, or sales of assets or earning power by or to subsidiaries of the
Company as specified in the Rights Agreement), each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right to receive, upon exercise, common stock or equivalent securities
of the acquiring company having a value equal to two times the exercise price
of the Rights. The events described in this paragraph and in the second
preceding paragraph are referred to as the "Triggering Events."
The purchase price payable when Rights are exercised, the number and kind
of shares covered by each Right and the number of Rights outstanding 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
Common Stock, (ii) if holders of the Common Stock are granted certain rights or
warrants to subscribe for Common Stock or securities convertible into Common
Stock at less than the then current market price of the Common Stock, or (iii)
upon the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends at a rate not
in excess of 125% of the rate of the last cash dividend theretofore paid or
dividends payable in shares of Common Stock) or of subscription rights or
warrants (other than those referred to in (ii) immediately above).
With certain exceptions, no adjustment in the purchase price will be
required until
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<PAGE> 56
cumulative adjustments amount to at least 1% of the purchase price. No
fractional shares of Common Stock are required to be issued. In lieu of
fractions, the Company may pay in cash based on the market price of the Common
Stock on the trading date immediately before the date of exercise.
At any time after any person or group becomes an Acquiring Person and
before the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, a majority of the Continuing Disinterested
Directors may cause the Company to exchange the Rights (other than Rights owned
by such person or group, which will become void), in whole or in part, for
shares of Common Stock at an exchange ratio of one share of Common Stock (or in
certain circumstances, other securities including preferred stock) per Right,
appropriately adjusted to reflect any stock split, reverse stock split,
reclassification, stock dividend or similar transaction occurring after the
date of the Rights Agreement.
At any time before the close of business ten days after a Stock
Acquisition Date, a majority of the Continuing Disinterested Directors may
cause the Company to redeem the Rights in whole, but not in part, for $.001 per
Right (payable in cash, shares of Common Stock or other consideration deemed
appropriate by the Continuing Disinterested Directors). Immediately upon the
action of the Continuing Disinterested Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.001 redemption price.
The term "Continuing Disinterested Director" means any member of the Board
who was a member of the Board on the date the Board initially approved the
Rights Agreement, and any person who is later elected to the Board if such
person is recommended or approved by a majority of the Continuing Disinterested
Directors. However, "Continuing Disinterested Director" does not include (i)
an Acquiring Person, an affiliate or associate of an Acquiring Person, or any
representative of an Acquiring Person or an affiliate or associate of an
Acquiring Person, or (ii) an officer or employee of the Company.
Until a Right is exercised, its holder, as such, has no rights as a
shareholder of the Company, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights should not be
taxable to shareholders or to the Company, shareholders may, depending upon the
circumstances, recognize taxable income if the Rights become exercisable.
Except for its provisions relating to the principal economic terms of the
Rights, the Rights Agreement may be amended by a majority of the Continuing
Disinterested Directors before the Distribution Date. After the Distribution
Date, the Rights Agreement may be amended by majority of the Continuing
Disinterested Directors in order to cure any ambiguity, to correct or
supplement any provision of the Rights Agreement which may be defective or
inconsistent with any other provision of the Rights Agreement, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interest of any Acquiring Person or an affiliate or associate of an Acquiring
Person), to shorten or lengthen
-3-
<PAGE> 57
any time period under the Rights Agreement or to lower the threshold described
in the second paragraph of this summary to 10%. However, no amendment to
extend the deadline for redeeming the Rights may be adopted after the Rights
are no longer redeemable, and no amendment may lengthen any other time period
other than to protect, enhance or clarify the rights of, and/or the benefits
to, the holders of Rights (other than any Acquiring Person or an affiliate or
associate of an Acquiring Person).
The Company filed a copy of the Rights Agreement with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
April 25, 1997. A copy of the Rights Agreement is available free of charge
from the Rights Agent. This summary description of the Rights does not purport
to be complete. It is qualified in its entirety by reference to the Rights
Agreement, which is incorporated into this summary by reference.
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