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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 (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
TEKNOWLEDGE CORPORATION
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(Exact name of registrant as specified in charter)
Delaware 94-2760916
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(State of (IRS Employer
incorporation Identification No.)
or organization)
1810 Embarcadero Road, Palo Alto, California 94303
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(Address of registrant's principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (415) 424-0500
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Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which each class is
to be so registered to be registered
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None None
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- ------------------- ----------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock Purchase Rights
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(Title of Class)
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Item 1. Description of Registrant's Securities to be Registered.
On January 29, 1996, the Board of Directors of Teknowledge Corporation
(the "Company") declared a dividend distribution of one Common Stock Purchase
Right (each a "Right" and collectively the "Rights") for each outstanding share
of Common Stock, par value $.01 ("Common Stock"), of the Company. The
distribution was paid as of February 12, 1996 (the "Record Date"), to
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of the Company's
Series A Preferred Stock, $.01 par value (the "Preferred Stock"), at a price of
$2.00 (the "Purchase Price"). The description and terms of the Rights are set
forth in the Rights Agreement dated as of January 29, 1996 (the "Rights
Agreement"), between the Company and Registrar and Transfer Company (the "Rights
Agent").
Until the earlier to occur of (i) the tenth day following the first date
of public announcement by the Company or by a person or group of affiliated or
associated persons ("Acquiring Person"), other than the Company, any subsidiary
of the Company or any employee benefit plan or employee stock plan of the
Company or any of any subsidiary of the Company ("Exempt Person"), that such an
Acquiring Person has acquired, or obtained the right to acquire, without
approval of the Board of Directors or good faith determination of the Board of
Directors that such a person or group of affiliated or associated persons has
inadvertently become an Acquiring Person, beneficial ownership of securities of
the Company representing 15% or more of the outstanding Common Stock of the
Company (other than solely as a result of a reduction in the outstanding shares
of the Common Stock of the Company) or such earlier date as a majority of the
Board of Directors shall become aware of such acquisition of the Common Stock
(the "Stock Acquisition Date") (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the close of business on the Record Date) or
(ii) the tenth business day (subject to extension by the Board prior to the time
a person becomes an Acquiring Person) following the commencement of, or public
announcement of an intention to commence, a tender or exchange offer by any
person (other than by an Exempt Person), the consummation of which would result
in the beneficial ownership of 15% or more of the outstanding Common Stock by
such person, together with its affiliates and associates (the earlier of such
dates being called the "Distribution Date"), the Rights will be evidenced, with
respect to all shares of Common Stock that are issued after the Record Date
prior to the Distribution Date (or earlier redemption or expiration of the
Rights), by certificates representing such shares of Common Stock together with
the Summary of Rights attached thereto. The Rights Agreement provides that,
until the Distribution Date (or earlier redemption or expiration of the Rights),
the Rights will be represented by and transferred with, and only with, the
Common Stock. Until the Distribution Date (or earlier redemption or expiration
of the Rights), new certificates issued for Common Stock (including, without
limitation, certificates issued upon transfer or exchange of Common Stock) after
the Record Date, will contain a legend incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any of the Company's Common Stock
certificates, with or without the aforesaid legend or the Summary of Rights
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attached thereto, will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Company's
Common Stock as of the close of business on the Distribution Date, and such
separate certificates alone will evidence the Rights from and after the
Distribution Date.
The Rights are not exercisable until the Distribution Date. The Rights
will expire at the close of business on January 28, 2006, unless earlier
redeemed or exchanged by the Company as described below.
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for Preferred Stock or convertible securities at less
than the current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding dividends payable in Preferred Stock) or of subscription
rights or warrants (other than those referred to above). The number of Rights
associated with each share of Common Stock is also subject to adjustment in the
event of a stock split of the Common Stock or a stock dividend on the Common
Stock payable in Common Stock or subdivisions, consolidations or combinations of
the Common Stock occurring, in any such case, prior to the Distribution Date.
The Preferred Stock purchasable upon exercise of the Rights will be
nonredeemable and junior to any other series of preferred stock the Company may
issue (unless otherwise provided in the terms of such other series). Each share
of Preferred Stock will have a preferential cumulative quarterly dividend in an
amount equal to the greater of (a) $50.00 or (b) 100 times the dividend declared
on each share of Common Stock. In the event of liquidation, the holders of
Preferred Stock will receive a preferred liquidation payment equal to the
greater of (a) $200.00 per share, plus accrued dividends to the date of
distribution whether or not earned or declared, or (b) an amount per share equal
to 100 times the aggregate payment to be distributed per share of Common Stock.
Each share of Preferred Stock will have 100 votes, voting together with the
shares of Common Stock. In the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged for or changed into
other securities, cash and/or other property, each share of Preferred Stock will
be entitled to receive 100 times the amount and type of consideration received
per share of Common Stock. The rights of the Preferred Stock as to dividends,
liquidation and voting, and in the event of mergers and consolidations, are
protected by customary anti-dilution provisions. Fractional shares (in integral
multiples of one one-hundredth) of Preferred Stock will be issuable; however,
the Company may elect to distribute depositary receipts in lieu of such
fractional shares. In lieu of fractional shares other than fractions that are
multiples of one one-hundredth of a share, an adjustment in cash will be made
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based on the market price of the Preferred Stock on the last trading date prior
to the date of exercise. Because of the nature of the Preferred Stock's
dividend, liquidation and voting rights, the value of one one-hundredth of a
share of Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.
In the event (i) any person (other than an Exempt Person), alone or
together with its affiliates or associates, becomes the beneficial owner of 15%
or more of the then outstanding shares of Common Stock or (ii) any Acquiring
Person or any of its Affiliates or Associates, directly or indirectly, (1)
consolidates with or merges into the Company or any of its subsidiaries or
otherwise combines with the Company or any of its subsidiaries in a transaction
in which the Company or such subsidiary is the continuing or surviving
corporation of such merger or combination and the Common Stock of the Company
remains outstanding and no shares thereof shall be changed into or exchanged for
stock or other securities of any other person or of the Company or cash or any
other property, (2) transfers, in on one or more transactions, any assets to the
Company or any of its subsidiaries in exchange for capital stock of the Company
or any of its subsidiaries or for securities exercisable for or convertible into
capital stock of the Company or any of its subsidiaries or otherwise obtains
from the Company or any of its subsidiaries, with or without consideration, any
capital stock of the Company or any of its subsidiaries or securities
exercisable for or convertible into capital stock of the Company or any of its
subsidiaries (other than as part of a pro rata offer or distribution to all
holders of such stock), (3) sells, purchases, leases, exchanges, mortgages,
pledges, transfers or otherwise disposes to, from or with the Company or any of
its subsidiaries, as the case may be, assets on terms and conditions less
favorable to the Company or such subsidiary than the Company or such subsidiary
would be able to obtain in arm's-length negotiation with an unaffiliated third
party, (4) receives any compensation from the Company or any of its subsidiaries
for services other than compensation for employment as a regular or part-time
employee, or fees for serving as a director at rates in accordance with the
Company's (or its subsidiary's) past practice, (5) receives the benefit (except
proportionately as a stockholder) of any loans, advances, guarantees, pledges or
other financial assistance or tax credit or advantage, or (6) engages in any
transaction with the Company (or any of its subsidiaries) involving the sale,
license, transfer or grant of any right in, or disclosure of, any patents,
copyrights, trade secrets, trademarks or know-how (or any other intellectual or
industrial property rights recognized under any country's intellectual property
rights laws) which the Company (including its subsidiaries) owns or has the
right to use on terms and conditions not approved by the Board of Directors of
the Company, or (iii) while there is an Acquiring Person, there shall occur any
reclassification of securities (including any reverse stock split), any
recapitalization of the Company, or any merger or consolidation of the Company
with any of its subsidiaries or any other transaction or transactions involving
the Company or any of its subsidiaries (whether or not involving the Acquiring
Person) which have the effect of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities of the Company
or any of its subsidiaries which is directly or indirectly owned or controlled
by the Acquiring Person (such events are collectively referred to herein as the
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"Flip-In Events"), then, and in each such case, each holder of record of a
Right, other than the Acquiring Person, will thereafter have the right to
receive, upon payment of the then current Purchase Price, in lieu of one
one-hundredth of a share of Preferred Stock per outstanding Right, that number
of shares of Common Stock having a market value at the time of the transaction
equal to the Purchase Price (as adjusted to the Purchase Price in effect
immediately prior to the Flip-In Event multiplied by the number of one
one-hundredths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such Flip-In Event) divided by one-half the average of the
daily closing prices per share of the Common Stock for the thirty consecutive
trading days ("Current Market Price") on the date of such Flip-In Event.
Notwithstanding the foregoing, Rights held by the Acquiring Person or any
Associate or Affiliate thereof or certain transferees will be null and void and
no longer be transferable.
The Company may at its option substitute for a share of Common Stock
issuable upon the exercise of Rights in accordance with this paragraph such
number or fractions of shares of Preferred Stock having an aggregate current
market value equal to the Current Market Price of a share of Common Stock. In
the event that insufficient shares of Common Stock are available to permit the
exercise in full of the Rights in accordance with the foregoing paragraph, the
Board of Directors shall, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party, (A)
determine the excess (such excess, the "Spread") of (1) the value of the shares
of Common Stock issuable upon the exercise of a Right in accordance with this
paragraph (the "Current Value") over (2) the Purchase Price, and (B) with
respect to each Right (other than Rights which have become void pursuant to the
foregoing paragraph), make adequate provision to substitute for the shares of
Common Stock issuable in accordance with this paragraph upon exercise of the
Right and payment of the Purchase Price, (1) cash, (2) a reduction in such
Purchase Price, (3) shares of Preferred Stock or other equity securities of the
Company (including, without limitation, shares or fractions of shares of
preferred stock which, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of Common Stock, are
deemed in good faith by the Board of Directors to have substantially the same
value as the shares of Common Stock, (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having a value which,
when added to the value of the shares of Common Stock actually issued upon
exercise of such Right, shall have an aggregate value equal to the Current Value
(less the amount of any reduction in such Purchase Price); provided, however,
that if the Company shall not make adequate provision to deliver value pursuant
to clause (B) above within thirty (30) days following the Flip-In Event, then
the Company shall be obligated to deliver, to the extent permitted by applicable
law and any material agreements then in effect to which the Company is a party,
upon the surrender for exercise of a Right and without requiring payment of such
Purchase Price, shares of Common Stock (to the extent available), and then, if
necessary, such number or fractions of shares of Preferred Stock (to the extent
available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. Rights are not exercisable following the
occurrence of the events set forth in the foregoing paragraph until the
expiration of the period during which the Rights may be redeemed as described
below.
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Unless the Rights are earlier redeemed, in the event that following the
first occurrence of a Flip-In Event, the Company were to be acquired in a merger
or other business combination in which any shares of the Company's Common Stock
are exchanged or converted for other securities or assets (other than a merger
or other business combination in which the voting power represented by the
Company's securities outstanding immediately prior thereto continues to
represent all of the voting power represented by the securities of the Company
thereafter and the holders of such securities have not changed as a result of
such transaction), or 50% or more of the assets or earning power of the Company
and its subsidiaries (taken as a whole) were to be sold or transferred in one or
a series of related transactions (such transactions are collectively referred to
herein as the "Flip-Over Events"), the Rights Agreement provides that proper
provision shall be made so that each holder of record of a Right (other than an
Acquiring Person, or affiliates or associates thereof) will from and after such
date have the right to receive, upon payment of the then current Purchase Price,
that number of shares of common stock of the acquiring company having a market
value at the time of such transaction equal to the Purchase Price divided by
one-half the Current Market Price of such common stock.
No fractional shares of Common Stock will be issued upon exercise of the
Rights and, in lieu thereof, a payment in cash will be made to the holder of
such Rights equal to the same fraction of the current market value of a share of
Common Stock.
At any time until the occurrence of a Flip-In Event, the Board may redeem
the Rights in whole, but not in part, at a price of $.001 per Right. Immediately
upon the action of the Board of Directors of the Company authorizing redemption
of the Rights, the right to exercise the Rights will terminate, and the only
right of the holders of Rights will be to receive the Redemption Price without
any interest thereon.
At any time after the occurrence of a Flip-In Event and prior to the
earlier of a Flip-Over Event or such time as any Person (other than an Exempt
Person), together with all Affiliates and Associates, becomes the Beneficial
Owner of more than 50% of the Common Stock outstanding, the Board of Directors
of the Company may, at its option, exchange all or any portion of the
outstanding Rights (other than Rights held by any Acquiring Person which have
become void) for shares of Common Stock on a pro rata basis, at an exchange
ratio of one share of Common Stock or one one-hundredth of a share of Preferred
Stock (or of a share of a class or series of the Company's Preferred Stock
having equivalent rights, preferences and privileges) per Right. Immediately
upon the ordering of such exchange 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 shares of Common Stock or Common Stock Equivalents
pursuant to the exchange. In the event there are insufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights, the Company shall take all actions necessary to authorize
additional shares.
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Until the Rights become nonredeemable the Company may, except with respect
to the redemption price of the Rights, amend the Rights Agreement in any manner.
After the Rights become nonredeemable, the Company may amend the Rights
Agreement to cure any ambiguity, to correct or supplement any provision which
may be defective or inconsistent with any other provisions, or to shorten or
lengthen any time period under the Rights Agreement, or to arrange or supplement
the provisions hereunder in any manner which the Company may deem necessary or
desirable, provided that no such amendment may adversely affect the interests of
the holders of the Rights (other than the Acquiring Person or its affiliates or
associates) or cause the Rights to again be redeemable or the Agreement to again
be freely amendable.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.
The issuance of the Rights is not taxable to the Company or to
stockholders under presently existing federal income tax law, and will not
change the way in which stockholders can presently trade the Company's shares of
Common Stock. If the Rights should become exercisable, stockholders, depending
on then existing circumstances, may recognize taxable income.
The Rights have certain anti-takeover effects. Under certain circumstances
the Rights could cause substantial dilution to a person or group who attempts to
acquire the Company on terms not approved by the Company's Board of Directors.
However, the Rights should not interfere with any merger or other business
combination approved by the Board.
The form of Rights Agreement between the Company and Continental Stock
Transfer & Trust Company, as Rights Agent (including as Exhibit A the form of
Certificate of Designation, Preferences and Rights of the Terms of the Series A
Preferred Stock, as Exhibit B the form of Right Certificate, and as Exhibit C
the Summary of Terms of Rights Agreement), the Company's press release dated
January 30, 1996 and a form of letter to the Company's stockholders dated
February 12, 1996 are attached hereto as Exhibit 1 , Exhibit 2 and Exhibit 3,
respectively, and incorporated herein by reference. The foregoing description of
the Rights is qualified in its entirety by reference to such exhibits.
Item 2. Exhibits.
The form of Rights Agreement between the Company and Registrar and
Transfer Company, as Rights Agent (including as Exhibit A the form of
Certificate of Designation, Preferences and Rights of the Terms of the Series A
Preferred Stock, as Exhibit B the form of Right Certificate, and as Exhibit C
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the Summary of Terms of Rights Agreement), the Company's press release dated
January 30, 1996 and a form of letter to the Company's stockholders dated
February 12, 1996 are attached hereto as Exhibit 1 , Exhibit 2 and Exhibit 3,
respectively, and incorporated herein by reference. See Exhibit Index located on
page 10 of this Registration Statement.
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SIGNATURES
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, thereunto duly authorized.
TEKNOWLEDGE CORPORATION
(Registrant)
By: /S/ Dennis Bugbee
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Dennis Bugbee
Director of Finance
Dated: February 12, 1996
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EXHIBIT INDEX
Exhibit Description
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1 Form of Rights Agreement between the Company and Registrar and
Transfer Company, as Rights Agent (including as Exhibit A the form of
Certificate of Designation, Preferences and Rights of the Terms of the
Series A Preferred Stock, as Exhibit B the form of Right Certificate,
and as Exhibit C the Summary of Terms of Rights Agreement).
2 Press Release, dated January 30, 1996.
3 Form of Letter to Teknowledge Corporation stockholders, dated
February 12, 1996.
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EXHIBIT 1
TEKNOWLEDGE CORPORATION
and
REGISTRAR AND TRANSFER COMPANY
Rights Agent
RIGHTS AGREEMENT
Dated as of January 29, 1996
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TABLE OF CONTENTS
Page
1. Certain Definitions ................................................... 1
2. Appointment of Rights Agent ........................................... 4
3. Issuance of Right Certificates ........................................ 4
4. Form of Right Certificates ............................................ 6
5. Countersignature and Registration ..................................... 6
6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen
Right Certificates .................................................... 7
7. Exercise of Rights; Purchase Price; Expiration Date of Rights ......... 7
8. Cancellation and Destruction of Right Certificates .................... 8
9. Reservation and Availability of Shares of Preferred Stock ............. 9
10. Preferred Stock Record Date ........................................... 10
11. Adjustments to Number and Kind of Shares, Number of Rights or
Purchase Price ........................................................ 10
12. Certification of Adjustments .......................................... 17
13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power ................................................................. 17
14. Fractional Rights and Fractional Shares ............................... 20
15. Rights of Action ...................................................... 21
16. Agreement of Right Holders ............................................ 21
17. Right Certificate Holder Not Deemed a Stockholder ..................... 21
18. Concerning the Rights Agent ........................................... 22
19. Merger or Consolidation or Changed Name of Rights Agent ............... 22
20. Duties of Rights Agent ................................................ 22
21. Change of Rights Agent ................................................ 24
22. Issuance of New Right Certificates .................................... 25
23. Redemption ............................................................ 25
24. Exchange of Rights for Common Stock ................................... 26
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25. Notice of Proposed Actions ............................................ 27
26. Notices ............................................................... 27
27. Supplements and Amendments ............................................ 28
28. Successors ............................................................ 28
29. Benefits of this Rights Agreement ..................................... 28
30. Governing Law ......................................................... 28
31. Counterparts .......................................................... 28
32. Descriptive Headings .................................................. 28
33. Severability .......................................................... 28
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RIGHTS AGREEMENT
This Rights Agreement ("Rights Agreement"), is dated as of January 29,
1996, between Teknowledge Corporation, a Delaware corporation (the "Company"),
and Registrar and Transfer Company, a New York corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company on January 29, 1996 (i)
announced that it authorized the issuance and declared a dividend of one right
("Right") for each share of the common stock of the Company ("Common Stock")
outstanding as of the Close of Business (as such term is hereinafter defined) on
February 12, 1996 (the "Record Date"), each Right representing the right to
purchase one one-hundredth of a share of Series A Preferred Stock of the Company
having the rights, powers and preferences set forth in the form of Certificate
of Designation attached hereto as Exhibit A upon the terms and subject to the
conditions hereinafter set forth, and (ii) further authorized the issuance of
one Right with respect to each share of Common Stock of the Company that shall
become outstanding between February 12, 1996, and the Distribution Date (as such
term is hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties agree as follows:
1. Certain Definitions. For purposes of this Agreement the following
terms shall have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, without the prior approval of the Board of Directors, shall be the
Beneficial Owner (as such term is hereinafter defined) of fifteen percent (15%)
or more of the outstanding Common Stock; provided, however, that in no event
shall a Person who or which, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of less than 15% of the Company's outstanding
shares of Common Stock, become an Acquiring Person solely as a result of a
reduction of the number of shares of outstanding Common Stock, including
repurchases of outstanding shares of Common Stock by the Company, which
reduction increases the percentage of outstanding shares of Common Stock
beneficially owned by such Person, provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Company's outstanding shares
of Common Stock then outstanding solely by reason of a reduction of the number
of shares of outstanding Common Stock, and shall thereafter become the
Beneficial Owner of any additional shares of Common Stock of the Company, then
such Person shall be deemed to be an "Acquiring Person" unless upon the
consummation of the acquisition of such additional shares of Common Stock such
person does not own fifteen percent (15%) or more of the shares of Common Stock
then outstanding, and provided further, that an Acquiring Person shall not
include an Exempt Person (as such term is hereinafter defined). Notwithstanding
the foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this paragraph (a), has become such inadvertently
(including, without limitation, because (i) such Person was unaware that it
beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an "Acquiring Person" or (ii) such Person was aware of the extent
of its Beneficial Ownership but had no actual knowledge of the consequences of
such Beneficial Ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be or to have become an "Acquiring Person" for any purposes of this
Agreement.
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(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended ("Exchange Act"), as in effect
on the date of this Agreement.
(c) A Person shall be deemed the "Beneficial Owner" of any
securities:
(i) which such Person or any of such Person's Affiliates
or Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether such
right is exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), whether or not in writing, or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to "beneficially own," 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; or (B) 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, or any comparable or successor
rule, 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 securities if the
agreement, arrangement or understanding to vote such security (1) arises solely
from a revocable proxy or consent given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act and (2) is not also then reportable 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 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 as described in
clause (B) of subparagraph (ii) of this Section 1(c)] or disposing of any
securities of the Company;
provided, however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities that are "beneficially
owned" (as defined in this Section 1(c)), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.
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 as in effect on the date hereof.
(d) "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 the State of
California are authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New
York time, on such date; provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.
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(f) "Common Stock" when used with reference to the Company shall
mean the common stock of the Company. "Common Stock" when used with reference to
any Person other than the Company which shall be organized in corporate form
shall mean the capital stock or other equity security with the greatest per
share voting power of such Person or, if such Person is a Subsidiary of or is
controlled by another Person, the Person which ultimately controls such
first-mentioned Person. "Common Stock" when used with reference to any Person
other than the Company which shall not be organized in corporate form shall mean
units of beneficial interest which shall represent the right to participate in
profits, losses, deductions and credits of such Person and which shall be
entitled to exercise the greatest voting power per unit of such Person.
(g) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.
(h) "Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.
(i) "Current Value" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(j) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(k) "Equivalent Common Stock" shall have the meaning set forth
in Section 11(b) hereof.
(l) "Exchange Act" shall have the meaning set forth in
Section 1(b) hereof.
(m) "Exempt Person" shall mean the Company or any Subsidiary of the
Company, including, without limitation, in its fiduciary capacity, any employee
benefit plan or employee stock plan of the Company or of any Subsidiary of the
Company, or any Person, organized, appointed, established or holding Common
Stock for or pursuant to the terms of any such plan or funding other employee
benefits for employees of the Company or any subsidiary of the Company.
(n) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(o) "Flip-In Event" shall mean any event described in
Section 11(a)(ii)(A), 11(a)(ii)(B) or 11(a)(ii)(C) hereof.
(p) "Flip-In Exercise Payment" shall have the meaning set forth
in Section 11(a)(ii) hereof.
(q) "Flip-In Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(r) "Flip-Over Event" shall mean any event described in
clause (x), (y) or (z) of Section 13(a) hereof.
(s) "Flip-Over Exercise Payment" shall have the meaning set
forth in Section 13(a) hereof.
(t) "NASDAQ" shall have the meaning set forth in Section 9(b)
hereof.
(u) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(v) "Preferred Stock" shall mean the Series A Preferred Stock, $.01
par value of the Company having the rights, powers and preferences set forth in
Exhibit A hereto, and, to the extent that there is not a sufficient number of
shares of Series A Preferred Stock authorized to permit the full
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exercise of the Rights, any other series of Preferred Stock, $.01 par value, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Preferred Stock.
(w) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(x) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(y) "Record Date" shall have the meaning set forth in the WHEREAS
clause at the beginning of the Agreement.
(z) "Redemption Date" shall have the meaning set forth in
Section 7(a) hereof.
(aa) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(bb) "Right Certificate" shall have the meaning set forth in
Section 3(a) hereof.
(cc) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(dd) "Stock Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such or such earlier date as a majority of the directors shall become
aware of the existence of an Acquiring Person.
(ee) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(ff) "Subsidiary" of a Person shall mean any corporation or other
entity of which securities or other ownership interests having ordinary voting
power sufficient to elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or indirectly, by
such Person and any corporation or other entity that is otherwise controlled by
such Person.
(gg) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.
(hh) "Trading Day" shall have the meaning set forth in
Section 11(d) hereof.
(ii) "Triggering Event" shall mean any event described in Section
11(a)(ii)(A), 11(a)(ii)(B) or 11(a)(ii)(C) or Section 7(c), 13 hereof.
(jj) "Voting Power" shall mean the voting power of all securities of
the Company then outstanding and generally entitled to vote for the election of
directors of the Company.
Any determination required by the definitions contained in this Section 1
shall be made by the Board of Directors of the Company in its good faith
judgment, which determination shall be binding on the Rights Agent and the
holders of the Rights.
2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agents and any Co-Rights Agents shall be as the
Company shall determine.
3. Issuance of Right Certificates.
(a) Until the earlier of (i) the tenth day after the Stock
Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs
before the Record Date, the Close of Business on the Record Date) or (ii) the
tenth business day (or such later date as may be determined by action of the
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Board of Directors prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than an Exempt Person)
of, or of the first public announcement of the intent of any Person (other than
an Exempt Person) to commence (which intention to commence remains in effect for
five business days after such announcement), a tender or exchange offer upon the
successful consummation of which such Person, together with its Affiliates and
Associates, would be the Beneficial Owner of 15% or more of the outstanding
Common Stock (irrespective of whether any shares are actually purchased pursuant
to any such offer) (including any such date which is after the date of this
Agreement and prior to the issuance of the Rights; the earlier of such dates
being herein referred to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of Section 3(c) hereof) by the certificates
for the Common Stock registered in the names of the holders of the Common Stock
and not by separate Right Certificates, and (y) each Right will be transferable
only in connection with the transfer of a share (subject to adjustment as
hereinafter provided) of Common Stock. As soon as practicable after the
Distribution Date, the Rights Agent will mail, by first-class, postage prepaid
mail, to each record holder of the Common Stock as of the Close of Business on
the Distribution Date. as shown by the records of the Company, to the address of
such holder shown on such records, a Right certificate in substantially the form
of Exhibit B hereto ("Right Certificate") evidencing one Right for each share of
Common Stock so held. As of and after the Distribution Date the Rights will be
evidenced solely by such Right Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company will send a copy of a Summary of Rights to Purchase Preferred Stock,
substantially in the form attached hereto as Exhibit C ("Summary of Rights"), by
first-class, postage prepaid mail, to each record holder 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.
(c) Rights shall be issued in respect of all shares of Common Stock
that are issued (either as an original issuance or from the Company's treasury)
after the Record Date prior to the earlier of the Distribution Date, the
Redemption Date or the Expiration Date. With respect to certificates
representing such shares of Common Stock, the Rights will be evidenced by such
certificates for Common Stock registered in the names of the holders thereof
together with the Summary of Rights. Until the Distribution Date (or, if
earlier, the Redemption Date or Final Expiration Date), the surrender for
transfer of any certificate for Common Stock outstanding on the Record Date
(with or without a copy of the Summary of Rights attached thereto), shall also
constitute the surrender for transfer of the Rights associated with the Common
Stock represented thereby.
(d) Certificates issued for Common Stock (including, without
limitation, certificates issued upon transfer or exchange of Common Stock) after
the Record Date but prior to the earlier of the Distribution Date, the
Redemption Date or the Final Expiration Date shall have impressed on, printed
on, written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Teknowledge
Corporation and Registrar and Transfer Company, as Rights Agent, dated as
of January 29, 1996, as the same may be amended from time to time (the
"Rights Agreement"), the terms of which are incorporated herein by
reference and a copy of which is on file at the principal executive office
of Teknowledge Corporation 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.
Teknowledge Corporation will mail to the holder of this certificate a copy
of the Rights Agreement without charge after receipt by it of a written
request therefor. Under certain circumstances as provided in the Rights
Agreement, Rights issued to, beneficially owned by or transferred to any
person who is or becomes an Acquiring Person (as defined in the Rights
Agreement) or an Associate or Affiliate (as defined in the Rights
Agreement) thereof and certain transferees thereof will be null and void
and will no longer be transferable.
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With respect to such certificates containing the foregoing legend, the Rights
associated with the Common Stock represented by such certificates shall, until
the Distribution Date, be evidenced by such certificates alone, and registered
holders of Common Stock shall also be the registered holders of the associated
Rights, and the surrender for transfer of any such certificate shall also
constitute the surrender for transfer of the Rights associated with the Common
Stock represented thereby. In the event that the Company purchases or acquires
any shares of Common Stock after the Record Date but prior to the earlier of the
Distribution Date, the Redemption Date or the Expiration Date, any Rights
associated with such shares of Common Stock shall be deemed cancelled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the shares of Common Stock no longer outstanding.
Notwithstanding this paragraph (d), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
4. Form of Right Certificates.
(a) The Right Certificates (and the forms of election to purchase
shares and of assignment to be printed on the reverse thereof), when, as and if
issued, shall be substantially in the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Rights Agreement, or as may be required
to comply with any 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
Sections 11.13 and 22 hereof, the Right Certificates evidencing the Rights
issued on the Record Date whenever such certificates are issued, shall be dated
as of the Record Date and the Right Certificates evidencing Rights to holders of
record of Common Stock issued after the Record Date shall be dated as of the
Record Date but shall also be dated to reflect the date of issuance of such
Right Certificate. On their face, Right Certificates shall entitle the holders
thereof to purchase, for each Right, one one-hundredth of a share of Preferred
Stock, or other securities or property as provided herein, as the same may from
time to time be adjusted as provided herein, at the price per share of $2.00, as
the same may from time to time be adjusted as provided herein (the "Purchase
Price").
(b) Notwithstanding any other provision of this Rights Agreement,
any Right Certificate that represents Rights that are or were at any time on or
after the earlier of the Stock Acquisition Date or the Distribution Date
beneficially owned by an Acquiring Person or any Affiliate or Associate thereof
(or any transferee of such Rights) shall have impressed on, printed on, written
on or otherwise affixed to it (if the Company or the Rights Agent has knowledge
that such Person is an Acquiring Person or an Associate or Affiliate thereof or
transferee of such Persons or a nominee of any of the foregoing) the following
legend:
The beneficial owner of the Rights represented by this Right Certificate
is an Acquiring Person or an Affiliate or Associate (as defined in the
Rights Agreement) of an Acquiring Person or a subsequent holder of such
Right Certificates beneficially owned by such Persons. Accordingly, this
Right Certificate and the Rights represented hereby are null and void and
will no longer be transferable as provided in the Rights Agreement.
The provisions of Section 11(a)(ii) and Section 24 of this Rights Agreement
shall be operative whether or not the foregoing legend is contained on any such
Right Certificates.
5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its President or any Vice President,
either manually or by facsimile signature, and 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 Right Certificates shall be manually countersigned by the
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Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
issued and delivered with the same force and effect as though the person who
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices designated for such purposes, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates, the date of each of the Right Certificates and the certificate
numbers for each of the Right Certificates.
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates.
(a) Subject to the provisions of Sections 7(e), 11(a)(ii) and 14
hereof, at any time after the Close of Business on the Distribution Date
and at or prior to the Close of Business on the earlier of the Redemption Date
or the Final Expiration Date, any Right Certificate or Certificates (other than
Right Certificates representing Rights that have become void pursuant to Section
11(a)(ii) hereof or that have been exchanged pursuant to Section 24 hereof) may
be (i) transferred or (ii) split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of shares of Preferred Stock or other securities as the Right
Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer any Right Certificate shall
surrender the Right Certificate at the office of the Rights Agent designated for
such purposes with the form of assignment on the reverse side thereof duly
endorsed (or enclose with such Right Certificate a written instrument of
transfer in form satisfactory to the Company and the Rights Agent), duly
executed by the registered holder thereof or his attorney duly authorized in
writing, and with such signature duly guaranteed. Any registered holder desiring
to split up, combine or exchange any Right Certificate shall make such request
in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall, subject
to Sections 4(b), 7(e), 11 and 14 hereof, countersign (by manual signature) and
deliver to the person entitled thereto a Right Certificate or Right
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
Right Certificates.
(b) Subject to the provisions of Section 11(a)(ii) hereof, upon
receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, if requested by the Company,
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will execute and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered owner in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.
7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 11(a)(ii) hereof, the Rights shall become
exercisable, and may be exercised to purchase Preferred Stock, except as
otherwise provided herein, in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
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election to purchase on the reverse side thereof duly executed (with such
signature duly guaranteed), to the Rights Agent at 2 Broadway, New York, N.Y.
10004, together with payment of the Purchase Price with respect to each Right
exercised, subject to adjustment as hereinafter provided, at or prior to the
Close of Business on the earlier of (i) January 28, 2006 (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section 23
hereof (such date being herein referred to as the "Redemption Date") or (iii)
the time at which all such Rights are exchanged as provided in Section 24 hereof
(the earliest of (i), (ii), (iii) and (iv) being herein referred to as the
"Expiration Date").
(b) The Purchase Price and the number of shares of Preferred Stock
or other securities or consideration to be acquired upon exercise of a Right
shall be subject to adjustment from time to time as provided in Sections 11 and
7(c), 13 hereof. The Purchase Price shall be payable in lawful money of the
United States of America, in accordance with Section 7(c), 13 hereof.
(c) Except as provided in Section 11(a)(ii) hereof, upon receipt of
a Right Certificate with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) or so much thereof as is necessary for
the shares to be purchased and an amount equal to any applicable transfer tax,
by cash, certified check or official bank check payable to the order of the
Company or the Rights Agent, the Rights Agent shall, subject to Section 20(k),
thereupon promptly (i) requisition from any transfer agent of the Preferred
Stock (or make available if the Rights Agent is the transfer agent) certificates
for the number of shares of Preferred Stock so elected to be purchased and the
Company will comply and hereby authorizes and directs such transfer agent to
comply with all such requests, (ii) requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14(b) hereof, and (iii) promptly after receipt of such Preferred Stock
certificates cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, and, when appropriate, after receipt promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event of a purchase of securities, other than Preferred
Stock, pursuant to Section 11(a) or Section 7(c), 13 hereof, the Rights Agent
shall promptly take the appropriate actions corresponding to the foregoing
clauses (i) through (iii). In the event that the Company is obligated to issue
other securities of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when appropriate.
(d) Except as otherwise provided herein, in case the registered
holder of any Right Certificate shall exercise less than all the Rights
evidenced thereby, a new Right Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
8. Cancellation and Destruction of Right Certificates. All Right Certificates
surrendered for the purpose of exercise, transfer, split up, combination or
exchange shall, if surrendered to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in canceled form, or, if
surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the Provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
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cancel and retire, any Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
9. Reservation and Availability of Shares of Preferred Stock.
(a) The Company covenants and agrees that at all times it will cause
to be reserved and kept available, out of and to the extent of its authorized
and unissued shares of Preferred Stock not reserved for another purpose (and,
following the occurrence of a Triggering Event, other securities) or held in its
treasury, the number of shares of Preferred Stock (and, following the occurrence
of a Triggering Event, other securities) 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, provided, however, that the Company shall not
be required to reserve and keep available shares of Preferred Stock or other
securities sufficient to permit the exercise in full of all outstanding Rights
pursuant to the adjustments set forth in Section 11(a)(ii), Section 11(a)(iii)
or Section 7(c), 13 hereof unless, and only to the extent that, the Rights
become exercisable pursuant to such adjustments.
(b) The Company shall (i) use its best efforts to cause, from and
after such time as the Rights become exercisable, the Rights and all shares of
Preferred Stock (and following the occurrence of a Triggering Event, other
securities) issued or reserved for issuance upon exercise thereof to be reported
by the National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or such other system then in use, and if the Preferred Stock
shall become listed on any national securities exchange, to cause, from and
after such time as the Rights become exercisable, the Rights and all shares of
Preferred Stock (and, following the occurrence of a Triggering Event, other
securities) issued or reserved for issuance upon exercise thereof to be listed
on such exchange upon official notice of issuance upon such exercise and (ii) if
then necessary, to permit the offer and issuance of such shares of Preferred
Stock (and, following the occurrence of a Triggering Event, other securities),
register and qualify such share of Preferred Stock (and, following the
occurrence of a Triggering Event, other securities) under the Securities Act and
any applicable state securities or "blue sky" laws (to the extent exemptions
therefrom are not available), cause such registration statement and
qualifications to become effective as soon as possible after such filing and
keep such registration and qualifications effective until the earlier of the
Redemption Date or the Final Expiration Date of the Rights. The Company may
temporarily suspend, for a period of time not to exceed ninety (90) days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act 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 unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (and
following the occurrence of a Triggering Event, other securities) delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price in respect thereof), be duly
and validly authorized and issued and fully paid and nonassessable shares in
accordance with applicable law.
(d) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Preferred Stock (or other securities, as the case may be) upon
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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
Right Certificates to a Person other than, or the issuance or delivery of
certificates for Preferred Stock (or other securities, as the case may be) upon
exercise of Rights in a name other than that of, the registered holder of the
Right Certificate, and the Company shall not be required to issue or deliver a
Right Certificate or certificate for Preferred Stock (or other securities, as
the case may be) to a person other than such registered holder until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
10. Preferred Stock Record Date. Each Person in whose name any certificate for
shares of Preferred Stock (or other securities, as the case may be) is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the shares of Preferred Stock (or other securities, as the
case may be) represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company with respect to the shares for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
11. Adjustments to Number and Kind of Shares, Number of Rights or Purchase
Price. The number and kind of shares subject to purchase upon the exercise of
each Right, the number of Rights outstanding and the Purchase Price are subject
to adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Rights Agreement (A) declare or pay any dividend on Preferred Stock payable
in shares of Preferred Stock, (B) subdivide or split the outstanding shares of
Preferred Stock into a greater number of shares, (C) combine or consolidate the
outstanding shares of Preferred Stock into a smaller number of shares or effect
a reverse split of the outstanding shares of Preferred Stock, or (D) issue any
shares of its capital stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of Preferred Stock or capital stock, as the case may be, 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 or
other securities, which, if such Right had been exercised immediately prior to
such date, the holder thereof 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 prior
to, any adjustment required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24, in the event
(A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall consolidate with or merge with and into the
Company or any of its Subsidiaries or otherwise combine with the Company or any
of its Subsidiaries and the Company or such Subsidiary shall be the continuing
or surviving corporation of such consolidation, merger or combination and the
Common Stock of the Company shall remain outstanding and no shares thereof shall
be changed into or exchanged for stock or other securities of the Company or of
any other Person or cash or any other property, or (2) shall, in one or more
transactions, other than in connection with the exercise of a Right or Rights
and other than in connection with the exercise or conversion of securities
exercisable for or convertible into securities of the Company or of any
Subsidiary of the Company, transfer any assets or property to the Company or
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any of its Subsidiaries in exchange (in whole or in part) for any shares of any
class of capital stock of the Company or any of its Subsidiaries or any
securities exercisable for or convertible into shares of any class of capital
stock of the Company or any of its Subsidiaries, or otherwise obtain from the
Company or any of its Subsidiaries, with or without consideration, any
additional shares of any class of capital stock of the Company or any of its
Subsidiaries or any securities exercisable for or convertible into shares of any
class of capital stock of the Company or any of its Subsidiaries (other than as
part of a pro rata offer or distribution by the Company or such Subsidiary to
all holders of such shares), or (3) shall sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire (other than as a pro rata
dividend) or dispose, to, from or with, as the case may be, in one transaction
or a series of transactions, the Company or any of its Subsidiaries, assets
(including securities) on terms and conditions less favorable to the Company or
such Subsidiary than the Company or such Subsidiary would be able to obtain in
arm's-length negotiation with an unaffiliated third party, or (4) shall receive
any compensation from the Company or any of its Subsidiaries for services other
than compensation for employment as a regular or part-time employee, or fees for
serving as a director, at rates in accordance with the Company's (or its
Subsidiary's) past practices, or (5) shall receive the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or tax
advantage provided by the Company or any of its Subsidiaries, or (6) shall
engage in any transaction with the Company (or any of its Subsidiaries)
involving the sale, license, transfer or grant of any right in, or disclosure
of. any patents, copyrights, trade secrets, trademarks, know-how or any other
intellectual or industrial property rights recognized under any country's
intellectual property laws which the Company (including its Subsidiaries) owns
or has the right to use on terms and conditions not approved by the Board; or
(B) any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person; or
(C) during such time as there is an Acquiring
Person, there shall be any reclassification of securities (including any reverse
stock split), or any recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise involving an Acquiring
Person or any Affiliate or Associate of such Acquiring Person) which has the
effect, directly or indirectly, of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities of the Company
or any of its Subsidiaries, or securities exercisable for or convertible into
equity securities of the Company or any of its Subsidiaries, which is directly
or indirectly beneficially owned by any Acquiring Person or any Affiliate or
Associate of any Acquiring Person,
then upon the first occurrence of such Flip-In Event (A) the Purchase Price
shall be adjusted to be the Purchase Price in effect immediately prior to the
Flip-In Event multiplied by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
Flip-In Event, whether or not such Right was then exercisable, and (B) each
holder of a Right, except as otherwise provided in this Section 11(a)(ii) and
Section 11(a)(iii) hereof, shall thereafter have the right to receive, upon
exercise thereof at a price equal to the Purchase Price (as so adjusted), in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of shares of Common Stock as shall equal the result obtained
by dividing the Purchase Price (as so adjusted) by 50% of the Current Market
Price per share of the Common Stock (determined pursuant to Section 11(d)
hereof) on the date of such Flip-In Event; provided, however, that the Purchase
Price (as so adjusted) and the number of shares of Common Stock so receivable
upon the exercise of a Right shall, following the Flip-In Event, be subject to
further adjustment as appropriate in accordance with Sections 11(f) hereof.
Notwithstanding anything in this Agreement to the contrary, however, from and
after the Flip-In Event, any Rights that are beneficially owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (y) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the Flip-In Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Flip-In Event pursuant to either (I) a
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transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any provision of this Agreement. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder. From and after the Flip-In Event, no Right Certificate shall be
issued pursuant to Section 3 or Section 6 hereof that represents Rights that are
or have become void pursuant to the provisions of this paragraph, and any Right
Certificate delivered to the Rights Agent that represents Rights that are or
have become void pursuant to the provisions of this paragraph shall be
cancelled.
(iii) The Company may at its option substitute for a share of
Common Stock issuable upon the exercise of Rights in accordance with the
foregoing subparagraph (ii) such number or fractions of shares of Preferred
Stock having an aggregate current market value equal to the Current Market Price
of a share of Common Stock. In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Board of Directors shall, to the extent permitted by
applicable law and any material agreements then in effect to which the Company
is a party (A) determine the excess (such excess, the "Spread") of (1) the value
of the shares of Common Stock issuable upon the exercise of a Right in
accordance with the foregoing subparagraph (ii) (the "Current Value") over (2)
the Purchase Price (as adjusted in accordance with the foregoing subparagraph
(ii)), and (B) with respect to each Right (other than Rights which have become
void pursuant to the foregoing subparagraph (ii)), make adequate provision to
substitute for the shares of Common Stock issuable in accordance with the
foregoing paragraph (ii) upon exercise of the Right and payment of the Purchase
Price (as adjusted in accordance therewith), (1) cash, (2) a reduction in such
Purchase Price, (3) shares of Preferred Stock or other equity securities of the
Company (including, without limitation, shares or fractions of shares of
preferred stock which, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of Common Stock, are
deemed in good faith by the Board of Directors to have substantially the same
value as the shares of Common Stock (such shares of Preferred Stock and shares
or fractions of shares of preferred stock are hereinafter referred to as
("Common Stock Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having a value which, when
added to the value of the shares of Common Stock actually issued upon exercise
of such Right, shall have an aggregate value equal to the Current Value (less
the amount of any reduction in such Purchase Price), where such aggregate value
has been determined by the Board of Directors upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors; provided, however, that if the Company shall not make adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the Flip-In Event (the "Flip-In Trigger Date"), then the Company shall
be obligated to deliver, to the extent permitted by applicable law and any
material agreements then in effect to which the Company is a party, upon the
surrender for exercise of a Right and without requiring payment of such Purchase
Price, shares of Common Stock (to the extent available), and then, if necessary,
such number or fractions of shares of Preferred Stock (to the extent available)
and then, if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If the Board of Directors of the Company shall determine in
good faith that it is likely that sufficient additional shares of Common Stock
and/or Common Stock Equivalents could be authorized for issuance upon exercise
in full of the Rights, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Flip-In Trigger Date, in order that the Company may seek stockholder approval
for the authorization of such additional shares or Common Stock Equivalents
(such thirty (30) day period, as it may be extended, is herein called the
"Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the second and/or third sentence of this
Section 11(a)(iii), the Company (x) shall provide, subject to the last sentence
of Section 11(a)(ii) hereof, that such action shall apply uniformly to all
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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 the first sentence of Section 11(a)(iii) 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 per share of the
Common Stock on the Flip-In Trigger Date and the per share or per unit value of
any Common Stock Equivalent shall be deemed to equal the Current Market Price
per share of the Common Stock on such date. The Board of Directors may, but
shall not be required to, establish procedures to allocate the right to receive
Common Stock upon the exercise of the Rights among holders of Rights pursuant to
this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five calendar days after such record date) Preferred Stock, shares having
the same rights, privileges and preferences as the Preferred Stock ("equivalent
preferred stock") or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or equivalent preferred
stock (or having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the Current Market
Price per share of Preferred Stock on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock outstanding
on such record date, plus the number of shares of Preferred Stock which the
aggregate offering price of the total number of shares of Preferred Stock and/or
equivalent preferred stock (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such Current Market
Price, and the denominator of which shall be the number of shares of Preferred
Stock outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or equivalent preferred stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such non-cash consideration shall be as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. Shares of Preferred Stock owned by or
held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that 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) In case the Company shall fix a record date for a distribution
to all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash, assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred 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 prior to such record date by a fraction, the numerator of which
shall be the Current Market Price per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price per share of Preferred Stock. Such adjustments shall
be made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
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(d) (i) 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 the Common Stock for the thirty
consecutive Trading Days (as such term is hereinafter defined) immediately prior
to such date, and for purpose of computations made pursuant to Section
11(a)(iii) hereof, the "Current Market Price" per share of the Common Stock on
any date shall be deemed to be the average of the daily closing prices per share
of the Common Stock for the ten consecutive Trading Days immediately following
such date; provided, however, that in the event that the Current Market Price
per share of the Common Stock is determined during a period following the
announcement by the issuer of the Common Stock of (i) any dividend or
distribution on the Common Stock (other than a regular quarterly cash dividend
and other than the Rights), (ii) any subdivision, combination or
reclassification of the Common Stock, and prior to the expiration of the
requisite thirty 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, combination or reclassification occurs, then, and in each
such case, the Current Market Price shall be properly adjusted to take into
account ex-dividend trading. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the shares of Common Stock are not listed or admitted to trading on the New
York Stock Exchange, 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 sale 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 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 of Directors of the Company. 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
and shall be binding on the Rights Agent. 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 of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per share (or one one-hundredth of a share) of Preferred
Stock shall be determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share (or one one-hundredth of a
share) of Preferred Stock cannot be determined in the manner provided above or
if the Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "Current Market Price" per
share of Preferred Stock shall be conclusively deemed to be an amount equal to
1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock and the "Current Market Price" per one
one-hundredth of a share of Preferred Stock shall be equal to the Current Market
Price per share of the Common Stock (as appropriately adjusted). If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or traded,
"Current Market Price" per shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.
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(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 ten-hundredth of a share of Common Stock or
other share or one-hundred-hundredth of a share of Preferred Stock, as the case
may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment, or (ii)
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 become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Preferred Stock
continued in Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m)
hereof, and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect
to the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Preferred
Stock purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of one one-hundredths of a
share of Preferred Stock (calculated to the nearest one-hundred-hundredth)
obtained by (i) multiplying (x) the number of one one-hundredths of a share of
Preferred Stock covered by a Right immediately prior to this adjustment, by (y)
the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, 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 or any adjustment to the number of shares of Preferred Stock
for which a Right may be exercised made pursuant to Sections 11(a)(i), 11(b) or
11(c), to adjust the number of Rights in lieu of any adjustment in the number of
shares of Preferred Stock purchasable upon the exercise of a Right. Each of the
Rights outstanding after the adjustment in the number of Rights shall be
exercisable for the number of shares of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one hundred-hundredth) obtained by dividing
the Purchase Price in effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, shall be at least ten days
later than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14 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 Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
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shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of shares of Preferred Stock issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price per share and the number of shares which were
expressed in the initial Right Certificate issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the shares of Common
Stock, Preferred Stock or other capital stock issuable upon exercise of the
Rights, the Company shall take any corporate action, including using its best
efforts to obtain any required stockholder approvals, which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock, Preferred Stock or
other capital stock at such adjusted Purchase Price. If upon any exercise of the
Rights, a holder is to receive a combination of Common Stock and Common Stock
Equivalents, a portion of the consideration paid upon such exercise, equal to at
least the then par value of a share of Common Stock of the Company, shall be
allocated as the payment for each share of Common Stock of the Company so
received.
(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 Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares of Preferred Stock and other capital stock 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 their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance for cash of any shares of
Preferred Stock at less than the Current Market Price, (iii) issuance for cash
of shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights. options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person, (ii) merge
with or into any other Person, or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction or a series of related
transactions, assets or earning power aggregating 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, if (x) at the time of or immediately after such
consolidation, merger or sale there are any charter or by-law provisions or any
rights, warrants or other instruments or securities outstanding or agreements in
effect which substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the stockholders 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. The Company shall not
consummate any such consolidation, merger or sale unless prior thereto the
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Company and such other Person shall have executed and delivered to the Rights
Agent a supplemental agreement evidencing compliance with this subsection.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23, 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 will diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Record Date and prior to
the Distribution Date (i) declare or pay any 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, shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock following any such event
equals the result obtained by multiplying the number of Rights associated with
each share of Common Stock immediately prior to such event by a fraction, the
numerator or which shall be the number of shares of Common Stock outstanding
immediately prior to the occurrence of such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately following
the occurrence of such event.
12. Certification of Adjustments. Whenever an adjustment is made as provided
in Sections 11 and 13 hereof, the Company shall (a) promptly prepare a
certificate signed by its Chief Executive Officer, its President or any Vice
President and by the Treasurer or any Assistant Treasurer or the Secretary or
any Assistant Secretary of the Company setting forth such adjustment and a brief
statement of the facts giving rise to such adjustment, (b) promptly file with
the Rights Agent and with each transfer agent for the Preferred Stock and the
Common Stock a copy of such certificate and (c) mail a brief summary thereof to
each holder of a Right Certificate (or, if prior to the Distribution Date, to
each holder of a certificate representing shares of Common Stock) in accordance
with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of
the Company to give such notice shall not affect the validity of or the force or
effect of or the requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any certificate prepared by the Company pursuant
to Sections 11 and 13 and on any adjustment therein contained and shall not be
deemed to have knowledge of any such adjustment unless and until it shall have
received such certificate. Any adjustment to be made pursuant to Sections 11 and
13 of this Rights Agreement shall be effective as of the date of the event
giving rise to such adjustment.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.
(a) In the event that following the first occurrence of a Flip-In
Event, directly or indirectly, (x) the Company shall consolidate with, or merge
with and into, any other Person or Persons and the Company shall not be the
surviving or continuing corporation of such consolidation or merger, or (y) any
Person or Persons shall consolidate with, or merge with and into, the Company,
and the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or of the Company or
each or any other property [other than, in the case of the transactions
described in subparagraphs (x) or (y), a merger or consolidation which would
result in all of the Voting Power represented by the securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into securities of the surviving
entity) all of the Voting Power represented by the securities of the Company or
such surviving entity outstanding immediately after such merger or consolidation
and the holders of such securities not having changed as a result of such
transactions], or (z) the Company or one or more of its Subsidiaries shall sell,
mortgage or otherwise transfer to any other Person or any Affiliate or Associate
of such Person, 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), then, on the first occurrence
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of any such event (a "Flip-Over Event"), proper provision shall be made so that
(i) each holder of a Right (other than Rights which have become void pursuant to
Section 11(a)(ii) hereof) shall thereafter have the right to receive, upon the
exercise thereof at the Purchase Price (as theretofore adjusted in accordance
with Section 11(a)(ii) hereof), in accordance with the terms of this Agreement
and in lieu of shares of Preferred Stock or Common Stock of the Company, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall equal the result obtained by dividing
the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)
hereof) by 50% of the Current Market Price per share of the Common Stock of such
Principal Party (determined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; provided, however,
that the Purchase Price (as theretofore adjusted in accordance with Section
11(a)(ii) hereof) and the number of shares of Common Stock of such Principal
Party so receivable upon exercise of a Right shall be subject to further
adjustment as appropriate in accordance with Section 11(f) hereof to reflect any
events occurring in respect of the Common Stock of such Principal Party after
the occurrence of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Flip-Over Event, all the obligations and duties of the Company pursuant to
this Rights Agreement; (iii) the term "Company" for all purposes of this Rights
Agreement shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 hereof shall only apply
to such Principal Party following the first occurrence of a Flip-Over Event; and
(iv) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of shares of its Common Stock in
accordance with Section 9 hereof) in connection with the consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the rights;
provided, however, that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all assets, recapitalization,
reclassification of shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right, such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had he, at the time of such transaction, owned the shares of Common
Stock of the Principal Party purchasable upon the exercise of a Right, and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may necessary to permit the subsequent
exercise of the right in accordance with the terms hereof for such cash, shares,
rights, warrants and other property.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in (x) or (y) of
the first sentence of Section 13(a) hereof; (A) the Person that is the issuer of
the securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, or, if there is more than one such issuer, the
issuer the Common Stock of which has the greatest aggregate market value or (B)
if no securities are so issued, (x) the Person that is the other party to the
merger or consolidation and that survives said merger or consolidation, or, if
there is more than one such Person, the Person the Common Stock of which has the
greatest market value or (y) if the Person that is the other party to the merger
or consolidation does not survive the merger or consolidation, the Person that
does survive the merger or consolidation (including the Company if it survives);
and
(ii) in the case of any transaction described in (z) of the
first sentence in Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if each Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred or if the Person receiving the greatest portion of the
assets or earning power cannot be determined, whichever of such Persons as is
the issuer of Common Stock having the greatest aggregate market value of shares
outstanding;
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provided, however, that in any such case described in the foregoing (b)(i) or
(b)(ii), (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, the term
"Principal Party" shall refer to such other Person, or (2) if such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Stocks
of all of which are and have been so registered, the term "Principal Party"
shall refer to whichever of such Persons is the issuer of the Common Stock
having the greatest market value of shares outstanding, or (3) if such Person is
owned, directly or indirectly, by a joint venture formed by two or more Persons
that are not owned, directly or indirectly, by the same Person, the rules set
forth in clauses (1) and (2) above shall apply to each of the owners having an
interest in the joint venture as if the Person owned by the joint venture was a
Subsidiary of both or all of such joint venturers, and the Principal Party in
each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale
or transfer referred to in Section 13(a) unless the Principal Party shall have a
sufficient number of authorized shares of its Common Stock that 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 the
Principal Party involved therein shall have executed and delivered to the Rights
Agent an agreement confirming that the requirements of Sections 13(a) and (b)
hereof shall promptly be performed in accordance with their terms and that such
consolidation, merger, sale or transfer of assets shall not result in a default
by the Principal Party under this Rights Agreement as the same shall have been
assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof and
further providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the
Securities Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, use its best
efforts to cause such registration statement to become effective as soon as
practicable after such filing and use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the date of expiration of the Rights,
and similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the
Principal Party shall become listed on a national securities exchange, to list
(or continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if the Common Stock of
the Principal Party shall not be listed on a national securities exchange, to
cause the Rights and the securities purchased upon exercise of the Rights to be
reported by NASDAQ or such other system then in use;
(iii) deliver to holder of the Rights historical financial
statements for the Principal Party which comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act; and
(iv) obtain waivers of any rights of first refusal or
preemptive rights in respect of the shares of Common Stock of the Principal
Party subject to purchase upon exercise of outstanding Rights.
In the event that any of the transactions described in Section 13(a) hereof
shall occur at any time after the occurrence of a transaction described in
Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised
shall thereafter be exercisable in the manner described in Section 13(a).
(d) Furthermore, in case the Principal Party which is to be a party
to a transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which p rovision would have the
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effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of Common Stock of such Principal Party at less than the then Current
Market Price per share (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then current market price (other than to holders of
rights pursuant to this Section 13) or (ii) providing for any special payment,
tax or similar provisions in connection with the issuance of the Common Stock of
such Principal Party pursuant to the provisions of Section 13; then, in such
event, the Company hereby agrees with each holder of Rights that it shall not
consummate any such transaction unless prior thereto the Company and such
Principal Party shall have executed and delivered to the Rights Agent a
supplemental agreement providing that the provision in question of such
Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.
14. Fractional Rights and Fractional Shares
(a) The Company shall not be required to issue fractions of Rights
or to distribute Right Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the holders of record of the
Right Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the then current
market value of a whole Right. For the purposes of this Section 14(a), the then
current market value of a Right shall be determined in the same manner as the
Current Market Price of a share of Common Stock shall be determined pursuant to
Section 11(d) hereof.
(b) The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-hundredth of a
share of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-hundredth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the shares of Preferred Stock represented by
such depositary receipts. In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-hundredth of a share of Preferred Stock shall be one one-hundredth of
the Current Market Price of a share of Preferred Stock (as determined pursuant
to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date
of such exercise.
(c) Following the occurrence of a Flip-In Event, the Company shall
not be required to issue fractions of shares or units of Common Stock or Common
Stock Equivalents or other securities upon exercise of the Rights or to
distribute certificates which evidence fractional shares of such Common Stock or
Common Stock Equivalents or other securities. In lieu of fractional shares or
units of such Common Stock or Common Stock Equivalents or other securities, the
Company may pay to the registered holders of Right Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Current Market Value of a share or unit of such Common Stock or
Common Stock Equivalent or other securities. For purposes of this Section 14(c),
the Current Market Value shall be determined in the manner set forth in Section
11(d) hereof for the Trading Day immediately prior to the date of such exercise
and, if such Common Stock Equivalent is not traded, each such Common Stock
Equivalent shall have the value of one one-hundredth of a share of Preferred
Stock.
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(d) The holder of a Right by the acceptance of a Right expressly
waives his right to receive any fractional Right or any fractional shares upon
exercise of a Right.
15. Rights of Action. All rights of action in respect of this Agreement, other
than any rights of action vested in the Rights Agent pursuant to Sections 18 and
20 below, are vested in the respective holders of record of the Right
Certificates (and, prior to the Distribution Date, the holders of record of the
Common Stock); and any holder of record of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company or any other Person to enforce, or otherwise act in respect
of, his right to exercise the rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and, accordingly, that they will
be entitled to specific performance of the obligations under, and injunctive
relief against actual or threatened violations of, the obligations of any Person
subject to this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any action to enforce the provisions of this Agreement.
16. Agreement of Right Holders. Every holder of a Right by accepting the
same consents and agrees with the Company and the Rights Agent and with every
other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not be evidenced
by a Right Certificate and will be transferable only in connection with the
transfer of Common Stock;
(b) after the Distribution Date, the Right Certificates will be
transferable only on the registry books of the Rights Agent if surrendered at
the office of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer;
(c) the Company and the Rights Agent may deem and treat the person
in whose name the Right Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Right Certificate or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent or the transfer agent
of the Common Stock) for all purposes whatsoever, and neither the Company nor
the Rights Agent shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, that the Company must use its
best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
17. Right Certificate Holder Not Deemed a Stockholder. No holder of a Right,
as such, shall be entitled to vote, receive dividends in respect of or be deemed
for any purpose to be the holder of Common Stock or any other securities of the
Company which may at any time be issuable upon the exercise of the Rights, nor
shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote in the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 hereof),
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or to receive dividends or subscription rights in respect of any such stock or
securities, or otherwise, until the Right or Rights evidenced by such Right
Certificate shall have been exercised in accordance with the provisions hereof.
18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all service rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent for any thing done or omitted to be
done by the Rights Agent in connection with the acceptance and administration of
this Rights Agreement, including the cost and expenses of defending against any
claim of liability in the premises. The indemnity provided herein shall survive
the expiration of the Rights and the termination of this Rights Agreement.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Rights Agreement in reliance upon any Right
Certificate, certificate for Common Stock or other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary, guaranteed, verified or acknowledged, by the proper Person or
Persons.
19. Merger or Consolidation or Changed 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
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Right Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver such
Right Certificates so countersigned; and, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver such Right Certificates so countersigned; and
in case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name or in its changed name; and in all such cases such Right
Certificate shall have the full force provided in the Right Certificates and in
this Rights Agreement.
20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Rights Agreement upon the following terms and
conditions, by all of which the Company and the holder of Right Certificates, by
their acceptance thereof, shall be bound:
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(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted to be taken by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "Current Market Price") be proved or established by the
Company prior to taking 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 certificate signed by the
President or any Vice President and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Rights 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 Rights Agreement or in the
Right Certificates (except its countersignature thereof) or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Sections 11, 13, 23 or 24 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Right Certificates after receipt of Certificate
furnished pursuant to Section 12 describing 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 Rights Agreement or any Right Certificate or as to whether any shares of
Common Stock will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President or any Vice President or the Secretary or
any Assistant Secretary or the Treasurer or any Assistant Treasurer of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with instructions of any such
officer. Any application by the Rights Agent for written instructions from the
Company may, at the option of the Rights Agent, set forth in writing any action
proposed to be taken or omitted by the Rights Agent under this Rights Agreement
and the date on and/or after which such action shall be taken or such omission
shall be effective. Subject to Section 20(c) hereof, the Rights Agent shall not
be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
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Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has either not been completed or indicates an affirmative
response to clause 1 and/or 2 thereof, the Rights Agent shall not take any
further action with respect to such requested exercise of transfer without first
consulting with the Company.
21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may
resign and be discharged from its duties under this Rights Agreement upon 30
days notice in writing, or such earlier period as shall be agreed to 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 Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent (with or without cause) upon 30 days notice in writing, or such
earlier period as shall be agreed to 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 Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. Notwithstanding the foregoing provisions of this
Section 21, in no event shall the registration or removal of a Rights Agent be
effective until a successor Rights Agent shall have been appointed and have
accepted such appointment. If the Company shall fail to make such appointment
within a period of 30 days after such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who shall, with such
notice, submit his Right Certificate for inspection by the Company), then the
incumbent Rights Agent or the holder of record of any Right Certificate may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be (a) a corporation organized and doing business under the laws of
the United States or any State thereof, in good standing, 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
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or (b) an Affiliate controlled by a corporation
described in clause (a) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
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execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock, and mail a notice thereof in
writing to the registered holders of the Right 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.
22. Issuance of New Right Certificates. Notwithstanding any of the provisions
of this Rights Agreement or of the Rights to the contrary, the Company may, at
its option, issue new Right Certificates evidencing Rights in such form as may
be approved by its Board of Directors to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares of stock or
other securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Rights Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock following the
Distribution Date and prior to the redemption or expiration of the Rights, the
Company shall, with respect to shares of Common Stock so issued or sold pursuant
to the exercise of stock options or under any employee plan or arrangement, or
upon the exercise, conversion or exchange of securities hereinafter issued by
the Company, in each case existing prior to the Distribution Date, issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Right Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Right Certificate
would be issued, and (ii) no such Right Certificate shall be issued, if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
23. Redemption.
(a) (i) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (x) the first occurrence of a Flip-In Event or
(y) the Close of Business on the Expiration Date, 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 to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price").
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights (or at such later time as the
Board of Directors may establish for the effectiveness of such redemption), and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten (10) days after such action of the Board of Directors ordering the
redemption of the Rights (or such later time as the Board of Directors may
establish for the effectiveness of such redemption), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Stock. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of redemption shall state the method by which the payment of the Redemption
Price will be made.
(c) In the case of a redemption permitted under Section 23(a), the
Company may, at its option, discharge all of its obligations with respect to the
Rights by (i) issuing a press release announcing the manner of redemption of the
Rights and (ii) mailing payment of the Redemption Price to the registered
holders of the Rights at their last addresses as they appear on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent of the Common Stock, and upon such action, all
outstanding Right Certificates shall be null and void without any further action
by the Company.
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24. Exchange of Rights for Common Stock.
(a) The Board of Directors of the Company may, at its option, at any
time after the occurrence of a Flip-In Event, exchange all or part of the then
outstanding and exercisable Rights (which (i) shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) and (ii) shall
include, without limitation, any Rights issued after the Distribution Date in
accordance with Section 22) for shares of Common Stock at an exchange ratio of
one share of Common Stock per Right, appropraitely adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than an Exempt Person),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of shares of Common Stock aggregating 50% or more of the shares
of Common Stock then outstanding. From and after the occurrence of an event
specified in Section 13(a) hereof, any Rights that theretofore have not been
exchanged pursuant to this Section 24(a) shall thereafter be exercisable only in
accordance with Section 13 and may not be exchanged pursuant to this Section
24(a).
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of 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 promptly shall mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the shares of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute, and, in the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall substitute to the extent of such insufficiency, for each
share of Common Stock that would otherwise be issuable upon exchange of a Right,
a number of shares of Preferred Stock or fractions thereof (or equivalent
preferred shares, as such term is defined in Section 11(b)) having an aggregate
current per share market price (determined pursuant to Section 11(d) hereof)
equal to the current per share market price of one share of Common Stock
(determined pursuant to Section 11(d) hereof) as of the date of the Flip-In
Event.
(d) In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of shares
of Common Stock or to distribute certificates which evidence fractional shares
of Common Stock. In lieu of such fractional shares of Common Stock, the Company
shall pay to the registered holders of the Right Certificates with regard to
which such fractional shares of Common Stock would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this paragraph (d), the current
market value of a whole share of Common Stock shall be the Current Market Price
of a share of Common Stock (as defined in Section 11(d) hereof for the purposes
of computations made other than pursuant to Section 11(a)(iii)) for the Trading
Day immediately prior to the date of exchange pursuant to this Section 24.
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25. Notice of Proposed Actions.
(a) In case the Company, after the Distribution Date, shall propose
(i) to effect any of the transactions referred to in Section 11(a)(i) or to pay
any dividend to the holders of record of its Preferred Stock payable in stock of
any class or to make any other distribution to the holders of record of its
Preferred Stock (other than a regular periodic cash dividend), or (ii) to offer
to the holders of record of its Preferred Stock or options, warrants, or other
rights to subscribe for or to purchase shares of Preferred Stock (including any
security convertible into or exchangeable for Preferred Stock) or shares of
stock of any other class or any other securities, options, warrants, convertible
or exchangeable securities or other rights, or (iii) to effect any
reclassification of its Preferred Stock or any recapitalization or
reorganization of the Company, or (iv) to effect any consolidation or merger
with or into, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of 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, or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of record of a Right
Certificate, in accordance with Section 26 hereof, notice of such proposed
action, which shall specify the record date for the purposes of such transaction
referred to in Section 11(a)(i), or such dividend or distribution, or the date
on which such reclassification, recapitalization, reorganization, consolidation,
merger, sale or transfer of assets, liquidation, dissolution or winding up is to
take place and the record date for determining participation therein by the
holders of record of Preferred Stock, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (i) or (ii)
above at least 10 days prior to the record date for determining holders of
record of the Preferred Stock for purposes of such action, and in the case of
any such other action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of record of
Preferred Stock, whichever shall be the earlier.
(b) In case any of the transactions referred to in Section 11(a)(ii)
or Section 13 of this Rights Agreement are proposed, then, in any such case, the
Company shall give to each holder of Rights, in accordance with Section 26
hereof, notice of the proposal of such transaction at least 10 days prior to
consummating such transaction, which notice shall specify the proposed event and
the consequences of the event to holders of Rights under Section 11(a)(ii) or
Section 13 hereof, as the case may be, and, upon consummating such transaction,
shall similarly give notice thereof to each holder of Rights.
(c) The failure to give notice required by this Section 25 or any
defect therein shall not affect the legality or validity of the action taken by
the Company or the vote upon any such action.
26. Notices. Notices or demands authorized by this Rights Agreement to be given
or made by the Rights Agent or by the holder of record of any Right Certificate
or Right to or on behalf of 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:
Teknowledge Corporation
1810 Embarcadero Road
Palo Alto, CA 94303
Attention: Chief Executive Officer
Subject to the provisions of Section 20 hereof, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
record of any Right Certificate or Right to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Attention: Reorganization Department
27
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Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of record of any Right Certificate
or Right 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 it
papers upon the registry books of the Rights Agent or, prior to the Distribution
Date, on the registry books of the Transfer Agent.
27. Supplements and Amendments. Except as provided in the penultimate sentence
of this Section 27, for so long as the Rights are then redeemable, the Company
may in its sole and absolute discretion, and the Rights Agent shall if the
Company so directs, supplement or amend any provision of this Agreement in any
respect without the approval of any holders of the Rights. At any time when the
Rights are no longer redeemable, except as provided in the penultimate sentence
of this Section 27, the Company may, and the Rights Agent shall, if the Company
so directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order to (i) cure any ambiguity, (ii) correct
or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder, or (iv) change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable; provided that no
such supplement or amendment shall adversely affect the interests of the holders
of Rights as such (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person), and no such amendment may cause the Rights again to
become redeemable or cause the Agreement again to become amendable other than in
accordance with this sentence. Notwithstanding anything contained in this Rights
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Stock.
28. Successors. All of the covenants and provisions of this Rights
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.
29. Benefits of this Rights Agreement. Nothing in this Rights Agreement shall
be construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive benefit of the Company, the Rights Agent and the holders of
record of the Right Certificates (and, prior to the Distribution Date, the
Common Stock).
30. Governing Law. This Rights Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such state applicable to contracts to be made solely by
residents of such state and performed entirely within such state.
31. Counterparts. This Rights Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
32. Descriptive Headings. Descriptive headings of the several sections of
this Rights Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
33. Severability. If any term, provision, covenant or restriction of this
Rights Agreement is held by a court of competent jurisdiction or other authority
to be invalid, illegal or unenforceable, the reminder of the terms, provisions,
covenants and restrictions of this Rights Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
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42
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement
to be duly executed, and their seals affixed and attested, all as of the day and
year first above written.
[SEAL]
ATTEST: TEKNOWLEDGE CORPORATION
By: /s/ Dennis Bugbee By: /s/ Frederick Hayes-Roth
---------------------- ---------------------------------------------
Name: Dennis Bugbee Name: Frederick Hayes-Roth
Title: Secretary Title: Chairman and Chief Executive Officer
[SEAL]
ATTEST: TEKNOWLEDGE CORPORATION
By: /s/ Dennis Bugbee By: /s/ Neil Jacobstein
---------------------- ---------------------------------------------
Name: Dennis Bugbee Name: Neil Jacobstein
Title: Secretary Title: President and Chief Operating Officer
[SEAL]
ATTEST: REGISTRAR AND TRANSFER COMPANY
By: /s/ Margaret Villani By: /s/ Thomas L. Montrone
----------------------- --------------------------------------------
Name: Margaret Villani Name: Thomas L. Montrone
Title: Vice President Title: President and Chief Executive Officer
29
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43
EXHIBIT A
TEKNOWLEDGE CORPORATION
CERTIFICATE
OF DESIGNATION, PREFERENCES AND RIGHTS
OF THE TERMS OF THE
Series A Preferred Stock
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware
We, the Chairman and Chief Executive Officer, President and Chief
Operating Officer and Secretary, respectively, of Teknowledge Corporation,
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on January 29, 1996, adopted the following resolution creating a
series of 500,000 shares of Preferred Stock designated as Series A Preferred
Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Certificate of
Incorporation, a series of Preferred Stock of the Corporation be and it hereby
is created, and that the designation and amount thereof and the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock"), $.01
par value per share, and the number of shares constituting such series shall be
500,000.
Section 2. Dividends and Distributions.
(A) The dividend rate on the shares of Series A Preferred Stock
shall be for each quarterly dividend (hereinafter referred to as a "quarterly
dividend period"), which quarterly dividend periods shall commence on January 1,
April 1, June 1 and September 1 each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date") (or in the case of original
issuance, from the date of original issuance) and shall end on and include the
day next preceding the first date of the next quarterly dividend period, at a
rate per quarterly dividend period (rounded to the nearest cent) equal to the
greater of (a) $50 or (b) subject to the provisions for adjustment hereinafter
set forth, 100 times the aggregate per share amount of all cash dividends, and
100 times the aggregate per share amount (payable in cash, based upon the fair
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44
market value at the time the non-cash dividend or other distribution is declared
as determined in good faith by the Board of Directors) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared (but not withdrawn) on the Common Stock, par value $.01
per share, of the Corporation (the "Common Stock") during the immediately
preceding quarterly dividend period, or, with respect to the first quarterly
dividend period, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event this Company shall at any time after
February 12, 1996 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 45 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each share of Series A Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series A Preferred Stock were
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45
entitled immediately prior to such event shall be adjusted by multiplying such
number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(C) Except as set forth herein, in the Certificate of Incorporation
and in the By-laws, holders of Series A Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 5. Liquidation, Dissolution or Winding Up.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Series A
Preferred Stock shall be entitled to receive the greater of (a) $200 per share,
plus accrued dividends to the date of distribution, whether or not earned or
declared, or (b) an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount to be distributed
per share to holders of Common Stock. In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event pursuant to clause
(b) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 6. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
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46
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 8. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock. All payments made with respect to fractional shares
hereunder shall be rounded to the nearest whole cent.
Section 9. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Preferred Stock, except dividends paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series
A Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in exchange
for shares of any stock of the Corporation ranking junior (either as to
4
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47
dividends or upon dissolution, liquidation or winding up) to the Series A
Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the
Board of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 9, purchase or otherwise acquire such shares at such time and in
such manner.
Section 10. Ranking. The Series A Preferred Stock shall be junior to all
other Series of the Corporation's preferred stock as to the payment of dividends
and the distribution of assets, unless the terms of any series shall provide
otherwise.
Section 11. Amendment. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
or more of the outstanding shares of Series A Preferred Stock voting together as
a single class.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
od affirm the foregoing as true under the penalties of perjury this 30th day of
January, 1996.
/s/ Frederick Hayes-Roth
-------------------------------------
Frederick Hayes-Roth
Chairman and Chief Executive Officer
/s/ Neil Jacobstein
-------------------------------------
Neil Jacobstein
President and Chief Operating Officer
Attest:
/s/ Dennis Bugbee
- ------------------------
Dennis Bugbee, Secretary
5
<PAGE>
48
EXHIBIT B
[Form of Right Certificate]
Certificate No. W- _______________ Rights
NOT EXERCISABLE AFTER JANUARY 28, 2006, OR EARLIER IF REDEEMED OR
EXCHANGED. AT THE OPTION OF THE COMPANY, THE RIGHTS MAY BE REDEEMED AT
$.001 PER RIGHT OR EXCHANGED FOR PREFERRED STOCK ON THE TERMS SET FORTH IN
THE RIGHTS AGREEMENT. IN THE EVENT THAT THE RIGHTS REPRESENTED BY THIS
CERTIFICATE ARE ISSUED TO A PERSON WHO IS AN ACQUIRING PERSON OR CERTAIN
TRANSFEREE OF THE RIGHTS PREVIOUSLY OWNED BY SUCH PERSONS, THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY SHALL BE NULL AND VOID AND
WILL NO LONGER BE TRANSFERABLE.
RIGHT CERTIFICATE
TEKNOWLEDGE CORPORATION
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 January 29, 1996 ("Rights
Agreement") between Teknowledge Corporation, a Delaware corporation ("Company"),
and Registrar and Transfer Company ("Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 p.m. (New York time) on January 28, 2006, at
the principal office of the Rights Agent, or its successors as Rights Agent,
designated for such purposes, one one-hundredth of a fully paid and
nonassessable share of Series A Preferred Stock of the Company ("Preferred
Stock") at a purchase price of $200.00 per one one-hundredth of a share, as the
same may from time to time be adjusted in accordance with the Rights Agreement
1
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49
("Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to such
terms in the Rights Agreement.
As provided in the Rights Agreement, the Purchase Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events and, upon the
happening of certain events, securities other than shares of Preferred Stock, or
other property, may be acquired upon exercise of the Rights evidenced by this
Right Certificate, as provided by the Rights Agreement.
Upon the occurrence of a Flip-In Event, 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, (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 any Affiliate or Associate
of an Acquiring Person, such Rights shall be null and void and will no longer be
transferable and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Flip-In Events.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
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 of the Rights Agent,
the Company and the holders of record of the Right Certificates, which
limitation of rights include the temporary suspension of the exercisability of
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50
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal executive office of
the Company and are available upon written request to the Company.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder of record to purchase a like aggregate
number of shares of Preferred Stock as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof, another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, at any time prior to
the earlier of (i) the occurrence of a Flip-In Event (as such term is defined in
the Rights Agreement) or (ii) the Expiration Date (as such term is defined in
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. Subject
to the provisions of the Rights Agreement, the Company may, at its option, at
any time after a Flip-In Event, exchange all or part of the Rights evidenced by
this Certificate for shares of the Company's Common Stock or for Preferred Stock
(or shares of a class or series of the Company's preferred stock having the same
rights, privileges and preferences as the Preferred Stock).
No fractional shares of Preferred Stock shall be issued upon the exercise
of any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-hundredth of a share of Preferred Stock, which may, at the
3
<PAGE>
51
option of the Company, be evidenced by depositary receipts), and no fractional
shares of Common Stock will be issued upon the exchange of any Right or Rights
evidenced hereby, and in lieu thereof, as provided in the Rights Agreement,
fractions of shares of Preferred Stock or Common Stock shall receive an amount
in cash equal to the same fraction of the then Current Market Price (as such
term is defined in the Rights Agreement) of a share of Preferred Stock or Common
Stock, as the case may be.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of 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
stockholder of the Company or any right to vote in the election of directors; or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action or to receive notice of meetings or
other actions affecting stockholders (other than certain actions specified in
the Rights Agreement) or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised or exchanged as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
4
<PAGE>
52
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of __________________, _____.
ATTEST: TEKNOWLEDGE CORPORATION
______________________________ By: __________________________________
Secretary
Title: ________________________________
COUNTERSIGNED: REGISTRAR AND TRANSFER COMPAN
As Rights Agent
By: __________________________________
Authorized Officer
5
<PAGE>
53
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer any or all of the Rights
represented by this Right Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Name, address and social security or other
identifying number of transferee)
___________________________________ (_______________) of the Rights represented
by this Right Certificate, together with all right, title and interest in and to
said Rights, and hereby irrevocably constitutes and appoints
_________________________ attorney to transfer said Rights on the books of the
within-named Company with full power of substitution.
Dated:__________________, 19__ ___________________________
(Signature)
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the rights evidenced by this Right Certificate [ ] are [ ] are not
being sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person (as such capitalized terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or any transferee of such Persons.
Dated:__________________, 19__ ___________________________
(Signature)
Signature Guaranteed:
6
<PAGE>
54
Form of Reverse Side of Right Certificate
(continued)
NOTICE
The signatures to the foregoing Assignment and the foregoing Certificate,
if applicable, must correspond to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a participant in a Securities
Transfer Association ("STA") recognized signature program.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.
7
<PAGE>
55
Form of Reverse of Right Certificate
(continued)
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder
desires to exercise any or all of the Rights
represented by this Right Certificate)
To Teknowledge Corporation:
The undersigned hereby irrevocably elects to exercise _______________
(__________) of the Rights represented by this Right Certificate to purchase the
shares of the Common Stock of the Company, or other securities or property
issuable upon the exercise of said number of Rights pursuant to the Rights
Agreement.
The undersigned hereby requests that a certificate for any such securities
and any such property be issued in the name of and delivered to:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Name, address and social security or other
identifying number of issuee)
The undersigned hereby further requests that if said number of Rights
shall not be all the Rights represented by this Right Certificate, a new Right
Certificate for the remaining balance of such Rights be issued in the name of
and delivered to:
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Name, address and social security or other
identifying number of issuee)
Dated:__________________, 19__ ___________________________
(Signature)
Signature Guaranteed:
8
<PAGE>
56
Form of Reverse Side of Right Certificate
(continued)
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is or was an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or any transferee of such Persons.
Dated:__________________, 19__ ___________________________
(Signature)
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and the foregoing
Certificate, if applicable, must correspond to the name as written upon the face
of the this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
In the event that the foregoing Certificate is not executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.
9
<PAGE>
57
EXHIBIT C
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED
TO, BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) OR AN ASSOCIATE OR
AFFILIATE (AS DEFINED IN THE RIGHTS AGREEMENT) THEREOF AND CERTAIN TRANSFEREES
THEREOF WILL BE NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
TEKNOWLEDGE CORPORATION
Summary of Terms of
Rights Agreement
Nature of Right: When exercisable, each Right (a "Right") will
initially entitle the holder to purchase one
one-hundredth of a share of Series A Preferred
Stock ("Preferred Stock") of Teknowledge
Corporation (the "Company").
Means of Distribution: The Rights will be distributed to holders of the
Company's outstanding Common Stock as a dividend
of one Right for each share of Common Stock.
The Rights will also be attached to all future
issuances of Common Stock prior to the
Distribution Date (as defined below).
Exercisability: Rights become exercisable on the earlier of:
(i) the tenth day following the date of public
announcement by the Company or by any person or
group (an "Acquiring Person") that such person
or group has acquired beneficial ownership of
15% or more of the Company's outstanding Common
Stock, or (ii) the tenth business day (unless
extended by the Board prior to the time a
person becomes an Acquiring Person) following
the commencement, or announcement of an
intention to commence, by any person or group
of a tender or exchange offer which would
result in such person owning 15% or more of the
outstanding Common Stock of the Company (the
earlier of such dates is referred to as the
"Distribution Date"). Rights will trade
separately from the Common Stock once the
Rights become exercisable.
Exercise Price: $2.00 per share, which is the amount that in
the judgment of the Board of Directors
represents the long-term value of the Common
Stock over the term of the Rights Agreement
(the "Exercise Price").
Term: The Rights will expire upon the earlier of (i)
ten years after the date of issuance, or
January 28, 2006 or (ii) redemption or exchange
by the Company as described below.
Redemption of Rights: Rights are redeemable at a price of $0.001 per
Right, by the vote of the Company's Board of
Directors, at any time until the occurrence
of a Flip-In Event (defined below).
1
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58
Preferred Stock: The Preferred Stock purchasable upon exercise
of the Rights will be nonredeemable and junior
to any other series of preferred stock the
Company may issue (unless otherwise provided in
the terms of such other series). Each share of
Preferred Stock will have a preferential
cumulative quarterly dividend in an amount
equal to the greater of (a) $50 or (b) 100
times the dividend declared on each share of
Common Stock. In the event of liquidation, the
holders of Preferred Stock will receive a
preferred liquidation payment equal to the
greater of (a) $200 per share, plus accrued
dividends to the date of distribution whether
or not earned or declared, or (b) an amount per
share equal to 100 times the aggregate payment
to be distributed per share of Common Stock.
Each share of Preferred Stock will have 100
votes, voting together with the shares of
Common Stock. In the event of any merger,
consolidation or other transaction in which
shares of Common Stock are exchanged for or
changed into other securities, cash and / or
other property, each share of Preferred Stock
will be entitled to receive 100 times the
amount and type of consideration received per
share of Common Stock. The rights of the
Preferred Stock as to dividends, liquidation
and voting, and in the event of mergers and
consolidations, are protected by customary
anti-dilution provisions. Fractional shares
(in integral multiples of one one-hundredth) of
Preferred Stock will be issuable; however, the
Company may elect to distribute depositary
receipts in lieu of such fractional shares. In
lieu of fractional shares other than fractions
that are multiples of one one-hundredth of a
share, an adjustment in cash will be made based
on the market price of the Preferred Stock on
the last trading date prior to the date of
exercise. Because of the nature of the
Preferred Stock's dividend, liquidation and
voting rights, the value of one one-hundredth
of a share of Preferred Stock purchasable upon
exercise of each Right should approximate the
value of one share of Common Stock.
Rights in Event of In the event that an Acquiring Person
Self-Dealing Transac- engages in certain self-dealing transactions
tion or Acquisition of with the Company, or a Person becomes the
Substantial Amount of beneficial owner of 15% or more of the
Common Stock: outstanding Common Stock ("Flip-In Events"), a
holder of a Right thereafter has the right to
purchase, upon payment of the then current
Exercise Price, in lieu of one one-hundredth of a
share of Preferred Stock per outstanding Right,
such number of shares of Common Stock having a
market value at the time of the transaction equal
to the Exercise Price divided by one-half the
Current Market Price(as defined in the Rights
Agreement) of the Common Stock. Notwithstanding
the foregoing, Rights held by the Acquiring Person
or any Associate or Affiliate thereof or certain
transferees will be null and void and no longer be
transferable.
Self-dealing transactions are defined to include a
consolidation, merger or other combination of an
Acquiring Person with the Company in which the
Company is the surviving corporation, the transfer
of assets to the Company in exchange for
securities of the Company, or otherwise obtain
securities of the Company (other than in a pro
rata distribution to all stockholders), the sale,
purchase, transfer, distribution, lease, mortgage,
pledge or acquisition of assets by the Acquiring
Person to, from or with the Company on other
2
<PAGE>
59
than an arm's length basis, compensation to an
Acquiring Person for services (other than for
employment as a regular or part-time employee or
director on a basis consistent with the Company's
past practice), a loan or provision of other
financial assistance (except proportionately as a
stockholder) to an Acquiring Person or the
licensing, sale or other transfer of proprietary
technology or know-how from the Company to the
Acquiring Person on terms not approved by the
Board of Directors or a reclassification,
recapitalization or other transaction with the
effect of increasing by more than 1% the Acquiring
Person's proportionate share of any class of
securities of the Company.
Rights in Event of If, following the occurrence of a Flip-In
Business Combination: Event, the Company is acquired by any person
in a merger or other business combination
transaction in which the Common Stock is exchanged
or converted or in which the corporation is not
the surviving corporation, or 50% or more of its
assets or earnings power are sold to any person,
each holder of a Right (other than an Acquiring
Person, or Affiliates or Associates thereof) shall
thereafter have the right to purchase, upon
payment of the then current Exercise Price, such
number of shares of common stock of the acquiring
company having a current market value equal to the
Exercise Price divided by one-half the Current
Market Price of such common stock.
Exchange Option: In the event (i) any person or group becomes an
Acquiring Person or (ii) any of the types of
transactions, acquisitions or other events
described above as self-dealing transactions
occur, and prior to the acquisition by such
person or group of 50% or more of the
outstanding shares of Common Stock, the Board
may require all or any portion of the
outstanding Rights (other than Rights owned by
such Acquiring Person which have become void)
to be exchanged for Common Stock on a pro rata
basis, at an exchange ratio of one share of
Common Stock or one one-hundredth of a share of
Preferred Stock (or of a share of a class or
series of the Company's Preferred Stock having
equivalent rights, preferences and privileges),
per Right (subject to adjustment).
Fractional Shares: No fractional shares of Common Stock will be
issued upon exercise of the Rights and, in lieu
thereof, a payment in cash will be made to the
holder of such Rights equal to the same
fraction of the current market value of a share
of Common Stock.
Adjustment: The Exercise Price payable, and the number of
shares of Preferred Stock or other securities
or property issuable, upon exercise of the
Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision,
combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders
of the Preferred Stock of certain rights or
warrants to subscribe for Preferred Stock or
convertible securities at less than the current
market price of the Preferred Stock or (iii)
upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or
assets (excluding dividends payable in
Preferred Stock) or of subscription rights or
warrants (other than those referred to above).
The number of Rights associated with each share
of Common Stock is also subject to adjustment
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60
in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in
Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any
such case, prior to the Distribution Date.
Rights as Stockholder: The Rights themselves do not entitle the holder
thereof to any rights as a stockholder,
including, without limitation, voting rights or
to receive dividends.
Amendment of Rights: Until the Rights become nonredeemable, the
Company may, except with respect to the
redemption price, amend the Agreement in any
manner. After the Rights become nonredeemable,
the Company may amend the Agreement to cure any
ambiguity, to correct or supplement any
provision which may be defective or
inconsistent with any other provisions, to
shorten or lengthen any time period under the
Rights Agreement, or to change or supplement
any provision in any manner the Company may
deem necessary or desirable, provided that no
such amendment may adversely affect the
interests of the holders of the Rights (other
than t he Acquiring Person or its Affiliates or
Associates) or cause the Rights to again be
redeemable or the Agreement to again be freely
amendable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated February 12, 1996. A copy of the Rights Agreement is available, free
of charge, from the Company, 1810 Embarcadero Road, Palo Alto, CA 94303,
Attention: Secretary. This summary description of the Rights Agreement
does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, as amended from time to time, which is
incorporated in this summary description by reference.
4
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61
EXHIBIT 2
FOR IMMEDIATE RELEASE
Contact: Dennis Bugbee
Director of Finance
(415) 424-0500
TEKNOWLEDGE CORPORATION ADOPTS SHAREHOLDERS' RIGHTS PLAN
PALO ALTO, CALIF. (January 30, 1996) - Teknowledge Corporation announced
today that its Board of Directors had adopted a Preferred Stock Purchase Rights
Plan designed to enable all Teknowledge stockholders to realize the full value
of their investment and to provide for fair and equal treatment for all
Teknowledge stockholders in the event that an unsolicited attempt is made to
acquire Teknowledge. The adoption of the Plan is intended as a means to guard
against takeover tactics designed to gain control of Teknowledge without paying
all stockholders full and fair value. The distribution of the Rights is not in
response to any proposal to acquire Teknowledge. The Board is not aware of any
such effort.
Under the Plan, stockholders will receive one Right to purchase one
one-hundredth of a share of a new series of Preferred Stock for each outstanding
share of Teknowledge Common Stock held of record at the close of business on
February 12, 1996
The Rights, which will initially trade with the Common Stock, become
exercisable to purchase one one-hundredth of a share of the new Preferred Stock,
at $2.00 per Right, when someone acquires 15 percent or more of Common Stock or
announces a tender offer which could result in such person owning 15 percent or
more of Common Stock. Each one one-hundredth of a share of the new Preferred
Stock has terms designed to make it substantially the economic equivalent of one
share of Common Stock. Prior to someone acquiring 15 percent, the Rights can be
redeemed for $.001 each by action of the Board. Under certain circumstances, if
someone acquires 15 percent or more of Common Stock, the Rights permit the
holders to purchase Teknowledge Common Stock having a market value of twice the
exercise price of the Rights, in lieu of the Preferred Stock. In addition, in
the event of certain business combinations, the Rights permit purchase of the
Common Stock of an acquiror at a 50 percent discount. In either case, Rights
held by the acquiror will become null and void.
The rights expire on January 28, 2006. The Rights distribution will not be
taxable to stockholders and will be payable to stockholders of record on
February 12, 1996.
Teknowledge has reported five consecutive profitable quarters since
turning around the business by eliminating unprofitable divisions. The Company
expects to publish in February its Fourth Quarter and Annual 1995 results. The
Company provides software architecture, design services, and Internet
application software. Its core competencies are in knowledge-based systems,
distributed intelligent systems, and intelligent network associates. Teknowledge
builds both defense and commercial application software. This software is aimed
primarily at supporting distributed collaborative decision making and the
automation of routine knowledge-based tasks.
Teknowledge stock is traded over the counter under the symbol TEKC.
<PAGE>
62
EXHIBIT 3
February 12, 1996
Dear Fellow Shareholders:
Teknowledge Corporation's Board of Directors has adopted a Shareholder
Rights Plan (the "Plan"). We have enclosed with this letter a summary of the
principal terms of the Plan.
The Plan is designed to protect your interests in the event the Company is
confronted with an unsolicited takeover attempt. The Plan contains provisions
designed to deter unsolicited offers that do not treat all stockholders equally,
and other coercive takeover tactics which may impair the Board's ability to
represent your interests fully. This includes acquisitions of significant blocks
of shares in the open market, without paying a control premium. These tactics
unfairly pressure stockholders, squeeze them out of their investment without
giving them any real choice, and deprive them of receiving the full value for
their Common Stock. The Plan is similar to plans adopted by over 1500 publicly
held companies, and was adopted by the Board of Directors after consultation
with the Company's investment bankers and counsel. We consider the Plan to be an
effective tool in protecting your equity investment, while not preventing a fair
acquisition offer.
The Plan is not intended to prevent a takeover of the Company and will not
do so. It is designed to deal with unilateral actions by a hostile acquiror that
are calculated to deprive the Board and the Company's stockholders of the
ability to take actions to maximize stockholder value. The Plan does not
preclude the Board from considering or accepting an offer to acquire all or part
of the Company, if the Board believes the offer to be in the best interests of
the Company's stockholders. The Plan has not been adopted in response to any
known effort to acquire control of the Company.
The adoption of the Plan does not weaken the financial strength of the
Company or interfere with its business plans. The issuance of the Rights has no
dilutive effect, will not affect reported earnings per share, is not taxable to
the Company or you, and will not change the way in which you can trade the
Company's stock. As explained in detail in the enclosed summary of the Plan, the
Rights can only be exercised if and when an acquiror proceeds beyond a
predetermined threshold without prior Board approval. The Board believes that
the adoption of the Plan represents a sound and reasonable means of preserving
the long-term value of the Company for all its stockholders.
You are not required to take any action at this time. We recommend,
however, that you read the enclosed summary of the many features of the Plan,
and retain the summary with your Teknowledge Corporation stock certificates or
records. If you should require further information, a copy of the Plan is
available from the Corporate Secretary.
Teknowledge has reported five consecutive profitable quarters since
turning around the business by eliminating unprofitable divisions. The Company
expects to publish in February its Fourth Quarter and 1995 results. The Company
is looking forward to continuing growth. Thank you for your active support.
/s/ Frederick Hayes-Roth /s/ Neil Jacobstein
- ------------------------------------ -------------------------------------
Chairman and Chief Executive Officer President and Chief Operating Officer
1
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63
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED
TO, BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) OR AN ASSOCIATE OR
AFFILIATE (AS DEFINED IN THE RIGHTS AGREEMENT) THEREOF AND CERTAIN TRANSFEREES
THEREOF WILL BE NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.
TEKNOWLEDGE CORPORATION
Summary of Terms of
Rights Agreement
Nature of Right: When exercisable, each Right (a "Right") will
initially entitle the holder to purchase one
one-hundredth of a share of Series A Preferred
Stock ("Preferred Stock") of Teknowledge
Corporation (the "Company").
Means of Distribution: The Rights will be distributed to holders of the
Company's outstanding Common Stock as a dividend
of one Right for each share of Common Stock.
The Rights will also be attached to all future
issuances of Common Stock prior to the
Distribution Date (as defined below).
Exercisability: Rights become exercisable on the earlier of:
(i) the tenth day following the date of public
announcement by the Company or by any person or
group (an "Acquiring Person") that such person
or group has acquired beneficial ownership of
15% or more of the Company's outstanding Common
Stock, or (ii) the tenth business day (unless
extended by the Board prior to the time a
person becomes an Acquiring Person) following
the commencement, or announcement of an
intention to commence, by any person or group
of a tender or exchange offer which would
result in such person owning 15% or more of the
outstanding Common Stock of the Company (the
earlier of such dates is referred to as the
"Distribution Date"). Rights will trade
separately from the Common Stock once the
Rights become exercisable.
Exercise Price: $2.00 per share, which is the amount that in
the judgment of the Board of Directors
represents the long-term value of the Common
Stock over the term of the Rights Agreement
(the "Exercise Price").
Term: The Rights will expire upon the earlier of (i)
ten years after the date of issuance, or
January 28, 2006 or (ii) redemption or exchange
by the Company as described below.
Redemption of Rights: Rights are redeemable at a price of $0.001 per
Right, by the vote of the Company's Board of
Directors, at any time until the occurrence
of a Flip-In Event (defined below).
2
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64
Preferred Stock: The Preferred Stock purchasable upon exercise
of the Rights will be nonredeemable and junior
to any other series of preferred stock the
Company may issue (unless otherwise provided in
the terms of such other series). Each share of
Preferred Stock will have a preferential
cumulative quarterly dividend in an amount
equal to the greater of (a) $50 or (b) 100
times the dividend declared on each share of
Common Stock. In the event of liquidation, the
holders of Preferred Stock will receive a
preferred liquidation payment equal to the
greater of (a) $200 per share, plus accrued
dividends to the date of distribution whether
or not earned or declared, or (b) an amount per
share equal to 100 times the aggregate payment
to be distributed per share of Common Stock.
Each share of Preferred Stock will have 100
votes, voting together with the shares of
Common Stock. In the event of any merger,
consolidation or other transaction in which
shares of Common Stock are exchanged for or
changed into other securities, cash and / or
other property, each share of Preferred Stock
will be entitled to receive 100 times the
amount and type of consideration received per
share of Common Stock. The rights of the
Preferred Stock as to dividends, liquidation
and voting, and in the event of mergers and
consolidations, are protected by customary
anti-dilution provisions. Fractional shares
(in integral multiples of one one-hundredth) of
Preferred Stock will be issuable; however, the
Company may elect to distribute depositary
receipts in lieu of such fractional shares. In
lieu of fractional shares other than fractions
that are multiples of one one-hundredth of a
share, an adjustment in cash will be made based
on the market price of the Preferred Stock on
the last trading date prior to the date of
exercise. Because of the nature of the
Preferred Stock's dividend, liquidation and
voting rights, the value of one one-hundredth
of a share of Preferred Stock purchasable upon
exercise of each Right should approximate the
value of one share of Common Stock.
Rights in Event of In the event that an Acquiring Person
Self-Dealing Transac- engages in certain self-dealing transactions
tion or Acquisition of with the Company, or a Person becomes the
Substantial Amount of beneficial owner of 15% or more of the
Common Stock: outstanding Common Stock ("Flip-In Events"), a
holder of a Right thereafter has the right to
purchase, upon payment of the then current
Exercise Price, in lieu of one one-hundredth of a
share of Preferred Stock per outstanding Right,
such number of shares of Common Stock having a
market value at the time of the transaction equal
to the Exercise Price divided by one-half the
Current Market Price(as defined in the Rights
Agreement) of the Common Stock. Notwithstanding
the foregoing, Rights held by the Acquiring Person
or any Associate or Affiliate thereof or certain
transferees will be null and void and no longer be
transferable.
Self-dealing transactions are defined to include a
consolidation, merger or other combination of an
Acquiring Person with the Company in which the
Company is the surviving corporation, the transfer
of assets to the Company in exchange for
securities of the Company, or otherwise obtain
securities of the Company (other than in a pro
rata distribution to all stockholders), the sale,
purchase, transfer, distribution, lease, mortgage,
pledge or acquisition of assets by the Acquiring
Person to, from or with the Company on other
3
<PAGE>
65
than an arm's length basis, compensation to an
Acquiring Person for services (other than for
employment as a regular or part-time employee or
director on a basis consistent with the Company's
past practice), a loan or provision of other
financial assistance (except proportionately as a
stockholder) to an Acquiring Person or the
licensing, sale or other transfer of proprietary
technology or know-how from the Company to the
Acquiring Person on terms not approved by the
Board of Directors or a reclassification,
recapitalization or other transaction with the
effect of increasing by more than 1% the Acquiring
Person's proportionate share of any class of
securities of the Company.
Rights in Event of If, following the occurrence of a Flip-In
Business Combination: Event, the Company is acquired by any person
in a merger or other business combination
transaction in which the Common Stock is exchanged
or converted or in which the corporation is not
the surviving corporation, or 50% or more of its
assets or earnings power are sold to any person,
each holder of a Right (other than an Acquiring
Person, or Affiliates or Associates thereof) shall
thereafter have the right to purchase, upon
payment of the then current Exercise Price, such
number of shares of common stock of the acquiring
company having a current market value equal to the
Exercise Price divided by one-half the Current
Market Price of such common stock.
Exchange Option: In the event (i) any person or group becomes an
Acquiring Person or (ii) any of the types of
transactions, acquisitions or other events
described above as self-dealing transactions
occur, and prior to the acquisition by such
person or group of 50% or more of the
outstanding shares of Common Stock, the Board
may require all or any portion of the
outstanding Rights (other than Rights owned by
such Acquiring Person which have become void)
to be exchanged for Common Stock on a pro rata
basis, at an exchange ratio of one share of
Common Stock or one one-hundredth of a share of
Preferred Stock (or of a share of a class or
series of the Company's Preferred Stock having
equivalent rights, preferences and privileges),
per Right (subject to adjustment).
Fractional Shares: No fractional shares of Common Stock will be
issued upon exercise of the Rights and, in lieu
thereof, a payment in cash will be made to the
holder of such Rights equal to the same
fraction of the current market value of a share
of Common Stock.
Adjustment: The Exercise Price payable, and the number of
shares of Preferred Stock or other securities
or property issuable, upon exercise of the
Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a
stock dividend on, or a subdivision,
combination or reclassification of the
Preferred Stock, (ii) upon the grant to holders
of the Preferred Stock of certain rights or
warrants to subscribe for Preferred Stock or
convertible securities at less than the current
market price of the Preferred Stock or (iii)
upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or
assets (excluding dividends payable in
Preferred Stock) or of subscription rights or
warrants (other than those referred to above).
The number of Rights associated with each share
of Common Stock is also subject to adjustment
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in the event of a stock split of the Common Stock
or a stock dividend on the Common Stock payable in
Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any
such case, prior to the Distribution Date.
Rights as Stockholder: The Rights themselves do not entitle the holder
thereof to any rights as a stockholder,
including, without limitation, voting rights or
to receive dividends.
Amendment of Rights: Until the Rights become nonredeemable, the
Company may, except with respect to the
redemption price, amend the Agreement in any
manner. After the Rights become nonredeemable,
the Company may amend the Agreement to cure any
ambiguity, to correct or supplement any
provision which may be defective or
inconsistent with any other provisions, to
shorten or lengthen any time period under the
Rights Agreement, or to change or supplement
any provision in any manner the Company may
deem necessary or desirable, provided that no
such amendment may adversely affect the
interests of the holders of the Rights (other
than t he Acquiring Person or its Affiliates or
Associates) or cause the Rights to again be
redeemable or the Agreement to again be freely
amendable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated February 12, 1996. A copy of the Rights Agreement is available, free
of charge, from the Company, 1810 Embarcadero Road, Palo Alto, CA 94303,
Attention: Secretary. This summary description of the Rights Agreement
does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, as amended from time to time, which is
incorporated in this summary description by reference.
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