SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) September 30, 1996
ELECTRONIC CLEARING HOUSE, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-15245 93-0946274
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
28001 Dorothy Drive, Agoura Hills, California 91301
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 706-8999
(Former name or former address, if changes since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On September 30, 1996, the Company signed the following Rights
Agreement (Attachment A) which was designed to protect
shareholders in the event of an unsolicited attempt to acquire
the Corporation for an inadequate price and to protect against
abusive practices that do not treat all shareholders equally.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
ELECTRONIC CLEARING HOUSE, INC.
(Registrant)
By \s\ Alice L. Cheung
Alice L. Cheung, Treasurer &
Chief Financial Officer
Dated: October 1, 1996
<PAGE>
ATTACHMENT A
ELECTRONIC CLEARING HOUSE, INC.
and
OXFORD TRANSFER & REGISTRAR
Rights Agent
RIGHTS AGREEMENT
Dated as of September 30, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. CERTAIN DEFINITIONS 4
SECTION 2. APPOINTMENT OF RIGHTS AGENT 7
SECTION 3. ISSUE OF RIGHTS CERTIFICATES 7
SECTION 4. FORM OF RIGHTS CERTIFICATES 8
SECTION 5. COUNTERSIGNATURE AND REGISTRATION 9
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE 10
OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED,
LOST OR STOLEN RIGHTS CERTIFICATES
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; 11
EXPIRATION DATE OF RIGHTS
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS 13
CERTIFICATES
SECTION 9. AVAILABILITY OF PREFERRED STOCK 13
SECTION 10. PREFERRED STOCK RECORD DATE 14
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF 14
SHARES OR NUMBER OF RIGHTS
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR 21
NUMBER OF SHARES
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF 21
ASSETS OR EARNING POWER
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES 25
SECTION 15. RIGHTS OF ACTION 26
SECTION 16. AGREEMENT OF RIGHTS HOLDERS 26
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A 26
STOCKHOLDER
SECTION 18. CONCERNING THE RIGHTS AGENT 27
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF 27
NAME OF RIGHTS AGENT
SECTION 20. DUTIES OF RIGHTS AGENT 28
SECTION 21. CHANGE OF RIGHTS AGENT 29
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES 30
SECTION 23. REDEMPTION 31
SECTION 24. EXCHANGE 31
SECTION 25. NOTICE OF CERTAIN EVENTS 33
SECTION 26. NOTICES 33
SECTION 27. SUPPLEMENTS AND AMENDMENTS 34
SECTION 28. REGISTRATION OF SECURITIES 35
SECTION 29. DETERMINATION AND ACTIONS BY THE BOARD 35
OF DIRECTORS
SECTION 30. SUCCESSORS 35
SECTION 31. BENEFITS OF THIS AGREEMENT 35
SECTION 32. SEVERABILITY 35
SECTION 33. GOVERNING LAW 36
SECTION 34. COUNTERPARTS 36
SECTION 35. DESCRIPTIVE HEADINGS 36
Exhibit A: Form of Certificate of Designation for Series A Junior
Participating Preferred Shares
Exhibit B: Form of Rights Certificate
Exhibit C: Summary of Rights to Purchase Preferred Shares
RIGHTS AGREEMENT
THIS AGREEMENT, dated as of September 30, 1996, is between Electronic Clearing
House, Inc., a Nevada corporation ("Company"), and Oxford Transfer & Registrar,
a California corporation ("Rights Agent").
Pursuant to this Agreement, the Board of Directors of the Company has
authorized and declared a dividend of one preferred share purchase right
("Right") for each share of Common Stock (as hereinafter defined) of the
Company outstanding on September 30, 1996 ("Record Date"), each Right
representing the right to purchase one one-hundredth of a Preferred Stock share
(as hereinafter defined), upon the terms and subject to the conditions herein
set forth, and as further authorized and directed the issuance of one Right
with respect to each Common Stock share that shall become outstanding between
the Record Date and the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which, together with all Affiliates and Associates (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner
(as such term is hereinafter defined) of twenty-percent (20%) or more of the
Common Stock of the Company then outstanding, but shall not include the
Company, any Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company,
or of any entity holding Common Stock for or pursuant to the terms of any such
plan, provided, however, that if a Person is the Beneficial Owner at the close
of business on the date of this Agreement of twenty-percent (20%) or more of
the Common Stock of the Company, such Person shall not be deemed an Acquiring
Person unless and until such Person acquires any additional Common Stock in any
manner other than pursuant to a stock dividend, stock split, recapitalization,
or similar transaction that does not affect the percentage of outstanding
Common Stock. Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common Stock by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to twenty-
percent (20%) or more of the Common Stock of the Company then outstanding;
provided, however, that if a Person shall become the Beneficial Owner of
twenty-percent (20%) or more of the Common Stock of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
Common Stock of the Company, then such Person shall be deemed to be an
"Acquiring Person." Notwithstanding the foregoing, if a majority of the Board
of Directors then in office determines in good faith that a Person who should
be an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph (a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an Acquiring Person, as defined pursuant to the
foregoing provisions of this paragraph (a), then such a Person shall not be
deemed to be an "Acquiring Person" for any purposes to this Agreement.
(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 and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire, whether such right is exercisable
immediately or only after the passage of time, pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or from and after, but only after, the exercise of
conversion rights, exchange rights, rights [other than these Rights at any time
prior to the occurrence of a Flip-in-Event, but thereafter including these
Rights acquired from and after the Distribution Date (as defined in Section
3(a) below)], 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 or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or (B) the right to
vote pursuant to any agreement, arrangement or understanding; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, any security if the agreement, arrangement or understanding
to vote such security (1) arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations
promulgated under the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding whether or not in
writing (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of
securities) for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso in Section 1(d)(ii)(B)) or disposing of any
securities of the Company; provided, however, that in no case shall an officer
or director of the Company be deemed the Beneficial Owner of securities held of
record by the trustee of any employee benefit plan of the Company or any
Subsidiary of the Company for the benefit of any employee of the Company or any
Subsidiary of the Company, other than the officer or director, by reason of any
influence that such officer or director may have over the voting of the
securities held in such plan.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder. Furthermore, directors and officers of
the Company shall not be deemed to beneficially own each others' Common Stock
solely due to their status as a director or officer of the Company.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the State of California are authorized
or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 p.m., Los
Angeles time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., Los Angeles time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean the Common Stock, $.01 par value, of the
Company (as such term is defined in the introductory paragraphs above) or any
other shares of capital stock of the Company into which the Common Stock shall
be reclassified or changed, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the shares of capital stock of
such Person if such Person is a corporation, of any class or series, or units
of equity interests in such Person, if such Person is not a corporation, of any
class or series, the term of which do not limit, as a fixed amount and not
merely in proportional terms, the amount of dividend or income payable or
distributable on such class or series upon any voluntary or involuntary
liquidation, dissolution, or winding up of such Person and do not provide that
such class or series is subject to redemption at the option of such Person, or
any shares of capital stock or units of equity interests into which the
foregoing shall be reclassified or changed; provided, however, that if at any
time there shall be more than one such class or series of capital stock or
equity interests of such Person, "Common Stock" of such Person shall include
all such classes and series substantially in the proportion of the total number
of shares or other units of each class or series outstanding at such time.
(h) "Current Value" shall have the meaning set forth in Section 11(a)(iv)
hereof.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(k) "Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
(l) "Person" shall mean any individual, firm, partnership, joint venture,
corporation or other entity, and shall include any successor (by merger or
otherwise) of such entity.
(m) "Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, no par value, of the Company having the rights and preferences
set forth in the Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock attached hereto as Exhibit A.
(n) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
` (o) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(p) "Registered Common Stock" shall have the meaning set forth in Section
13(b)(ii) hereof.
(q) "Stock Acquisition Date" shall mean the first date of public
announcement, which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act, by
the Company or an Acquiring Person that an Acquiring Person has become such or
such earlier date as a majority of the directors of the Company shall become
aware of the existence of an Acquiring Person.
(r) "Spread" shall have the meaning set forth in Section 11(a)(iv)
hereof.
(s) "Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
(t) "Substitution Period" shall have the meaning set forth in Section
11(a)(iv) hereof.
(u) "Trading Day" shall have the meaning set forth in Section 11(d)(i)
hereof.
SECTION 2. APPOINTMENT OF RIGHTS AGENT
The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company may from time to time
appoint such Co-Rights Agent as it may deem necessary or desirable. In the
event the Company appoints one or more Co-Rights Agents, the respective duties
of the Rights Agent and any Co-Rights Agents shall be as the Company shall
determine.
SECTION 3. ISSUE OF RIGHTS CERTIFICATES
(a) Until the earlier of the close of business on (i) the tenth day after
the Stock Acquisition Date, or (ii) the tenth Business Day (or such later date
as may be determined by action of the Board of Directors prior to such time as
any Person becomes an Acquiring Person) after the date of the commencement by
any Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any Subsidiary of the Company or any entity
holding Common Stock for or pursuant to the terms of any such plan) of, or of
the first public announcement of the intention of any person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or of any Subsidiary of the Company or any entity holding Common Stock
for or pursuant to the terms of any such plan) to commence, a tender or
exchange offer the consummation of which would result in any Person becoming
the Beneficial owner of Common Stock aggregating twenty-percent (20%) or more
of the then outstanding Common Stock, irrespective of whether any shares of
Common Stock are actually purchased pursuant to such offer (including any such
date which is after the date of this Agreement and prior to the issuance of the
Rights, the earliest of such dates being herein referred to as the
"Distribution Date"), (x) the Rights will be evidenced, subject to the
provisions of Section 3(b) hereof, by the certificates for Common Stock
registered in the names of the holders thereof (which certificates shall also
be deemed to be Rights Certificates) and not be separate Rights Certificates,
and (y) the right to receive Rights Certificates will be transferable only in
connection with the transfer of Common Stock. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate, in substantially the form of Exhibit B attached
hereto ("Rights Certificate"), evidencing one Right for each Common Stock share
so held. As of the Distribution Date, the Rights will be evidenced solely by
such Rights Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in
substantially the form of Exhibit C attached hereto ("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. With respect to certificates for Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders
thereof regardless of whether a copy of the Summary of Rights is attached
thereto. Until the Distribution Date (or the earlier of the Redemption Date or
the 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 transfer of the
Rights associated with the Common Stock represented thereby.
(c) Certificates for shares of Common Stock which becomes outstanding,
including, without limitation, reacquired shares of Common Stock referred to in
the last sentence of this paragraph (c), after the Record Date but prior to the
earliest 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 a Rights Agreement between Electronic Clearing House,
Inc. and Oxford Transfer & Registrar, dated September 30, 1996 ("Rights
Agreement"), the terms of which are hereby incorporated herein by reference and
a copy of which is on file at the principal executive offices of Electronic
Clearing House, Inc. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will no
longer be evidenced by this certificate. Electronic Clearing House, Inc. will
mail to the holder of this certificate a copy of the Rights Agreement without
charge after receipt of a written request thereof. Under certain
circumstances, as set forth in the Rights Agreement, Rights issued to any
Person who becomes an Acquiring Person, as defined in the Rights Agreement, may
become null and void.
With respect to such certificates containing the foregoing legend, until
the earlier of the Distribution Date or Final Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone, and the surrender for transfer of any
such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented thereby. In the event that the Company
purchases or acquires any Common Stock after the Record Date but prior to the
Distribution Date, the Company shall not be entitled to exercise any Rights
associated with such Common Stock while they are not outstanding.
SECTION 4. FORM OF RIGHTS CERTIFICATES
(a) The Rights Certificates, and the forms of election to purchase
Preferred Stock and of assignment to be printed on the reverse thereof, shall
be substantially the same as Exhibit B attached 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 consistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange or other organization on which the
Rights may from time to time be listed or quoted, or to conform to usage.
Subject to the provisions of Section 22 hereof, the Rights Certificates shall
entitle the holders thereof to purchase such number of one one-hundredth of a
Preferred Stock shares as shall be set forth therein at the price per one one-
hundredth of a Preferred Stock share set forth therein ("Purchase Price"), but
the number of such one one-hundredth of a Preferred Stock shares and the
purchase Price shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights beneficially owned by: (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person, or any such Associate or Affiliate, who becomes a transferee
after the Acquiring Person becomes such, except a transferee purchasing from or
through a nationally recognized broker-dealer where such transferee and such
transferee's Associate and Affiliates do not collectively acquire, and will not
have acquired during the preceding twenty (20) calendar days, in combination
with the proposed transfer, an amount of Common Stock equal to more than one-
percent (1%) of the outstanding shares of Common Stock, and (iii) a transferee
of an Acquiring Person, or any such Associate or Affiliate, who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer, whether or not for
consideration, from the Acquiring Person to or on behalf of holders of equity
interests in such Acquiring person or to any Person with whom the Acquiring
Person has any continuing agreement, arrangement, or understanding regarding
the transferred Rights or (B) a transfer which the Board of Directors otherwise
conclude in good faith is part of a plan, arrangement, or understanding which
has a primary purpose or effect of avoidance of Section 7(f) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement, or adjustment of any other Rights Certificate
referred to in this sentence, shall contain, to the extent feasible and
reasonably identifiable as such, the following legend:
The Rights represented by this Rights Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights Certificate and the Rights represented
hereby may become void in the circumstances specified in Section 7(f) of such
Agreement.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chairman of the Board, its Chief Executive Officer, its President, or any
of its Executive Vice Presidents, either manually or by facsimile signature,
shall have affixed thereto the Company's seal or a facsimile thereof, and shall
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be manually
countersigned by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Rights Certificates, the number of
Rights evidenced on its face by each of the Rights Certificates and the date of
each of the Rights Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE
OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED,
LOST OR STOLEN RIGHTS CERTIFICATES
Subject to the provisions of Section 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 Rights Certificate or Rights Certificates (other than Rights 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 transferred,
split up, combined or exchanged for another Rights Certificate or Rights
Certificates, entitling the registered holder to purchase a like number of one
one-hundredth of a Preferred Stock shares as the Rights Certificate or Rights
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Rights Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Rights Certificate or Rights
Certificates to be transferred, split up, combined or exchanged at the
principal office of the Rights Agent. Thereupon the Rights Agent shall
countersign and deliver to the person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Rights Certificate if mutilated, the Company will make and deliver a new
Rights Certificate of like tenor to the Rights Agent for delivery to the
registered holder in lieu of the Rights Certificate so lost, stolen, destroyed
or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE;
EXPIRATION DATE OF RIGHTS
(a) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided herein) in whole or in
part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each one one-hundredth of a
Preferred Stock share as to which the Rights are exercised, at or prior to the
earliest of (i) the close of business on September 30, 2006 ("Final Expiration
Date"), (ii) the time at which the Rights are redeemed as provided in Section
23 hereof ("Redemption Date"), or (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof.
(b) The Purchase Price for each one one-hundredth of a Preferred Stock
share pursuant to the exercise of a Right shall initially be $0.50, shall be
subject to adjustment from time to time as provided in Sections 11 and 13
hereof or by amendment consistent with Section 27 hereof, and shall be payable
in lawful money of the United States of America or otherwise in accordance with
paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Rights
Certificate in accordance with Section 9 hereof by cash, certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Stock certificates for the number of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from the depositary agent
depositary receipts representing such number of one one-hundredth of a
Preferred Stock shares as are to be purchased (in which case certificates for
the Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company hereby directs the
depositary agent to comply with such request, (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof, (iii) after receipt
of such certificates or depositary receipts, cause the same to be delivered to
or upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder and (iv)
when appropriate, after receipt, deliver such cash to or upon the order of the
registered holder of such Rights Certificate.
The payment of the Purchase Price, as such amount may be reduced pursuant
to Section 11(a)(iii) hereof, shall be made in cash or by certified check,
cashier's check, bank draft, or money order payable to the order of the
Company, except that if so provided by the Board, the payment of the Purchase
Price following the Flip-In Event and until the first occurrence of an event
described in Section 13 may be made wholly or in part by delivery of a
certificate or certificates, with appropriate stock powers executed in blank
attached thereto, evidencing a number of shares of Common Stock of the Company
equal to the then Purchase Price divided by the closing price, as determined
pursuant to Section 11(d) hereof, per share of Common Stock on the Trading Day
immediately preceding the date of such exercise. In the event that the Company
is obligated to issue other securities of the Company, pay cash, or distribute
other property pursuant to Section 11(a)(ii) hereof, subject to Section 14
hereof, the Company will make all arrangements necessary so that such other
securities, cash, or property are available for distribution by the Rights
Agent, if and when appropriate. In addition, in the case of an exercise of the
Rights by a holder pursuant to Section 11(a)(ii), the Rights Agent shall return
such Rights Certificate, or otherwise indicating thereon that the rights
represented by such Rights Certificate no longer include the rights provided by
Section 11(a)(ii) of the Rights Agreement and if less than all the Rights
represented by such Rights Certificate were so exercised, the Rights Agent
shall indicate on the Rights Certificate the number of Rights represented
thereby which continue to include the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Rights Certificate shall
exercise, except pursuant to Section 11(a)(ii), less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Rights Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
(e) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Stock or any
Preferred Stock held in its treasury, the number of Preferred Stock shares that
will be sufficient to permit the exercise in full of all outstanding Rights in
accordance with this Section 7.
(f) Notwithstanding anything in this Agreement to the contrary, from and
after the occurrence of a Flip-In Event, any Rights beneficially owned by (a)
an Acquiring Person or an Associate or Affiliate of an Acquiring Person, (b)
except as provided below or in Section 4(b), a transferee of an Acquiring
Person, or any such Associate or Affiliate, who becomes a transferee after the
Acquiring Person becomes such, and (c) except as provided below, a transferee
of an Acquiring Person, or any such Associate or Affiliate, who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (i) a transfer, whether or not for
consideration, from the Acquiring Person to or on behalf of holders of equity
interests in such Acquiring Person or to any Person with whom the Acquiring
person has any continuing agreement, arrangement, or understanding regarding
the transferred Rights or (ii) a transfer which the Board of Directors
otherwise conclude in good faith is part of a plan, arrangement, or
understanding which has as a primary purpose or effect of avoidance of this
Section 7(f), shall become null and void without any further action, and any
holder of such Rights shall thereupon have no rights to exercise such Rights
under any provision of this Agreement. A majority of the Board of Directors
may in appropriate circumstances waive application of this Section 7(f) and the
requirements of Section 4(b) to any transfer by an Acquiring Person in
connection with a transfer or series of transfers which cause an Acquiring
Person to become the Beneficial Owner of voting securities having less than
twenty-percent (20%) of the Common Stock of the Company. The Company shall use
all reasonable efforts to insure that the provisions of this Section 7(f)
hereof are complied with, but shall have no liability to any holder of Rights
for the inability to make any determination with respect to an Acquiring Person
or any of their respective Affiliates, Associates, or transferees thereunder.
(g) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action
with respect to a registered holder of any Rights Certificate upon the
occurrence of any purported exercise as set forth in this Section 7 unless the
certificate contained in the appropriate form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise
shall have been completed and signed by the registered holder thereof and the
Company shall have been provided with such additional evidence of the identity
of the Beneficial Owner, or former Beneficial Owner, of such Rights Certificate
or Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS
CERTIFICATES
All Rights Certificates surrendered for the purpose of exercise, transfer,
split up, combination or exchange shall, if surrendered to the Company or to
any of its agents, be delivered to the Rights Agent for cancellation or in
cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by
it, and no Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Rights Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other Rights Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the
Company, or shall, at the written request of the Company, destroy such
cancelled Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
SECTION 9. AVAILABILITY OF PREFERRED STOCK
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and following the occurrence of a Flip-In Event, Common Stock or other
securities) or any authorized and issued shares of Preferred Stock (and
following the occurrence of a Flip-In Event, Common Stock or other securities)
held in its treasury, the number of shares of Preferred Stock (and following
the occurrence of a Flip-In Event, Common Stock, or other securities) that,
except as provided in Section 11(a)(iii) and subject to section 7(f) hereof,
will be sufficient to permit the exercise in full of all outstanding Rights.
(b) So long as shares of Preferred Stock (and following at the occurrence
of a Flip-In Event, Common Stock, or other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Company shall use its best efforts to cause from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed
on such exchange upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the Distribution Date, a registration statement under the
Securities Act of 1933 (the "Act"), with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective with a prospectus at all times meeting the requirements of the Act
until the date of the expiration of the Rights. The Company will also take
such action as may be appropriate under the "blue sky" laws of the various
states.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Stock delivered upon exercise of
Rights shall, at the time of delivery of the certificates for such Preferred
Stock, subject to payment of the Purchase Price, be duly and validly authorized
and issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect to the issuance of delivery of the Rights Certificates or
of any Preferred Stock upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect to
any transfer or delivery of Rights Certificates to a person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Stock in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depositary receipts for Preferred Stock upon the
exercise of any Right until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's reasonable
satisfaction that no such tax is due.
SECTION 10. PREFERRED STOCK RECORD DATE
Each person in whose name any certificate for Preferred Stock is issued
upon the exercise of Rights shall for all purposes be deemed to have become the
holder of record of the Preferred Stock represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
and any applicable transfer taxes was made; provided, however, that if the date
of such surrender and payment is a date upon which the Preferred Stock transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificates shall be dated, the next
succeeding Business Day on which the Preferred Stock transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a holder
of Preferred Stock for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER OF
SHARES OR NUMBER OF RIGHTS
The Purchase Price, the number of Preferred Stock covered by each Right
and the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the
outstanding Preferred Stock into a smaller number 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, and
except as otherwise provided in this Section 11(a) and in Section 7(f) hereof,
the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification,
and the number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of shares
of capital stock which, if such Right had been exercised immediately prior to
such date and at a time when the Preferred Stock transfer books of the Company
were open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration
to be paid upon the exercise of one Right be less than the aggregate par value
of the shares of capital stock of the Company issuable upon exercise of one
Right. If an event occurs which would require an adjustment under both Section
11(a)(i) and Section 11(a)(ii), the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to any adjustment
required pursuant to Section 11(a)(ii).
(ii) Subject to Section 24 of this Agreement, at the close of
business on the tenth (10th) day after the Stock Acquisition Date, or such
later date as may be provided by the Board of Directors under the terms of
Section 23(a), ("Flip-In Event"), proper provision shall be made so that each
holder of a Right, except as provided in Section 7(f) hereof,
shall thereafter have a right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, in lieu
of shares of Preferred Stock, such number of shares of Common Stock of the
Company, such number of shares being referred to herein as the "Adjustment
Stock", as shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of one one-hundredth of a share of Preferred
Stock for which a Right is then exercisable and dividing that product by (y)
50% of the current per share market price, determined pursuant to Section 11(d)
hereof, of Common Stock on the date on which the first of the events listed
above in this subparagraph (ii) occurs. In the event that any Person shall
become an Acquiring Person and the Rights shall then be outstanding, the
Company shall not take any action which would eliminate or diminish the
benefits intended to be afforded by the Rights.
(iii) The right to buy Common Stock of the Company pursuant to
subparagraph (ii) of this paragraph (a) shall not arise as a result of any
Person becoming an Acquiring Person through a purchase of Common Stock pursuant
to a tender offer made in the manner prescribed by Section 14(d) of the
Exchange Act and the rules and regulations promulgated thereunder; provided,
however, that such tender offer shall provide for the acquisition of all of the
outstanding Common Stock held by any Person other than such Person and its
Affiliates or Associates at a price and on terms determined by at least a
majority of the members of the Board of Directors who are not officers of the
Company and who are not representatives, nominees, Affiliates or Associates of
an Acquiring Person, after receiving advice from one or more investment or
financial advisers, to be (A) fair to stockholders from a financial
perspective, taking into account all factors which such members of the Board
deem relevant including, without limitation, prices which could reasonably be
achieved if the Company or its assets were sold on an orderly basis designed to
realize maximum value, or (B) otherwise in the best interests of the Company
and its stockholders, employees, customers and communities in which the Company
does business.
(iv) In the event that there shall not be sufficient Common Stock
authorized but unissued to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii), the Company shall; (A)
determine the excess of (1) the value of the Adjustment Stock issuable upon the
exercise of a Right ("Current Value"), over (2) the Purchase Price, such excess
being hereinafter referred to as the "Spread", and (B) with respect to each
Right, make adequate provision to substitute for such unavailable Adjustment
Stock, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction
in the Purchase Price, (3) other equity securities of the Company, including
without limitation, Preferred Stock, (4) debt securities of the Company, (5)
other assets, or (6) any combination of the foregoing, having, together with
the Adjustment Stock issued upon exercise of such Right, an aggregate value
equal to the Current Value, where such aggregate value has been determined by
the Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of Directors of the
Company; provided, however, if, within 30 days following the date of the Flip-
In Event, the Company shall have not made adequate provision to deliver value
pursuant to clause (B) above, then the Company shall be obligated to deliver,
upon the surrender for exercise of a Right and without requiring payment of the
Purchase Price, Common Stock, to the extent such shares are available, and
then, if necessary, cash, which shares 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 Common Stock could be
authorized for issuance upon exercise in full of the Rights, the 30-day period
set forth above may be extended to the extent necessary, but not more than 120
days following the date of the occurrence of the Flip-In Event, in order that
the Company may seek shareholder approval for the authorization of such
additional shares; such period, as it may be extended, hereinafter referred to
as the "Substitution Period." To the extent that the Company determines that
action need be taken pursuant to the first or second sentences of this Section
11(a)(iv), the Company (A) shall provide, subject to Section 11(a)(ii) hereof,
that such action shall apply uniformly to all outstanding Rights, and (B) may
suspend that exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares or
to decide the appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iv), the value of the Common Stock shall be the
current per share market price, as determined pursuant to Section 11(d) hereof,
per Common Stock shares on the date of the occurrence of the earliest of the
Flip-In Event.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them,
for a period expiring within forty-five (45) calendar days after such record
date, to subscribe for or purchase Preferred Stock (or shares having the same
rights, privileges and preferences as the Preferred Stock ("equivalent
preferred shares") or securities convertible into Preferred Stock or equivalent
preferred shares at a price per Preferred Stock shares or equivalent preferred
shares (or having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred shares) less than the then current per
share market price of the Preferred Stock, as defined in Section 11(d), on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
Preferred Stock outstanding on such record date plus the number of Preferred
Stock which the aggregate offering price of the total number of Preferred Stock
or equivalent preferred shares so to be offered (or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be
the number of Preferred Stock outstanding on such record date plus the number
of additional Preferred Stock or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent. 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
record date is fixed; and in the event that such rights, options of 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 the making of a
distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidence of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable
in 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 then current per share market price of the Preferred Stock
on such record date, less the fair market value (as determined in good faith by
the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to one Preferred Stock share and the denominator of
which shall be such current per share market price of the Preferred Stock;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company to be issued upon exercise of one Right. Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the twenty (20) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares, or (B) any subdivision, combination or reclassification of such
Security and prior to the expiration of twenty (20) Trading Days after the ex-
dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last reported trade in the
over-the-counter market, as reported by the NASDAQ National Market ("NASDAQ")
or such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bids and asked
prices as furnished by a professional market maker making a market in the
security selected by the Board of Directors of the Company. The term "Trading
Day" shall mean a day on which the principal national securities exchange on
which the Security is listed or admitted to trading is open for the transaction
of business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, the "current per
share market price" of the Preferred Stock shall be determined in accordance
with the method set forth in Section 11(d)(i). If the Preferred Stock are not
publicly traded, the "current per share market price" of the Preferred Stock
shall be conclusively deemed to be the current per share market price of the
Common Stock as determined pursuant to Section 11(d)(i), appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof, multiplied by one hundred. If neither the Common Stock
nor the preferred Stock are publicly held or so listed or traded, "current per
share market price" shall mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one one-millionth of a
Preferred Stock share or one ten-thousandth of any other share or security, as
the case may be. Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the date of the expiration of the right to exercise any
Rights.
(f) If as a result of an adjustment made pursuant to Section 11(a) or
Section 13 hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Company other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Section 11(a), (b), (c), (e), (g),
(h), (i), (j), (k), and (m), inclusive, and the provisions of Section 7, 9, 10,
13, and 14, with respect to the Preferred Stock, shall apply on like terms to
any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredth of a
Preferred Stock shares 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-hundredth of a
Preferred Stock shares, calculated to the nearest one one-millionth of a
Preferred Stock share, obtained by (i) multiplying (x) the number of one one-
hundredth of a share 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 to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredth of a Preferred Stock shares
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredth of a Preferred Stock shares 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 ten-thousandth, obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price.
The Company shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Rights Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed
to holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Rights Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights
Certificates to be so distributed shall be issued, executed and countersigned
in the manner provided for herein and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredth of a Preferred Stock shares issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price and the number of one one-
hundredth of a Preferred Stock shares which were expressed in the initial
Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below one one-hundredth of the then par value, if any, of the
Preferred Stock issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specific
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date of the
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the 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 upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any Preferred Stock at less than the current market price,
issuance wholly for cash of Preferred Stock or securities which by their terms
are convertible into or exchangeable for Preferred Stock, dividends on
Preferred Stock payable in
Preferred Stock or issuance of rights, options or warrants referred to
hereinabove in Section 11(b), 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, or merge with and into, any other
Person, other than a Subsidiary of the Company in a transaction that complies
with Section 11(o), (ii) permit or cause any Person to consolidate with the
Company, or merge with and into the Company, other than a Subsidiary of the
Company in a transaction that complies with Section 11(o), or (iii) sell or
otherwise transfer, or permit any Subsidiary to sell or transfer, in one of
more transactions, assets or earning power aggregating fifty-percent (50%) or
more of the assets or earning power of the Company and its Subsidiaries, taken
as a whole, to any other Person or Persons, other than the Company or any of
its Subsidiaries in one or more transactions each of which complies with
Section 11(o), if at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments or
securities outstanding or agreements in effect that would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights.
(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 of the Company to take, any action if at
the time such action is taken it is reasonably foreseeable that such action
will diminish substantially or otherwise eliminate the benefits intended to be
afforded by the Rights.
(p) In the event that at any time after the date of this Agreement and
prior to the Distribution Date, the Company shall (i) declare or pay any
dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock, by
reclassification or otherwise than by payment of dividends in Common Stock,
into a greater or lesser number of Common Stock, then in any such case (A) the
number of one one-hundredth of a Preferred Stock shares purchasable after such
event upon proper exercise of each Right shall be determined by multiplying the
number of one one-hundredth of a Preferred Stock shares so purchasable
immediately prior to such event by a fraction, the numerator of which is the
number of Common Stock outstanding immediately before such event and the
denominator of which is the number of Common Stock outstanding immediately
after such event, and (B) each Common Stock shares outstanding immediately
after such event shall have been issued with respect to it that number of
Rights which each Common Stock shares outstanding immediately prior to such
event had issued with respect to it. The adjustments provided for in this
Section 11(p) shall be made successively whenever such a dividend is declared
or paid or such a subdivision, combination or consolidation is effected.
(q) The exercise of Rights under Section 11(a)(ii) shall only result in
the loss of rights under Section 11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Rights
Agreement, including the rights represented by Section 13.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR
NUMBER OF SHARES
Whenever an adjustment is made as provided in Section 11 and 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Stock or the Preferred Stock a copy of such certificate and (c) mail a brief
summary to each holder of a Rights Certificate in accordance with Section 25
hereof.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER
(a) If, following the Distribution Date, directly or indirectly, (i) the
Company shall consolidate with, or merge with and into, any other Person and
the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) any Person shall consolidate with the Company, or
merge with and into the Company and the Company shall be the continuing or
surviving corporation of such merger and, in connection with such merger, all
or part of the Common Stock shall be changed into or exchanged for stock or
other securities of any other Person (or the Company) or cash or any other
property, (iii) any Person shall acquire all or a majority of the Common Stock
pursuant to a statutory plan of exchange, or (iv) the Company shall sell or
otherwise transfer, or one or more of its Subsidiaries shall sell or otherwise
transfer, in one or more transactions, assets or earning power aggregating
fifty-percent (50%) or more of the assets or earning power of the Company and
its Subsidiaries, taken as a whole, to any other Person other than the Company
or one or more of its wholly-owned Subsidiaries, then, and in each such case,
proper provision shall be made so that (A) each holder of a Right, except as
otherwise provided herein, shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price multiplied
by the number of one one-hundredth of a Preferred Stock shares for which a
Right is then exercisable, in accordance with the terms of this Agreement and
in lieu of Preferred Stock, such number of Common Stock of the Principal Party,
as hereinafter defined, not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall equal the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredth
of a Preferred Stock shares for which a Right is then exercisable and dividing
that product by (2) fifty-percent (50%) of the then current per share market
price of the Common Stock, determined pursuant to Section 11(d) hereof, of such
Principal Party on the date of consummation of such consolidation, merger, sale
or transfer; (B) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (C) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provision of Section 11 shall apply only to such
Principal Party after the first occurrence of an event described in this
Section 13(a); (D) such Principal Party shall take such steps, including, but
not limited to, the reservation of a sufficient number of its Common Stock in
accordance with Section 9 hereof, in connection with such consummation as may
be necessary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the Common Stock
thereafter deliverable upon the exercise of the Rights; and (E) the provisions
of Section 11(a)(ii) shall be of no further effect following the first
occurrence of any event described in this Section 13(a).
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (i), (ii) or
(iii) of Section 13(a), (A) the Person that is the issuer of any securities
into which Common Stock of the Company are converted in such merger,
consolidation or for which they are exchanged in such statutory plan of
exchange, or, if there is more then one such issuer, the issuer of Common Stock
that has the highest aggregate current per share market price, determined in
accordance with Section 11(d), and (B) if no securities are so issued, the
Person that is the other party to such merger, consolidation or statutory plan
of exchange; or, if there is more than one such Person, the Person, the Common
Stock of which has the highest aggregate current per share market price,
determined in accordance with Section 11(d); and
(ii) in the case of any transaction described in clause (iv) of
Section 13(a), the Person that is the party receiving the largest portion of
the assets or earning power transferred pursuant to such transaction or
transactions, or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power
transferred pursuant to such transaction or transactions or if the Person
receiving the largest portion of the assets or earning power cannot be
determined, whichever Person the Common Stock of which has the highest
aggregate current per share market price, determined in accordance with Section
11(d); provided, however, that in any such case, (A) if the Common Stock of
such Person are not at such time and have not been continuously over the
preceding twelve-month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and such
Person is a direct or indirect Subsidiary of another Person that has Registered
Common Stock outstanding, "Principal Party" shall refer to such other Person;
(B) if the Common Stock of such Person are not Registered Common Stock or such
Person is not a corporation, and such Person is a direct or indirect Subsidiary
of another Person but is not a direct or indirect Subsidiary of another Person
which has Registered Common Stock outstanding, "Principal Party" shall refer to
the ultimate parent entity of such first-mentioned Person; (C) if the Common
Stock of such Person are not Registered Common Stock or such Person is not a
corporation, and such Person is directly or indirectly controlled by more than
one Person, and one or more of such other Persons has Registered Common Stock
outstanding, "Principal Party" shall refer to whichever of such other Persons
is the issuer of the registered Common Stock having the highest aggregate
current per share market price, determined in accordance with Section 11(d);
and (D) if the Common Stock of such Person are not Registered Common Stock or
such Person is not a corporation, and such Person is directly or indirectly
controlled by more than one Person, and none of such other Persons have
Registered Common Stock outstanding, "Principal Party" shall refer to whichever
ultimate parent entity is the corporation having the greatest shareholders'
equity or, if no such ultimate parent entity is a corporation, shall refer to
whichever ultimate parent entity is the entity having the greatest net assets.
(c) The Company shall not consummate any such consolidation, merger,
statutory plan of exchange, sale or transfer unless prior thereto the Company
and the Principal Party shall have executed and delivered to the Rights Agent a
supplement agreement confirming that (i) such Principal Party shall, upon
consummation of such consolidation, merger, statutory plan of exchange or sale
or transfer of assets or earning power, assume this Agreement in accordance
with Section 13, (ii) all rights of first refusal or preemptive rights in
respect of the issuance of Common Stock of such Principal Party upon exercise
of outstanding Rights have been waived, (iii) any provision of the authorized
securities of such Principal Party or of its charter, bylaws or other
instruments governing its corporate affairs which would obligate such Principal
Party to issue in connection with, or as a consequence of, the consummation of
a transaction referred to in Section 13(a), Common Stock of such Principal
Party at less than the then current per share market price, determined in
accordance with Section 11(d)(i), or securities exercisable for, or convertible
into, such Common Stock at less than such then current per share market price
(other than to the holders of Rights pursuant to this Section 13) have been
waived or canceled, and (iv) such transaction shall not result in a default by
such Principal Party under this Agreement and further providing that, as soon
as practicable after the date of any consolidation, merger, statutory plan of
exchange or sale or transfer of assets or earning power referred to in Section
13(a), such Principal Party will:
(A) prepare and file a registration statement under the
Securities Act of 1933, as amended, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, use
its best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause such
registration statement to remain effective, with a prospectus at all times
meeting the requirements of the Securities Act of 1933, as amended, until the
Final Expiration Date of the Rights, and similarly comply with applicable state
securities laws;
(B) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise of the Rights under the Blue Sky laws
of such jurisdictions as may be necessary or appropriate;
(C) use its best efforts to list, or continue the listing of,
the Rights and the securities purchasable upon exercise of the Rights or to
meet the eligibility requirements for quotation of the Rights and such
securities on NASDAQ or other system then in use; and
(D) deliver to holders of the Rights historical financial
statements for such Principal Party which comply in all respects with the
requirements for registration on Form 10, or any successor for, under the
Exchange Act.
In the event that at any time after the occurrence of an event described
in Section 11(a)(ii) hereof some or all of the Rights shall not have then been
exercised at the time of the occurrence of an event described in Section 13(a)
hereof, the Rights which have not theretofore been exercised shall thereafter
be exercisable in the manner described in Section 13(a), without taking into
account any prior adjustment required by Section 11(a)(ii).
(d) The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.
(e) Notwithstanding anything in this Agreement to the contrary, this
Section 13 shall not be applicable to a transaction described in Section
13(a)(i), (ii) or (iii) if:
(i) such transaction is consummated with a Person or Persons who
acquired Common Stock pursuant to a tender offer described in Section
11(a)(iii), or with a wholly-owned Subsidiary of any such Person or Persons,
(ii) the price per Common Stock shares offered in such transaction
is not less than the price per Common Stock shares paid to all holders of
Common Stock whose shares were purchased pursuant to such tender or exchange
offer, and
(iii) the form of consideration being offered to the remaining
holders of Common Stock pursuant to such transaction is the same as the form of
consideration paid pursuant to such tender offer. Upon consummation of any
such transaction contemplated by this Section 13(e), all Rights shall expire.
The Company shall not enter into any transaction of the kind referred to
in this Section 13 if at the time of such transaction there are any rights,
warrants, instruments, or securities outstanding, or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and
adjustments under Section 11(a)(ii) and shall survive any exercise thereof.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Company shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purpose of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights 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 Rights are listed or admitted to trading, or
if the Rights are not listed or admitted to trading on any national securities
exchange, the last reported trade in the over-the-counter market, as reported
by NASDAQ or such other system then in use or, if on any such date the Rights
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such date
no such market maker is making a market in the Rights, the fair value of the
Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Stock, other than fractions which are integral multiples of one one-hundredth
of a Preferred Stock share, upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Stock, other than fractions
which are integral multiples of one one-hundredth of a Preferred Stock share.
Fractions of Preferred Stock in integral multiples of one one-hundredth of a
Preferred Stock share may, at the election of the Company, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the Company
and a depositary selected by it; provided, however, that such agreement shall
provide that the holders of such depositary receipts shall have all the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Stock represented by such depositary receipts. In lieu of
fractional Preferred Stock that are not integral multiples of one one-hundredth
of a Preferred Stock share, the Company shall pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
Preferred Stock share. For the purposes of this Section 14(b), the current
market value of a Preferred Stock share shall be the closing price of a
Preferred stock share, as determined pursuant to the second sentence of Section
11(d)(i) hereof, for the Trading Day immediately prior to the date of such
exercise.
(c) The holder of a Right by the acceptance of the Right expressly waives
the right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as provided above.
SECTION 15. RIGHTS OF ACTION
All rights of action in respect to this Agreement, excepting the rights of
action given to the Rights Agent under Section 18 hereof, are vested in the
respective registered holders of the Rights Certificates and, prior to the
Distribution Date, the registered holders of the Common Stock; and any
registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock) without the consent of the Rights Agent or the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in the holder's own behalf and for the holder's own
benefit, enforce, and may institute and maintain any lawsuit, legal action or
proceeding against the Company to enforce, or otherwise act in respect of, the
holder's right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it
is specifically acknowledged that the holders of Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to
specific performance of the obligation 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 attorney's fees, incurred by them in any action
to enforce the provisions of this Agreement.
SECTION 16. AGREEMENT OF RIGHT HOLDERS
Every holder of a Right, by accepting the same, consents and agrees with
the Company and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company may deem and treat the person in whose name the Rights
Certificate or, prior to the Distribution Date, the associated Common Stock
certificate, is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificate or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER
No holder of any Rights Certificate, by reason of being a holder of such
Rights Certificate, shall be entitled to vote, receive dividends or be deemed
for any purpose the holder of the Preferred Stock or any other securities of
the Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders, except as
provided in Section 25 hereof, or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
SECTION 18. CONCERNING THE RIGHTS AGENT
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection
with, its administration of this Agreement in reliance upon any Rights
Certificate or certificate for the Preferred Stock or Common Stock or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 20 hereof.
SECTION 19. MERGER OR CONSOLIDATION OR CHANGE OF
NAME OF RIGHTS AGENT
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
SECTION 20. DUTIES OF RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Rights Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel, who may be legal
counsel for the Company, and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter, including, without limitation, the identity of
any Acquiring Person and the determination of "current per share market price,"
unless other evidence in respect thereof be herein specifically prescribed, may
be deemed to be conclusively proved and established by a certificate signed by
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Executive Vice President, or the Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever, including, but not limited to, lost profits,
even if the Rights Agent has been advised of the likelihood of such loss of
damage and regardless of the form of action.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificate, except its countersignature thereof, or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof, except the
due execution hereof by the Rights Agent, or in respect of the validity or
execution of any Rights Certificate, except its countersignature thereof; nor
shall be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall
it be responsible for any change in the exercisability of the Rights, including
the Rights becoming void pursuant to Section 11(a)(ii) hereof, or any
adjustment in the terms of the Rights, including the manner, method or amount
thereof, provided for in Section 3, 11, 13, 23, or 24, or the ascertaining of
the existence of facts that would require any such change or adjustment, except
with respect to the exercise of Rights evidenced by Rights Certificates after
actual notice that such change or adjustment is required; nor shall it by any
act hereunder be deemed to make any representation of warranty as to the
authorization or reservation of any Preferred Stock to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any Preferred Stock
will, when issued, be validly authorized and issued, fully paid and
nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Executive Vice President, or the Secretary of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and it
shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction
in which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself of 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 of 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.
SECTION 21. CHANGE OF RIGHTS AGENT
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days' notice
in writing mailed to the Company and to each transfer agent of the Common Stock
or Preferred Stock by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. The Company may remove the Rights
Agent or any successor Rights Agent upon thirty (30) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock or Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate for inspection (who
shall, with such notice, submit his Rights Certificate for inspection by the
Company) then the registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the
United States or any state of the United States so long as such corporation is
authorized under such laws to exercise corporate trust or stock transfer
powers, is in good standing, and is subject to supervision or examination by
federal or state authority, and has at the time of its appointment as Rights
Agent a combined capital and surplus of at least $1 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it has been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment the Company shall file notice with the
predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
of class of shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Company (i) 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, notes or debentures issued by the Company, and (ii)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the
appropriate number of Rights in connection with such issuance or sale;
provided, however, that no such Rights Certificate shall be issued if, and to
the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and no
such Rights Certificate shall be issued if, and to the extent that, appropriate
adjustment shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION
(a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth (10th) day
following the Stock Acquisition Date, which ten-day period may be extended by
the Board of Directors for successive periods of ten days, not to exceed an
aggregate of thirty (30) days following the Stock Acquisition Date, or (ii) the
Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $0.001 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;" provided, however, that if,
following the occurrence of a Stock Acquisition Date and following the
expiration of the right of redemption hereunder but prior to any Triggering
Event, (i) a Person who is an Acquiring Person shall have transferred or
otherwise disposed of a number of shares of Common Stock in one transaction or
series of transactions, not direct or indirectly involving the Company or any
of its Subsidiaries, which did not result in the occurrence of a Triggering
Event such that such Person is thereafter a Beneficial Owner of 10% or less of
the outstanding shares of Common Stock, and (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, then the right of redemption shall be reinstated and
thereafter be subject to the provisions of this Section 23. Notwithstanding
anything contained in this Agreement or the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event until such
time as the Company's right of redemption hereunder has expired. The Company,
may, at its option, pay the Redemption Price in cash, shares of Common Stock
(based on the "current market price," as defined in Section 11(d)(i) hereof, of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights pursuant to paragraph (a) of this Section
23, and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of
such redemption. Within ten (10) days after such action of the Board of
Directors ordering the redemption of the Rights, the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last address 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 will state the method by which the payment of the
Redemption Price will be made.
SECTION 24. EXCHANGE
(a) The Board of Directors of the Company may, at its option, at any time
after any Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights, which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) hereof, for Common
Stock at an exchange ratio of one Common Stock share per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof, such exchange ratio being hereinafter referred
to as the "Exchange Ratio." Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or of any such Subsidiary, or of any entity holding
Common Stock for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50%
or more of the Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to subsection (a) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of 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 address as
they appear upon the registry books of the Rights Agent. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of exchange will state the method
by which the exchange of the Common 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 Preferred Stock, or equivalent preferred shares, as such
term is defined in Section 11(b) hereof, for Common Stock exchangeable for
Rights, at the initial rate of one one-hundredth of a Preferred Stock share, or
equivalent preferred share, for each Common Stock share, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Stock
pursuant to the terms thereof, so that the fraction of a Preferred Stock share
delivered in lieu of each Common Stock share shall have the same voting rights
as one Common Stock share.
(d) In the event that there shall not be sufficient Common Stock or
Preferred Stock issued but outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall use its best efforts to cause all such action to be taken as may
be necessary to authorize additional Common Stock or Preferred Stock for
issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions of Common Stock
or to distribute certificates which evidence fractional Common Stock. In lieu
of such fractional Common Stock, the Company shall pay to the registered
holders of the Rights Certificates with regard to which such fractional Common
Stock would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole Common Stock share. For the purposes of
this paragraph (e), the current market value of a whole Common Stock share
shall be the closing price of a Common Stock share, as determined pursuant to
the second sentence of section 11(d)(i) hereof, for the Trading Day immediately
prior to the date of exchange pursuant to this Section 24.
SECTION 25. NOTICE OF CERTAIN EVENTS
(a) In case the Company shall propose (i) to pay any dividend payable in
stock of any class to the holders of its Preferred Stock or to make any other
distribution to the holders of its Preferred Stock, other than a regular
quarterly cash dividend, (ii) to offer to the holders of its Preferred Stock
rights or warrants to subscribe for or to purchase any additional Preferred
Stock or shares of stock of any class or any other securities, rights or
options, (iii) to effect any reclassification of its Preferred Stock, other
than a reclassification involving only the subdivision of outstanding Preferred
Stock, (iv) to effect any consolidation or merger into or with, 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 fifty-
percent (50%) or more of the assets or earning power of the Company and its
Subsidiaries, taken as a whole, to any other Person, (v) to effect the
liquidation, dissolution or winding up of the Company, or (vi) to declare or
pay any dividend on the Common Stock payable in Common Stock or to effect a
subdivision, combination or consolidation of the Common Stock, by
reclassification or otherwise than by payment of dividends in Common Stock,
then, in each such case, the Company shall give to each holder of a Rights
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock or Preferred Stock, if any such date
is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) and (ii) above at least ten (10) days prior to the record
date for determining holders of the Preferred Stock for purposes of such
action, and in the case of any such other action, at least ten (10) days prior
to the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Stock or Preferred Stock, whichever shall
be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) hereof.
SECTION 26. NOTICES
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed, until another address is filed in writing with the Rights
Agent, as follows:
Electronic Clearing House, Inc.
28001 Dorothy Drive
Post Office Box
Agoura Hills, California 91301
Attn: President
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the
holder of any Rights Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed, until another address is filed in writing with the Company, as
follows:
Oxford Transfer & Registrar
317 S.W. Alder, Suite 1120
Portland, Oregon 97204
Attn: President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS
The Board of Directors and the Rights Agent may from time to time, if the
Board so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order to cure any ambiguity, to correct
or supplement any provisions contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other provisions
with respect to the Rights which the Company may deem necessary or desirable,
any such supplement or amendment to be evidenced by a writing signed by the
Company and the Rights Agent; provided, however, that from and after such time
as any Person becomes an Acquiring Person, this Agreement shall not be amended
in any manner which would adversely affect the interests of the holders of
Rights. Without limiting the foregoing, the Company may at any time prior to
such time as any Person becomes an Acquiring Person amend this Agreement to
raise or lower the thresholds set forth in Sections 1(a) and 3(a), provided the
threshold may not be lowered to less than the greater of (a) any percentage
greater than the largest percentage of the outstanding Common Stock then known
by the Company to be beneficially owned by any Person, other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company or any entity holding Common Stock for or
pursuant to the terms of any such plan, and (b) twenty-percent (20%). This
Agreement shall not be supplemented or amended in any way following the
Distribution Date unless such amendment is approved by a majority of the Board
of Directors whose determination shall be final. Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall have determined in good faith that such
supplement or amendment would not adversely affect its interest under this
Agreement. Prior to the Distribution Date, the interests of holders of Rights
shall be deemed coincident with the interests of holders of Common Stock.
SECTION 28. REGISTRATION OF SECURITIES
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, if deemed necessary by the Company, such registration statements and
other filings under the Securities Act of 1933, as amended, and the securities
or "blue sky" laws of any state, with respect to any securities purchasable
upon the exercise of the Rights, and to permit the same 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
has been obtained or a registration statement has become effective in such
jurisdiction.
SECTION 29. DETERMINATION AND ACTIONS BY THE BOARD
OF DIRECTORS
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or to the Company, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determination deemed necessary or advisable for
the administration of this Agreement, including a determination to redeem or to
not redeem the Rights or to amend the Agreement. All such actions,
calculations, interpretations and determinations, including, for purposes of
clause (y) below, all omissions with respect to the foregoing, which are done
or made by the Board in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject the Board to any liability to the holders of the
Rights.
SECTION 30. SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit
of the Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 31. BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Rights Agent and the registered holders
of the Rights Certificates, and, prior to the Distribution Date, the Common
Stock, any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates, and, prior
to the Distribution Date, the Common Stock.
SECTION 32. SEVERABILITY
If any term, provision, covenant or restriction of this Agreement is held
by a court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
SECTION 33. GOVERNING LAW
This Agreement and each Rights Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of California and for
all purposes shall be governed by and construed in accordance with the laws of
such State applicable to contracts to be made and performed entirely within
such State.
SECTION 34. COUNTERPARTS
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
SECTION 35. DESCRIPTIVE HEADINGS
Descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
ELECTRONIC CLEARING HOUSE, INC.
By: /s/ Loel M. Barry
JOEL M. BARRY
Chairman of the Board and
Chief Executive Officer
OXFORD TRANSFER & REGISTRAR
By: /s/ Lori Livingston
LORI LIVINGSTON
President
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
OF
Electronic Clearing House, Inc., a Nevada Corporation
Pursuant to Section 78.195 of the Nevada Corporations Code:
We, Joel M. Barry, Chairman of the Board & Chief Executive Officer, and
Donna Camras, Corporate Secretary, of Electronic Clearing House, Inc., a
corporation organized and existing under the laws of the State of Nevada
("Corporation"), do hereby certify as follows:
1. The authorized number of shares of the Corporation's preferred stock
is 5,000,000.
2. Pursuant to the authority conferred upon the Board of Directors by
the Articles of Incorporation of the Corporation, the Board of Directors on
September 30, 1996, adopted the following resolution creating a series of
200,000 shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock:
RESOLVED, that the Board of Directors authorize, to implement the Rights
pursuant to the Corporation's Rights Agreement signed September 30, 1996 and
pursuant to the authority vested in the Board of Directors of this Corporation
in accordance with the provisions of its Articles of Incorporation, a series of
Preferred Stock of the Corporation be and hereby is created, and that the
designation and amount thereof and the voting 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:
"SERIES A JUNIOR PARTICIPATING PREFERRED STOCK:
Paragraph 1. DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Junior Preferred Stock") and the
number of shares constituting the Series A Junior Preferred Stock shall be
200,000. Such number of shares may be increased or decreased by resolution of
the Board of Directors, provided, that no decrease shall reduce the number of
shares of Series A Junior Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Corporation convertible into Series
A Junior Preferred Stock.
Paragraph 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the rights of the holders of any shares of any series of
Preferred Stock (or any similar stock) ranking prior and superior to the Series
A Junior Preferred Stock with respect to dividends, the holders of shares of
Series A Junior Preferred Stock, in preference to the holders of Common Stock,
par value of $0.01 (the "Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds legally available for the purpose, dividends
payable in cash (each payment date determined by the Board of Directors being
referred to herein as a "Dividend Payment Date"), commencing on the first
Dividend Payment Date after the first issuance of a share or fraction of a
share of series A Junior Preferred Stock, in an amount per share (subject to
the provisions for adjustment hereinafter set forth) equal to 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of the Common Stock (by reclassification
or otherwise), declared on the Common Stock since the immediately preceding
Dividend Payment Date or, with respect to the first Dividend Payment date,
since the first issuance of any share or fraction of a share of Series A Junior
Preferred Stock. In the event the Corporation shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision of combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock, then in each such case the amount to which holders of shares
of Series A Junior Preferred Stock were entitled immediately prior to such
event under the preceding sentence shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the
Series A Junior Preferred Stock as provided in paragraph (A) of this Paragraph
2 immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) The Board of Directors may fix a record date for the determination of
holders of shares of Series A Junior Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
not be more than 60 days prior to the date fixed for the payment thereof.
Paragraph 3. VOTING RIGHTS.
The holders of shares of Series A Junior Preferred Stock shall have the
following voting rights:
(A) Subject to the provisions for adjustment hereinafter set forth, each
share of Series A Junior Preferred Stock shall entitle the holder thereof to
100 votes on all matters submitted to a vote of the shareholders of the
Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the number of votes per share to which holders of shares
of Series A Junior Preferred Stock were entitled immediately prior to such an
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 prior to such event.
(B) Except as otherwise provided herein, in any other Certificate of
Amendment to the Certificate of Incorporation or Certificate of Designation
creating a series of Preferred Stock or any similar stock, or by law, the
holders of shares of Series A Junior Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the Corporation having general
voting rights shall vote together as one class on all matters submitted to a
vote of shareholders of the Corporation.
(C) Except as set forth herein, or as otherwise provided by law, holders
of Series A Junior 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.
Paragraph 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Preferred Stock as provided in Paragraph 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the series A Junior Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior Preferred
Stock, except dividends paid ratably on the series A Junior 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 junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Preferred Stock, provided
that the Corporation may at times redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Junior Preferred Stock, or any shares of stock ranking on a
parity with the Series A Junior 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 Paragraph
4, purchase or otherwise acquire such shares at such time and in such manner.
Paragraph 5. REACQUIRED SHARES
Any shares of Series A Junior Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
mat be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Certificate of Amendment to the Certificate of
Incorporation or Certificate of Designation creating a series of Preferred
Stock or any similar stock or as otherwise required by law.
Paragraph 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (1) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Preferred Stock unless, prior thereto, the holders of shares of
Series A Junior Preferred Stock shall have reached $100.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, provided that the holders of
shares of Series A Junior Preferred Stock shall be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount distributed per share to
holders of shares of Common Stock, or (2) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Junior Preferred Stock, except distributions made
ratably on the Series A Junior Preferred Stock and all such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
aggregate amount of which holders of shares of Series A Junior Preferred Stock
were entitled immediately prior to such event under the proviso in clause (1)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Paragraph 7. CONSOLIDATION, MERGER, ETC.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash or any other
property, then in any such case each share of Series A Junior Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash or any other property
(payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock into a greater or lesser number
of shares of Common Stock), then in each case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Junior 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.
Paragraph 8. NO REDEMPTION.
The shares of Series A Junior Preferred Stock shall not be redeemable.
Paragraph 9. RANK.
The Series A Junior Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of
any other class of the Corporation's Preferred Stock.
Paragraph 10. AMENDMENT.
The Certificate of Incorporation shall not be amended in any manner which
would materially alter or change the powers, preferences or special rights of
the Series A Junior Preferred Stock so as to affect them adversely without, in
addition to any other vote of shareholders required by law, the affirmative
vote of the holders of at least 60% of the outstanding shares of Series A
Junior Preferred Stock, voting together as a single class.
Paragraph 11. FRACTIONAL SHARES.
The Series A Junior Preferred Stock may be issued in fractions of a share
which shall entitle the holder, in proportion to such holder's fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of the
Series A Junior Participating Preferred Stock."
Executed on this day, September 30, 1996. The under signed affirm under
penalties of perjury that the foregoing instrument is the act and deed of the
Corporation and that the facts stated therein are true.
ELECTRONIC CLEARING HOUSE, INC.
By: /s/ Joel M. Barry
JOEL M. BARRY
Chairman of the Board & C.E.O.
By: /s/ Donna Camras
DONNA CAMRAS
Corporate Secretary
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On this day, September 30, 1996, before me a Notary Public in and for said
County and State, personally appeared Joel M. Barry proved to me on the basis
of satisfactory evidence to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
entity on behalf of which the person acted, executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
(Notary Seal) Signed: /s/ Nalini Khurana
STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
On this day, September 30, 1996, before me a Notary Public in and for said
County and State, personally appeared Donna Camras proved to me on the basis of
satisfactory evidence to be the person whose name is subscribed to the within
instrument and acknowledged to me that she executed the same in her authorized
capacity, and that by her signature on the instrument the person, or entity on
behalf of which the person acted, executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal the day
and year first above written.
(Notary Seal) Signed: /s/ Nalini Khurana
Exhibit B
FORM OF RIGHTS CERTIFICATE
Certificate No. R- Rights
NOT EXERCISABLE AFTER SEPTEMBER 30, 2006 OR EARLIER IF REDEMPTION OR
EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER RIGHT AND
TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS CERTIFICATE
Electronic Clearing House, Inc.
This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of September 30, 1996 ("Rights Agreement"),
between Electronic Clearing House, Inc., a Nevada corporation ("Company"), and
Oxford Transfer and Registrar ("Rights Agent"), to purchase from the Company at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) prior to 5:00 p.m., Los Angeles time, on September 30, 2006 at the
principal office of the Rights Agent, or at the office of its successor as
Rights Agent, one one-hundredth of a fully paid non-assessable share of Series
A Junior Participating Preferred Stock ("Preferred Stock"), of the Company, at
a purchase price of $0.50 per one one-hundredth of a Preferred Share ("Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase Duly executed. The number of Rights evidenced by
this Rights Certificate (and the number of one one-hundredth of a Preferred
Share which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of
September 30, 1996, based on the Preferred Shares as constituted at such date.
As provided in the Rights Agreement, the Purchase Price and the number of one
one-hundredth of a Preferred Share which may be purchased upon the exercise of
the Rights evidenced by this Rights Certificate are subject to modification and
adjustment upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies
of the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned offices of the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
Preferred Shares as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$0.001 per Right or (ii) may be exchanged in whole or in part for Preferred
Shares or shares of the Company's Common Stock, no par value.
No fractional Preferred Shares will 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 Preferred Share, which may, at the election
of the Company, be evidenced by depositary receipts), but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company which may at any time be issuable on the
exercise thereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting shareholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Rights Certificate shall
have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of
ATTEST: Electronic Clearing House, Inc.
By: _____________________
Authorized Signature
Countersigned:
OXFORD TRANSFER & REGISTRAR
By: _____________________
Authorized Signature
Form of Reserve Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED _______________________________________ hereby sells,
assigns and transfers unto
___________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all Rights, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated:
Signature: _____________________
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an eligible institution (as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934) which may include a
commercial bank, trust company, savings association, credit union or a member
firm of the American Stock Exchange, New York Stock Exchange, Pacific Stock
Exchange or Midwest Stock Exchange.
The undersigned hereby certifies that the Rights evidenced by this Rights
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Association thereof (as defined in the Rights Agreement).
______________________________
Signature
Form of Reverse Side of Rights Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
To ELECTRONIC CLEARING HOUSE, INC.:
The undersigned hereby irrevocably elects to exercise Rights represented
by this Rights Certificate to purchase the Preferred Shares issuable upon the
exercise of such Rights and requests that certificates for such Preferred
Shares be issued in the name of:
Please insert social security or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
______________________________________________________________________________
(Please print name and address)
______________________________________________________________________________
Dated: __________________________
______________________________
Signature
Signature Guaranteed:
______________________________
Signatures must be guaranteed by an eligible institution (as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934) which may include a
commercial bank, trust company, savings association, credit union or a member
firm of the American Stock Exchange, New York Stock Exchange, Pacific Stock
Exchange or Midwest Stock Exchange.
Form of Reverse Side of Certificate -- continued
The undersigned hereby certifies that the Rights evidenced by this Rights
Certificate are not beneficially owned by an Acquiring Person or an Affiliate
or Association thereof (as defined in the Rights Agreement).
______________________________
Signature
NOTICE
The signature in the foregoing Forms of Assignment and Election must conform to
the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or the
Form of Election to Purchase, as the case may be, is not completed, the Company
and the Rights Agent will deem the beneficial owner of the Rights evidenced by
this Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and such Assignment or Election to
Purchase will not be honored.
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On September 30, 1996, the Board of Directors of Electronic Clearing
House, Inc. ("Company") declared a dividend of one preferred share purchase
right ("Right") for each outstanding share of common stock, par value of $0.01
("Common Stock"), of the Company. The dividend is payable on September 30,
1996 ("Record date") to the stockholders of record on that date. Each Right
entitles the registered holder to purchase from the Company one one-hundredth
of a share of series A Junior Participating Preferred Stock, no par value
("Preferred Stock"), of the Company at a price of $0.50 per one one-hundredth
of a share of Preferred Stock ("Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement dated
as of September 30, 1996 ("Rights Agreement") between the Company and Oxford
Transfer & Registrar, as Rights agent ("Rights Agent").
Initially, the Rights will be attached to all certificates representing
Common Stock then outstanding, regardless of whether any such certificates have
a copy of this Summary of Rights attached thereto, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common
Stock and a Distribution Date will occur upon the earlier of (i) 10 days
following a public announcement that, without the prior consent of the Board of
Directors, a person or group of affiliated or associated persons ("Acquiring
Person") have acquired beneficial ownership of twenty-percent (20%) or more of
the outstanding Common Stock ("Stock Acquisition Date"), or (ii) 10 business
days (or such later date as may be determined by action of the Board of
Directors prior to such time as any Person becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make a tender
offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of twenty-percent (20%) or more of
such outstanding Common Stock.
The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificate for
Common Stock, outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Stock represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Stock as of the close of business on the
Distribution Date and such separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The Rights
will expire on September 30, 2006 ("Final Expiration Date"), unless the Rights
are earlier redeemed or exchanged by the Company, in each case, as described
below.
The Purchase Price payable, and the manner 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 or purchase Preferred Stock at a
price, or securities convertible into Preferred Stock with a conversion price,
less than the then current market price of the Preferred Stock or (iii) upon
the distribution to holders of the Preferred Stock of evidence of indebtedness
or assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Stock) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredth of a
share of Preferred Stock issuable upon exercise of each Right are also subject
to adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in Common Stock or a subdivision,
consolidation or combination of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of preferred Stock will be entitled to a minimum
preferential dividend payment of 100 times the dividend declared per share of
Common Stock. In the event of liquidation, the holder of the Preferred Stock
will be entitled to a minimum preferential liquidation payment of $100 per
share but will be entitled to an aggregate payment of 100 times the payment
made per share of Common Stock. Each share of Preferred Stock will have 100
votes, voting together with the Common Stock. Finally, in the event of any
merger, consolidation or other transaction in which Common Stock are exchanged,
each share of Preferred Stock will be entitled to receive 100 times the amount
received per share of Common Stock. These rights are protected by customary
antidilution provisions.
In the event that any person becomes the beneficial owner of twenty-
percent (20%) or more of the Common Stock of the Company, ten (10) days
thereafter ("Flip-In Event") each holder of a Right will thereafter have the
right to receive, upon exercise thereof at the then current Purchase Price of
the Right, Common Stock (or, in certain circumstances, a combination of cash,
other property, Common Stock or other securities) which has a value of two
times the Purchase Price of the Right (such right being called the "Flip-In
Right"). In the event that the Company is acquired in a merger or other
business combination transaction where the Company is not the surviving
corporation or in the event that 50% or more of its assets or earning power is
sold, proper provision shall be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price of the Right, common stock of the acquiring entity which
has a value of two times the Purchase Price of the Right. Upon the occurrence
of the Flip-In Event, any Rights that are or were at any time owned by an
Acquiring Person shall become null and void insofar as they relate to the Flip-
In Right.
At any time after the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of twenty-percent (20%) or more of
the outstanding Common Stock and prior to the acquisition by such person or
group of twenty-percent (20%) or more of the outstanding Common Stock, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such person or group which have become void), in whole or in part, at
an exchange ratio of one 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).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one-
percent (1%) in such Purchase Price. No fractional shares of Preferred Stock
will be issued (other than fractions which are integral multiples of one one-
hundredth of a share of Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the Preferred
Stock on the last trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) the tenth day after the
Stock Acquisition Date, or (ii) the expiration of the Rights, the Company may
redeem the Rights in whole, but not in part, at a price of $0.001 per Right
("Redemption Price"). The redemption shall be effective at such time, on such
basis and with such conditions as the Board of Directors in its sole discretion
may establish. Additionally, the Board of Directors may, following the Stock
Acquisition Date, redeem the then outstanding Rights in whole, but not in part,
at the Redemption Price providing that either (a) the Acquiring Person reduces
his beneficial ownership to less than twenty-percent (20%) of the voting power
of the Company in a manner which is satisfactory to the Directors and there are
not other Acquiring Persons, or (b) such redemption is incidental to a merger
or other business combination transaction or series of transactions involving
the Company but not involving an Acquiring Person or any person who was an
Acquiring Person. The redemption of Rights described in the preceding sentence
shall be effective only after ten (10) business days prior notice. Upon the
effective date of the 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.
Until a Right is exercised, the Holder of a right will not, by reason of
being such a holder, have rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
The terms of the Rights may be amended by the Board of Directors of the
Company in any manner without the consent of the holder of the Rights,
including an amendment to lower certain thresholds described above to not less
than the greater of (i) any percentage greater than the largest percentage of
the outstanding Common Stock then known to the Company to be beneficially owned
by any person or group of affiliated or associated persons and (ii) twenty-
percent (20%), except that from and after such time as any person becomes an
Acquiring Person no such amendment may adversely affect the interests of the
holders of the Rights.
As of September 16, 1996, there were 11,501,804 shares of Common Stock
issued and outstanding (including treasury stock). Each outstanding share of
Common Stock on September 30, 1996 will receive one Right. As long as the
Rights are attached to the Common Stock, the Company will issue one Right for
each share of Common Stock issued between the Record Date and the Distribution
Date so that all such shares will have attached Rights. As provided above,
however, upon and following the occurrence of the Flip-In Event, any such
Rights that are or were at any time owned by an Acquiring Person shall become
null and void insofar as they relate to the Flip-In Right. There will be
200,000 shares of Preferred Stock reserved for issuance upon exercise of the
Rights.
The Rights Agreement is designed to protect shareholders in the event of
an unsolicited attempt to acquire the Company for an inadequate price and to
protect against abusive practices that do not treat all shareholders equally
such as, among others, partial and two-tier tender offers, coercive offers, and
creeping stock accumulation programs. Such practices can pressure stockholders
into tendering their investment prior to realizing the full value or total
potential of such investments. The Rights Agreement is intended to make the
cost of such abusive practices prohibitive and create an incentive for a
potential acquiror to negotiate in good faith with the Board. The Rights
Agreement is not intended to, and will not, prevent all unsolicited offers to
acquire the Company. If an unsolicited offer is made, and the Board determines
that it is fair and in the best interest of the Company and its shareholders,
then, pursuant to the terms of the Rights Agreement, the Board has the
authority to redeem the Rights and permit the offer to proceed. Essentially,
the Rights Agreement will provide the Board with sufficient opportunity to
evaluate the fairness of any unsolicited offer and the credibility of the
bidder, and will therefore enable the Board to represent the interests of all
shareholders more effectively. Of course, in deciding whether to redeem the
Rights in connection with any unsolicited offer, the Board will be bound by its
fiduciary obligations to act in the best interests of the Company and its
shareholders.
A copy of the Rights Agreement is filed with the Securities and Exchange
Commission as an Exhibit to Form 8-K. A copy of the Rights Agreement is
available free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.
