SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
AULT INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-0842932
(State of Incorporation (IRS Employeer/Identification
or organization) No.)
7300 Boone Avenue North
Minneapolis, Minnesota 55428-1028
(Address of principal (zip code)
executive offices)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Stock Purchase Rights
(Title of Class)
Item 1. Description of Securities to be Registered.
On February 13, 1996, the Board of Directors of Ault Incorporated
(the "Company") declared a dividend of one Right for each
outstanding share of the Company's Common Stock, no par value (the
"Common Stock"), to the stockholders of record at the close of
business on March 4, 1996 (the "Record Date"). Except as set
forth below, each Right entitles the registered holder to purchase
from the Company one one-hundredth (1/100) of a share of Series A
Junior Participating Preferred Stock, no par value (the "Preferred
Stock"), at a price of $36 per one one-hundredth of a share (the
"Purchase Price"). The description and terms of the Rights are set
forth in a Rights Agreement dated as of February 13, 1996 (the
"Rights Agreement") between the Company and Norwest Bank Minnesota,
N.A., as Rights Agent.
Initially, the Rights will be attached implicitly to all Common
Stock certificates representing shares then outstanding, and no
separate Right certificates will be distributed. A Distribution
Date for the Rights will occur upon the earlier of ten days
following (i) a public announcement that, without the prior consent
of the Board of Directors, a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of voting
securities having 15% or more of the voting power of the Company
(the "Stock Acquisition Date"), or (ii) the commencement of (or a
public announcement of an intention to make) a tender offer or
exchange offer which would result in any person or group and
related persons having beneficial ownership of voting securities
having 15% or more of the voting power of the Company.
Until the Distribution Date, the Rights will be transferred with
and only with Common Stock certificates. From as soon as
practicable after the Record Date and 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 the Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any certificates for Common
Stock outstanding as of the Record Date 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 the separate Rights Certificates alone will evidence the
Rights.
The Rights are not exercisable until the Distribution Date. The
Rights will expire on February 13, 2006 unless earlier redeemed by
the Company as described below.
In the event that any person becomes the beneficial owner of 15% or
more of the voting power of the Company, ten (10) days thereafter
(the "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.
The Purchase Price payable, and the number of shares of Preferred
Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of the Preferred Stock, (ii) upon
the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for Preferred Stock or convertible securities
at less than the current market price of the Preferred Stock or
(iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other than
those referred to above).
At any time after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or
more of the voting power of the Company and prior to the
acquisition by such person or group of 50% or more of the voting
power of the Company, 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 1% in the Purchase Price. No fractions of shares will be
issued and, in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
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 $.001 per Right (the "Redemption Price"), which
redemption shall be effective at such time as the Board of
Directors shall establish. Additionally, the Continuing Directors
may, following the Stock Acquisition Date, redeem the then
outstanding Rights in whole, but not in part, at the Redemption
Price provided that either (a) the Acquiring Person reduces his
beneficial ownership to less than 15% of the voting power of the
Company in a manner which is satisfactory to the Continuing
Directors and there are no 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, it will not entitle the holder to any
rights as a stockholder of the Company (other than those as an
existing stockholder), 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 (i) prior to the Distribution Date in any manner, and
(ii) on or after the Distribution Date to cure any ambiguity, to
correct or supplement any provision of the Rights Agreement which
may be defective or inconsistent with any other provisions, or in
any manner not adversely affecting the interests of the holders of
the Rights.
As of February 13, 1996, there were 2,094,276 shares of Common
Stock issued and outstanding and 368,750 shares reserved for
issuance pursuant to the exercise of outstanding stock options.
Each outstanding share of Common Stock on March 4, 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. There will
be 50,000 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, including partial and twotier
tender offers, coercive offers, and creeping stock accumulation
programs. Such practices can pressure shareholders into tendering
their investments 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 interests 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.
The form of Rights Agreement between the Company and the
Rights Agent specifying the terms of the Rights, which includes as
Exhibit B the form of Rights Certificate, is attached hereto as
Exhibit 1 and is incorporated herein by reference. The foregoing
description of the Rights does not purport to be complete and is
qualified in its entirety by reference to such Exhibit.
Item 2. Exhibits.
Exhibit 1:
Form of Rights Agreement dated as of February 13, 1996 between Ault
Incorporated and Norwest Bank Minnesota, National Association,
which includes as Exhibit B thereto the form of
Rights Certificate. Pursuant to the Rights Agreement, Rights
Certificates will not be mailed until after the earlier of (i) the
tenth day after the Stock Acquisition Date, or (ii) the tenth day
after the date of the commencement of, or first public announcement
of the intent to commence, a tender or exchange offer by any person
or group of affiliated or associated persons if, upon consummation
thereof, such person or group would be the beneficial owner of 15%
or more of the voting power of the Company.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized.
AULT INCORPORATED
/s/ Frederick M. Green
Frederick M. Green, Chief Executive Officer
Dated: February 16, 1996
EXHIBIT 1
AULT INCORPORATED
and
NORWEST BANK MINNESOTA, N.A.
Rights Agent
RIGHTS AGREEMENT
Dated as of February 13, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
1. Certain Definitions 2
2. Appointment of Rights Agent 9
3. Issue of Rights Certificates 10
4. Form of Rights Certificates 13
5. Countersignature and Registration 16
6. Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights
Certificates 17
7. Exercise of Rights; Purchase Price;
Expiration Date of Rights 19
8. Cancellation and Destruction of Rights
Certificates 25
9. Reservation and Availability of Capital
Stock 26
10. Preferred Stock Record Date 28
11. Adjustment of Purchase Price, Number and
Kind of Stock or Number of Rights 29
12. Certificate of Adjusted Purchase Price or
Number of Stock 47
13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power 48
14. Fractional Rights and Fractional Stock 53
15. Rights of Action 56
16. Agreement of Rights Holders 57
17. Rights Certificate Holder Not Deemed a
Shareholder 58
18. Concering the Rights Agent 59
19. Merger or Consolidation or Change of Name
of Rights Agent 60
20. Duties of Rights Agent 62
21. Change of Rights Agent 66
22. Issuance of New Rights Certificates 68
23. Redemption and Termination 68
24. Exchange 71
25. Notice of Certain Events 74
26. Notices 75
27. Supplements and Amendments 76
28. Successors 77
29. Benefits of this Agreement 78
30. Administration of Agreement 78
31. Severability 79
32. Governing Law 79
33. Counterparts 79
34. Descriptive Headings 79
</TABLE>
<TABLE>
<S> <C>
Exhibit A: Certificate of Designation, Preferences
and Rights of Series A Junior Participating
Preferred Stock
Exhibit B: Form of Rights Certificate
Exhibit C: Summary of Shareholders' Rights Plan
</TABLE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of February 13, 1996 (the
"Agreement"), between Ault Incorporated, a Minnesota corporation
(the "Company"), and Norwest Bank Minnesota, N.A., a Minnesota
corporation (the "Rights Agent").
W I T N E S S E T H
WHEREAS, on February 13, 1996, the Board of Directors of the
Company authorized and declared a dividend distribution of one
Right (as hereinafter defined) for each outstanding share of the
Company's Common Stock, no par value (the "Common Stock")
outstanding at the close of business on March 4, 1996 (the "Record
Date"), each Right representing the right to purchase one one-
hundredth of a share of Series A Junior Participating Preferred
Stock of the Company having the rights, powers and preferences set
forth in the form of Certificate of Designation, Preferences and
Rights of Series A Junior Participating Preferred Stock attached
hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the "Rights") and further authorized the
issuance of one Right with respect to each share of Common Stock
that would become outstanding after the close of business on the
Record Date in accordance with the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as
follows:
Section 1. Certain Definitions. For purposes of this
Agreement, the following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such
term is hereinafter defined) who or which, together with all
Affiliates (as such term is hereinafter defined) and
Associates (as such term is hereinafter defined) of such
Person, without the prior approval of a majority of the Board
of Directors, shall be the Beneficial Owner (as such term is
hereinafter defined) of voting securities having fifteen
percent (15%) or more of the then voting power of the Company,
but shall not include the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity organized, appointed
or established by the Company 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 fifteen percent (15%) or more of the voting power
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 beneficially owned by such Person. 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 fifteen percent (15%) or more of the then voting
power of the Company then outstanding; provided, however, that
if a Person shall become the Beneficial Owner of fifteen
percent (15%) or more of the then voting power of the Company
then outstanding by reason of shares purchased 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
Continuing Directors then in office determines in good faith
that a Person who would otherwise be an "Acquiring Person", as
defined pursuant to the foregoing provisions of this paragraph
(a), has become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an
Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), then such Person shall not
be deemed to be an "Acquiring Person" for any purposes of this
Agreement.
(b) "Acquisition Event" shall mean the Flip-In event or
any event described in Section 13(a) hereof.
(c) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as in effect on the
date of this Agreement.
(d) 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 or obligation
to acquire (whether such right or obligation is
exercisable or effective immediately or only after the
passage of time) pursuant to any agreement, arrangement
or understanding (whether or not in writing) or upon the
exercise of conversion rights, exchange rights, rights
(other than the Rights at any time prior to the
occurrence of an Acquisition Event, but thereafter
including the Rights acquired from and after the
Distribution Date (as defined in Section 3(a) below)
other than pursuant to 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 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 (whether or not
in writing); provided, however, that a Person shall not
be deemed the "Beneficial Owner" of, or to "beneficially
own," any security under this clause (B) if the
agreement, arrangement or understanding to vote such
security: (1) arises solely from a revocable proxy given
in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act, and (2) is not
also then reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor report);
or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person or any of such
Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing
and other then customary agreements with and between
underwriters and selling group members with respect to a
bona fide public offering of securities), for the purpose
of acquiring, holding, voting (except pursuant to a
revocable proxy as described in clause (B) of
subparagraph (ii) of this paragraph (d)) or disposing of
any voting securities of the Company.
Notwithstanding the foregoing, a Person shall not be
deemed to be the "Beneficial Owner" of or to
"beneficially own" any securities that are issued, or
proposed to be issued, to such Person pursuant to any
stock option plan or other employee compensation plan or
arrangement of the Company or any of its Subsidiaries.
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.
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 suchPerson
would be deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in the
States of Minnesota or New York 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., Minneapolis, Minnesota time, on such date;
provided, however, that if such date is not a Business Day it
shall mean 5:00 P.M., Minneapolis, Minnesota time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean the Common Stock, no 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 terms of which do not limit (as a
fixed amount and not merely in proportional terms) the amount
of dividends or income payable or distributable on such class
or series or the amount of assets 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) "Continuing Director" shall mean (i) any member of
the Board of Directors of the Company, while such person is a
member of the Board, who is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, or a repre
sentative or nominee of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board prior to
the Stock Acquisition Date, and (ii) any successor of a
Continuing Director, while such successor is a member of the
Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative or
nominee of an Acquiring Person or of any such Affiliate or
Associate and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
(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,
corporation, partnership 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.
(n) "Stock Acquisition Date" shall mean the first date
of public announcement by the Company or an Acquiring Person
that an Acquiring Person has become such.
(o) "Subsidiary" shall mean, with reference to any other
Person, any corporation of which a majority of any class of
equity security is beneficially owned, directly or indirectly,
by such other Person.
(p) "Voting power of the Company" shall mean the
collective voting power of the Common Stock of the Company.
Any determination required by the definitions contained in
this Section 1 shall be made by the Board in their good faith
judgment, which determination shall be final and binding on the
Rights Agent.
Section 2. Appointment of Rights Agent. The Company hereby
appoints the Rights Agent to act as agent for the Company and the
holders of the Rights (who, in accordance with Section 3 hereof,
shall prior to the Distribution Date also be the holders of the
Common Stock) in accordance with the terms and conditions hereof,
and the Rights Agent hereby accepts such appointment. The Company
may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable. In the event the Company appoints one or
more Co-Rights Agents, the respective duties of the Rights Agent
and any Co-Rights Agent shall be as the Company shall determine.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of business on the
tenth (10th) day after the Stock Acquisition Date, or (ii) the
close of business on the tenth (10th) day (or such later date
as may be determined by action of the Continuing Directors
prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement of, or first public
announcement of the intent of any Person (other than the
Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company or any
entity organized, appointed or established by the Company for
or pursuant to the terms of any such plan), to commence, a
tender or exchange offer which would result in such person
becoming an Acquiring Person (includingany such date which is
after the date of this Agreement and prior to the issuance of
the Rights) (the earliest of (i) and (ii) being herein referred
to as the "Distribution Date"), (x) the Rights will be
evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for Common Stock registered in
the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor)
will be transferable only in connection with the transfer of
the underlying shares of Common Stock (including a transfer to
the Company). As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, postage
prepaid mail, to each record holder of the Common Stock as of
the close of business on the Distribution Date, at the address
of such holder shown on the records of the Company, one or more
rights certificates, in substantially the form of Exhibit B
hereto (the "Rights Certificates"), evidencing one Right for
each share of Common Stock so held. As of and after the
Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) As promptly as practicable following the Record
Date, the Company will send a copy of a Summary of the
Shareholders' Rights Plan, in substantially the form attached
hereto as Exhibit C (the "Summary of Rights"), by firstclass,
postage prepaid mail, to each record holder of the 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 the Common Stock outstanding as of
the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the earlier
of the Distribution Date or the Expiration Date (as such term
is defined in Section 7 hereof), the surrender for transfer of
any of the certificates for the Common Stock outstanding on the
Record Date shall also constitute the transfer of the Rights
associated with the Common Stock represented by such
certificate.
(c) Certificates for the Common Stock issued after the
Record Date but prior to the earlier of the Distribution Date
or the Expiration Date, shall be deemed also to be
certificates for Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights
Agreement between Ault Incorporated and Norwest Bank
Minnesota, N.A. dated as of February 13, 1996, (the
"Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is
on file at the principal offices of Ault Incorporated.
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. Ault Incorporated will mail to the holder
of this certificate a copy of the Rights Agreement
without charge promptly after receipt of a written
request therefor. Under certain circumstances, Rights
issued to, or held by, an Acquiring Person, or an
Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement) and any subsequent holder of
such Rights may become null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or (ii)
the Expiration Date, the Rights associated with the Common
Stock represented by such certificates shall be
evidenced by such certificates alone and the registered
holders of Common Stock shall also be the registered holders
of the associated Rights, and the surrender for transfer of
any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by
such certificates. In the event the Company purchases or
acquires any Common Stock after the Record Date but prior to
the Distribution Date, any Rights associated with such Common
Stock shall be deemed canceled and retired so that the Company
shall not be entitled to exercise any Rights associated with
the Common Stock which is no longer outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
exercise and of assignment to be printed on the reverse thereof)
shall each be substantially in the form attached hereto as Exhibit
B and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company
may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with
any
applicable law or with any rule or regulation made pursuant thereto
or with any rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to usage.
Subject to the provisions of Section 11 and Section 22 hereof, the
Rights Certificates, whenever distributed, shall be dated as of the
Record Date and on their face shall entitle the holders thereof to
purchase such number of shares of Preferred Stock (or Common Stock,
as the case may be) as shall be set forth therein at the price per
share set forth therein (the "Purchase Price"), but the number of
such 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 Associates and Affiliates do not collectively
acquire, and will not have acquired during the preceding 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 Continuing
Directors otherwise conclude in good faith is part of a plan,
arrangement or understanding which has as a primary purpose or
effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof
upon transfer, exchange, replacement or adjustment of any
other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible 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(e) of such
Agreement.
The provisions of Section 7(e) of the Rights Agreement shall
be operative whether or not the foregoing legend is contained on
any such Rights Certificate.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf
of the Company by its Chief Executive Officer, its President
or any Vice President either manually or by facsimile
signature, which shall be attested by the Secretary or any
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 so 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 Certificates 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
Agentwill keep or cause to be kept, at its offices in South
St. Paul, Minnesota or New York, New York, books for
registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number
of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of
Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights
Certificates.
(a) Subject to the provisions of 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 Expiration
Date, any Rights Certificate or 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 Certificates, entitling the registered holder to purchase a
like number of shares of Preferred Stock as the Rights
Certificate or Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange
any Rights Certificate shall make such request in writing
delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be transferred, split
up, combined or exchanged at the office or offices of the
Rights Agent designated for such purpose. 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.
(b) Upon receipt by the Company and the Rights
Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Rights Certificate, and,
in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to
the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the
Company will execute and deliver a new Rights Certificate of
like tenor to the Rights Agent for countersignature and
delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights.
(a) The registered holder of any Rights Certificate may
exercise the Rights evidenced thereby (except as otherwise
provided herein including without limitation, the restrictions
on exercisability set forth in Section 9(c), Section 1(a)(iii)
and Section 23(a) hereof) in whole or in part at any time
after the Distribution Date upon surrenderof the Rights
Certificate, with the form of election to exercise on the
reverse side thereof duly executed, to the Rights Agent at the
office or offices of the Rights Agent designated for such
purpose, together with payment of the Purchase Price for each
one one-hundredth of a share of Preferred Stock (or, if
applicable, such other number of shares or other securities)
as to which the Rights are exercised, at or prior to the
earlier of (i) the close of business on February 14, 2006 (the
"Final Expiration Date"), or (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof (such earlier
time being herein referred to as the "Expiration Date"). Any
Person who prior to the Distribution Date becomes a record
holder of shares of Common Stock may exercise all of the
rights of a registered holder of a Rights Certificate with
respect to the Rights associated with such shares of Common
Stock in accordance with and subject to the provisions of this
Agreement, including the provisions of Section 7(e) hereof, as
of the date such Person becomes a record holder of shares of
Common Stock.
(b) The Purchase Price for each one one-hundredth of a
share of Preferred Stock pursuant to the exercise of a Right
shall initially be Thirty-six Dollars ($36), and shall be
subject to adjustment from time to time as provided in Section
11 hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to exercise duly
executed, accompanied by payment of the Purchase Price for the
shares to be purchased and an amount equal to any applicable
transfer tax, the Rights Agent shall thereupon promptly (i)
(A) requisition from any transfer agent of the shares of
Preferred Stock (or make available, if the Rights Agent is the
transfer agent for such shares) certificates for the number of
shares of Preferred Stock to be purchased and the Company
hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Company, in its sole
discretion, shall have elected to deposit the shares of
Preferred Stock issuable upon exercise of the Rights hereunder
into a depositary, requisition from the depositary agent
depositary receipts representing such number of one one
hundredth of a share of Preferred Stock as are to be purchased
(in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will
direct the depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of
cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such
certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of
such Rights Certificate, registered in such name or names as
may be designated by such holder, and (iv) when appropriate,
after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate.
The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) 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 FlipIn 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 and/or
distribute other property pursuant to Section 11(a)(iii)
hereof, the Company will make all arrangements necessary so
that such other securities, cash, and/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 to the registered
holder thereof after imprinting, stamping 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 and
delivered to the registered holder of such Rights Certificate
or to his duly authorized assigns, subject to the provisions
of Section 14 hereof.
(e) 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 Continuing Directors otherwise conclude in
good faith is part of a plan, arrangement or understanding
which has as a primary purpose or effect avoidance of this
Section 7(e), shall become null and void without any further
action, and any holder of such Rights shall thereupon have no
right to exercise such Rights under any provision of this
Agreement. A majority of the Continuing Directors may in
appropriate circumstances waive application of this Section
7(e) 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 fifteen
percent (15%) of the voting power of the Company. The Company
shall use allreasonable efforts to insure that the provisions
of this Section 7(e) hereof are complied with, but shall have
no liability to any holder of Rights for the inability to make
any determinations with respect to an Acquiring Person or any
of their respective Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered
holder 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 any of its agents, be delivered to
the Rights Agent for cancellation or in canceled form, or, if
surrendered to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Agreement. The
Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any
other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company.
Section 9. Reservation and Availability of Capital stock.
(a) The Company covenants and agrees that it willcause
to be reserved and kept available out of its authorized and
unissued shares of Preferred Stock (and, following the
occurrence of an Acquisition Event, Common Stock and/or other
securities) or any authorized and issued shares of Preferred
Stock (and following the occurrence of an Acquisition Event,
Common Stock and/or other securities) held in its treasury,
the number of shares of Preferred Stock (and, following the
occurrence of an Acquisition Event, Common Stock and/or other
securities) that, except as provided in Section 11(a)(iii) and
subject to Section 7(e) hereof, will be sufficient to permit
the exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and,
following the occurrence of an Acquisition Event, Common Stock
and/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. 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 any required registration statement. Upon
any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
been temporarily suspended.
(d) The Company covenants and agrees that it will
takeall such action as may be necessary to ensure that all
shares of Preferred Stock (and, following the occurrence of an
Acquisition Event, Common Stock and/or other securities)
delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to
payment of the Purchase Price), be duly and validly authorized
and issued and fully paid and nonassessable shares or
securities.
(e) The Company further covenants and agrees that it
will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of
the issuance or delivery of the Rights Certificates and of any
certificates for shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) upon the exercise
of Rights. The Company shall not, however, be required to pay
any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a person other
than, or the issuance or delivery of the shares of Preferred
Stock (or Common Stock and/or other securities, as the case
may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any
certificates for shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in a name other
than that of the registered holder upon the exercise of any
Rights until such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificate at the time
of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each person in
whose name any certificate for shares of Preferred Stock (or Common
Stock, as the case may be) is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of
record of the shares of Preferred Stock (or Common Stock, as the
case may be) represented thereby on, and such certificate shall be
dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and
all applicable transfer taxes) was made; provided, however, that if
the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock, as the case may be) transfer
books of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such
certificate shall be dated, the next succeeding Business Day on
which the Preferred Stock (or Common Stock, as the case may be)
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 shareholder of the Company
with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of
Stock or Number of Rights. The Purchase Price, the number and kind
of shares covered by each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided
in this Section 11.
(a) (i) In the event the Company shall at any time
after the date of this Agreement (A) declare a dividend
on the Preferred Stock payable in shares of Preferred
Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller
number of shares, or (D) issue any shares of its capital
stock in a reclassification of the Preferred Stock
(including any such reclassification in connection with a
consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and in Section 7(e)
hereof, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of
such subdivision, combination or reclassification, and
the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date,
shall be proportionately adjusted so that the holder of
any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be,
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, he 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 (the "Flip-In Event"), proper
provision shall be made so that each holder of a Right,
except as provided below and in Section 7(e) 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 as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then
number of one one-hundredths of a share of Preferred
Stock for which a Right is then exercisable and dividing
that product by (y) 50% of the current market price
(determined pursuant to Section 11(d) hereof) per share
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) In lieu of issuing shares of Common Stock in accordance
with Section 11(a)(ii) hereof, the Company may, if a majority
of the Continuing Directors then in office determine that such
action is necessary or appropriate and not contrary to the
interests of holders of Rights, elect to issue or pay, upon the
exercise of the Rights, cash, property, shares of Common Stock,
other securities or any combination thereof having an aggregate
value equal to the value of the shares of Common Stock which
otherwise would have been issuable pursuant to Section
11(a)(ii), which value shall be determined by a nationally
recognized investment banking firm selected by a majority of
Continuing Directors then in office. For purposes of the
preceding sentence, the value of any preferred stock which a
majority of the Continuing Directors determines to be a "common
stock equivalent" shall be deemed to have the same value as the
Common Stock. Any such election by the Continuing Directors
must be made and publicly announced within 60 days of the Flip-
In Event. Following the occurrence of the Flip-In Event, a
majority of the Continuing Directors then in office may suspend
the exercisability of the Rights for a period of up to 60 days
following the occurrence of such Flip-In Event to the extent
that the Continuing Directors have not determined whether to
exercise their rights of election under this paragraph
(a)(iii). 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.
(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 to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record
date) Preferred Stock (or shares having the same rights, privileges
and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock
or equivalent preferred stock at a price per share of Preferred
Stock or per share of equivalent preferred stock (or having a
conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred stock) less than the
current market price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date, the
Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on
such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered
(and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of shares of
Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred
stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible);
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, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on
the Rights Agent. Stock of Preferred Stock owned by or held for
the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed; and in the event
that such rights or warrants
are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date
had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend
out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including
any dividend payable in stock other than Preferred Stock) or
subscription rights or warrants (excluding those referred to in
Section 11(b)), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price
in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined
pursuant to Section 11(d) hereof) per one onehundredth of a share
of Preferred Stock on such record date, less the fair market value
(as determined in good faith by the Board, whose determination
shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to
be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of
which shall be such current market price (as determined pursuant to
Section 11(d) hereof) per one one-hundredth of a share of 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 be adjusted to be the Purchase Price which would have been in
effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the
"current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices
per share of such Common Stock for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that
the current market price per share of the Common Stock is
determined during a period following the announcement by the
issuer of such Common Stock of (A) a dividend or distribution
on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other
than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the
expiration of the thirty (30) Trading Day period after the ex-
dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification,
then, and in each such case, the "current market price" shall
be properly adjusted to take into account ex-dividend trading.
The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange or, if
the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with
respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are
listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national
securities exchange, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") or such other system then in use, or, if on
any such date the shares of Common Stock are not quoted by any
such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a
market in the Common Stock selected by the Board. If on any
such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as
determined in good faith by the Board shall be used. The term
"Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are
listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not
so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by
the Board (or if there are Continuing Directors then in
office, a majority of the Continuing Directors then in
office), whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation hereunder,
the "current market price" per share of Preferred Stock shall
be determined in the same manner as set forth above for the
Common Stock in clause (i) of this Section 11(d) (other than
the last sentence thereof). If the current market price per
share of Preferred Stock cannot be determined in the manner
provided above, the "current market price" per share of
Preferred Stock shall be conclusively deemed to be an amount
equal to 100 times the current market price per share of
Common Stock, as appropriately adjusted for stock splits,
stock dividends or similar transactions after the date hereof.
If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, "current market price"
per share shall mean the fair value per share as determined in
good faith by the Board (or if there are Continuing Directors
then in office, a majority of the Continuing Directors then in
office), whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all
purposes.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least
one percent (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 ten-thousandth of a share of Common Stock or other
share or one-millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of(i) three (3) years from
the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a) or Section 13, the holder of any Right thereafter
exercised shall become entitled to receive any shares of
capital stock other than Preferred Stock, thereafter the number
of such other shares so receivable upon exercise of any Right
shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the
provisions contained in Section 11(a), (b), (c), (e), (g), (h),
(i), (j), (k) and (m), and the provisions of Sections 7, 9, 10,
13 and 14 hereof with respect to the Preferred Stock shall
apply on like terms to any such other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price
hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of shares of Preferred Stock
purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the
Purchase Price as a result of the calculations made in Sections
11(b) and (c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right
to purchase, at the adjusted Purchase Price, that number of one
one-hundredth of a share of Preferred Stock (calculated to the
nearest one-millionth) obtained by (i) multiplying (x) the
number of one onehundredth of a share covered by the 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
shares of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of
one one-hundredth of a share of Preferred Stock for which a
Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights
(calculated to the nearest one 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 toSection 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 so to be distributed
shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the
Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of 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 share
of Preferred Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per share and the
number of shares which were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below the then stated
or par value, if any, of the shares of Preferred Stock
issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally
issue fully paid and non-assessable shares of Preferred Stock,
Common Stock or other securities at such adjusted Purchase
Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made
effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event
the issuance to the holder of any Right exercised after such
record date the shares of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such
exercise over and above the shares of Preferred Stock and
other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional shares upon the occurrence of the
event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to
the extent that in their sole discretion a majority of the
Continuing Directors then in office shall determine to be
advisable in order that any (i) consolidation or subdivision
of the Preferred Stock, (ii) issuance wholly for cash of any
shares of Preferred Stock at less than the current market
price, (iii) issuance wholly for cash of shares of Preferred
Stock or securities which by their terms are convertible into
or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants
referred to in this Section 11, hereafter made by the Company
to holders of its Preferred Stock shall not be taxable to such
shareholders.
(n) The Company covenants and agrees that it shall not,
at any time after the Distribution Date, (i) consolidate with,
(ii) merge with or into, or (iii) sell or transfer (or permit
any Subsidiary to sell or transfer), in one or more
transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person 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 agreement in effect which would
substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
(o) The Company covenants and agrees that, after the
Stock Acquisition Date, it will not, except as permitted by
Section 23 hereof, take (or permit any Subsidiary to take) any
action the purpose or effect of which is to diminish
substantially or otherwise eliminate the benefits intended to
be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any
time after the date of this Agreement and prior to the
Distribution Date (i) declare a dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, or
(iv) issue any shares of its capital stock in a
reclassification of the outstanding Common Stock, the number
of Rights associated with each share of Common Stock shall be
proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to the occurrence
of the event and the denominator of which shall be the total
number of shares of Common Stock outstanding immediately
following the occurrence of such event.
(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 Stock. Whenever an adjustment is made as provided in Sections
11 and 13 hereof, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of
the facts accounting for such adjustment, (b) promptly file with
the Rights Agent and with each transfer agent for the Preferred
Stock and the Common Stock a copy of such certificate, and (c) mail
a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 26 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment
therein contained.
Section 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power.
(a) In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person, and the
Company shall not be the continuing or surviving corporation
of such consolidation or merger, (y) any Person shall
consolidate with, or merge with or into, the Company, and the
Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares
of Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer
(or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning
power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of
the Company), then, and in each such case, proper provision
shall be made so that: (i) each holder of a Right, shall
thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized
and issued, fully paid, non-assessable and freely tradeable
shares of Common Stock of the Principal Party (as hereinafter
defined), free and clear of liens, rights of call or first
refusal, encumbrances or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then
current Purchase Price by the then number of one onehundredth
of a share of Preferred Stock for which a Right is then
exercisable (without giving effect to the occurrence, if any,
of any transaction described in Section 11(a)(ii) hereof) and
(2) dividing that product by 50% of the current market price
(determined pursuant to Section 11(d)(i) hereof) per share of
the Common Stock of such Principal Party on the date of
consummation of such consolidation, merger, sale or transfer;
(ii) 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; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of Section 11
hereof shall apply to such Principal Party; and (iv) such
Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares
of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as
reasonably may be possible, in relation to its shares of
Common Stock thereafter deliverable upon the exercise of the
Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (x)
or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of
Common Stock of the Company are converted in such merger
or consolidation, and if no securities are so issued, the
Person that is the other party to such merger or
consolidation; and
(ii) in the case of any transaction described in
(z) of the first sentence in Section 13(a), the Person
that is the party receiving the greatest portion of the
assets or earning power transferred pursuant to such
transaction or transactions;
provided, however, that in any such case, (1) if the Common
Stock of such Person is not at such time and has not been
continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such
Person is a direct or indirect Subsidiary of another Person
the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; (2) in
case such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Stocks of two or more of
which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value; and (3) in
case such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set
forth in (1) and (2) above shall apply to each of the chains
of ownership having an interest in such joint venture as if
such party were a "Subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall
bear the obligations set forth in this Section 13 in the same
ratio as their direct or indirect interests in such Person
bear to the total of such interests.
(c) The Company shall not consummate any such
consolidation, merger, sale or transfer unless prior thereto
the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of
this Section 13 and further providing that, as soon as
practicable after the date of any consolidation, merger or
sale of assets mentioned in paragraph (a) of this Section 13,
the Principal Party will:
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate
form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective
(with a prospectus at all times meeting the requirements
of the Act) until the Expiration Date;
(ii) 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; and
(iii) will deliver to holders of the Rights
historical financial statements for the Principal Party
and each of its Affiliates which comply in all material
respects with the requirements for registration on Form
10 under the Exchange Act.
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 Stock.
(a) The Company shall not be required to issue fractions
of Rights, except prior to the Distribution Date as provided
in Section 11(p) hereof, or to distribute Rights Certificates
which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole
Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise
issuable. The closing price of the Rights 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 quoted sale price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use
or, if on any such date the 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 shall be used.
(b) The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions which are
integral multiples of one one-hundredth of a share of
Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of
one one-hundredth of a share of Preferred Stock). Fractions
of shares of Preferred Stock in integral multiples of one one-
hundredth of a share of Preferred Stock may, at the election
of the Company, be evidenced by depositary receipts, pursuant
to an appropriate agreement between the Company and a
depositary selected by it; provided, that such agreement shall
provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they
are entitled as beneficial owners of the shares of Preferred
Stock represented by such depositary receipts. In lieu of
fractional shares of Preferred Stock that are not integral
multiples of one one-hundredth of a share of Preferred Stock,
the Company may pay to the registered holders of 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 one-hundredth of a share of
Preferred Stock. For purposes of this Section 14(b), the
current market value of one one-hundredth of a share of
Preferred Stock shall be one one-hundredth of the closing sale
price of a share of Preferred Stock (as determined pursuant to
of Section 11(d)(ii) hereof) for the Trading Day immediately
prior to the date of such exercise.
(c) Following the occurrence of an Acquisition Event,
the Company shall not be required to issue fractions of shares
of Common Stock upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Common Stock.
In lieu of fractional shares of Common Stock, the Company may
pay to the registered holders of Rights Certificates at the
time such Rights are exercised as herein provided an amount in
cash equal to the same fraction of the current market value of
one (1) share of Common Stock. For purposes of this Section
14(c), the current market value of one (1) share of Common
Stock shall be the closing sale price of a share of Common
Stock (as determined pursuant to Section 11(d)(i) hereof) for
the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the
Rights expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right,
except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in
respect of this Agreement, excepting the rights of action given to
the Rights Agreement 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 of the holder of any other
Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may in his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in
respect of, his right to exercise the Rights evidenced by such
Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have
an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations
hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to
this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred
by them in any action to enforce the provisions of this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a
Right by accepting the same consents and agrees with the Company
and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common
Stock;
(b) after the Distribution Date, the Rights
Certificates are transferable only on the registry books of
the Rights Agent if surrendered at the office or offices of
the Rights Agent designated for such purposes, duly endorsed
or accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat
the person in whose name a 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
Shareholder. No holder, as such, of any Rights Certificate shall
be entitled to vote, receive dividends or be deemed for any purpose
the holder of the shares of Preferred Stock or any other securities
of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder
of any Rights Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate
action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 25 hereof), or to
receive dividends or subscription rights, or otherwise, until the
Right or Rights evidenced by such Rights Certificate shall have
been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company 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
disbursements 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 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 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, however, 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 a 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 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 such cases such Rights Certificates
shall have the full force provided in the Rights Certificates
and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent
undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, 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
selected by it (who may be legal counsel for the Company), and
the opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or
desirable that any fact or matter (including, without
limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or
established by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a
certificate signed by the Chief Executive Officer, the
President or any Vice President, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by
it under the provisions of this Agreement in reliance upon
such certificate.
(c) The Rights Agent shall be liable hereunder only for
its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained
in this Agreement or in the Rights Certificates or be required
to verify the same (except as to its countersignature on such
Rights Certificates), 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 it be responsible for any
breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the
provisions of Sections 11 or 13 hereof or responsible for the
manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any
such adjustment (except with respect to the exercise of Rights
evidenced by Right Certifications after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed
to make any representation or warranty as to the authorization
or reservation of any shares of Common Stock or Preferred
Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or
Preferred Stock will, when so 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 the Chief Executive Officer, the
President or any Vice President, the Secretary or any
Assistant 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 to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal
in any of the Rights or other securities of the Company or
become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein
shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents, and the Rights Agent shall not be answerable or
accountable for any act, or omission, default, neglect or
misconduct of any such attorneys or agents or for any loss to
the Company resulting from any such act, or omission, default,
neglect or misconduct; provided, however, 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 and Preferred Stock, by registered or certified mail, and to
the holders of the Rights Certificates by firstclass 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 and Preferred Stock,
byregistered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it
has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit 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) a corporation organized and doing
business under the laws of the United States or of the States of
Minnesota or New York (or of any other state of the United States
so long as such corporation is authorized to do business as a
banking institution in the States of Minnesota or New York), in
good standing, having a principal office in the States of Minnesota
or New York, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination
by federal or state authority and which has at the time of its
appointment as Rights Agent a combined capital and surplus of at
least $50,000,000 or (b) an Affiliate controlled by a corporation
described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than
the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and
each transfer agent of the Common Stock and the 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 the Board to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares
or other securities or property purchasable under the Rights
Certificates made in accordance with the provision of this
Agreement. In addition, the Company may, if deemed necessary or
appropriate by the Board, issue Rights Certificates in connection
with the sale of shares of Common Stock following the Distri bution
Date.
Section 23. Redemption and Termination.
(a) (i) The Board may, at its option, at any time
prior to the close of business on the earlier of (i) the
Flip-In Event, or (ii) the Final Expiration Date, redeem
all but not less than all the then outstanding Rights at
a redemption price of $.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the
"Redemption Price"). The redemption of the Rights by the
Board may be made effective at such time, on such basis
and with such conditions as the Board in its sole
discretion may establish.
(ii) In addition, a majority of the Continuing
Directors may redeem all but not less than all of the
then outstanding Rights at the Redemption Price following
the occurrence of a Stock Acquisition Date but prior to
any event described in Section 13(a) either (x) if each
of the following shall have occurred and remain in
effect: (1) a Person who is an Acquiring Person shall
have transferred or otherwise disposed of a number of
shares of Common Stock in a manner satisfactory to the
Continuing Directors such that such Person is thereafter
a Beneficial Owner of voting securities having less than
fifteen percent (15%) of the voting power of the Company,
and (2) there is no other Person, immediately following
the occurrence of the event described in clause (1), who
is an Acquiring Person, or (y) in connection with any
transaction not involving an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
(b) In the case of a redemption permitted under Section
23(a)(i), immediately upon the action of the Board
of Directors of the Company ordering the redemption of the
Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and
the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. In the case of a redemption
permitted only under Section 23(a)(ii), evidence of which
shall have been filed with the Rights Agent, the right to
exercise the Rights will terminate and represent only the
right to receive the Redemption Price only after ten (10)
business days following the giving of notice of such
redemption to the holders of such Rights. Within ten (10)
days after the action of the Board of Directors or
theContinuing Directors, as the case may be, ordering any such
redemption of the Rights, the Company shall give notice of
such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to the Rights
Agent and to all such holders at their last addresses as they
appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the
Transfer Agent for the Common Stock. 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 may, at its option, at any time after the
occurrence of an Acquisition Event, exchange all or part of
the then outstanding and exercisable Rights (which shall not
include Rights that have become void pursuant to the
provisions of Section 11(a)(ii) hereof) for Common Stock at an
exchange ratio of one share of Common Stock 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 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
any such Subsidiary, or 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 fifty (50%) or more of the voting power of
the Company.
(b) Immediately upon the action of the Board
ordering the exchange of any Rights pursuant to paragraph (a)
of this Section 24 and without any further action and without
any notice, the right to exercise such Rights shall terminate
and the only right thereafter of a holder of such Rights shall
be to receive that number of shares of Common Stock equal to
the number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether
or not the holder receives the notice. Each such notice of
exchange shall 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 stock, as such term is defined in Section
11(b) hereof) for some or all of the Common Stock exchangeable
for Rights, at the initial rate of one one hundredth of a
share of Preferred Stock (or equivalent preferred stock) for
each share of Common Stock, as appropriately adjusted to
reflect adjustments in the voting rights of the Preferred
Stock pursuant to the terms thereof, so that the fraction of a
share of Preferred Stock delivered in lieu of each share of
Common Stock shall have the same voting rights as one share of
Common Stock.
(d) In the event that there shall not be sufficient
shares of Common Stock or Preferred Stock issued but not
outstanding or authorized but unissued to permit any exchange
of Rights as contemplated in accordance with this Section 24,
the Company shall take all such action as may be necessary to
authorize additional Common Stock or Preferred Stock for
issuance upon exchange of the Rights.
(e) The Company shall not be required to issue fractions
of shares of Common Stock or to distribute certificates which
evidence fractional shares of Common Stock. In lieu of such
fractional shares of Common Stock, the Company shall pay to
the registered holders of the Right Certificates with regard
to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole share of
Common Stock. For the purposes of this paragraph (e), the
current market value of a whole share of Common Stock shall be
the closing price of a share of Common Stock (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. In case the Company
shall propose, at any time after the Distribution Date, (a) to pay
any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out
of earnings or retained earnings of the Company), or (b) to offer
to the holders of Preferred Stock rights or warrants to subscribe
for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or
options, or (c) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only thesubdivision
of outstanding shares of Preferred Stock), or (d) 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
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to, any other Person, or (e) to
effect the liquidation, dissolution or winding up of the Company,
then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the
date of participation therein by the holders of the shares of
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 (a)
or (b) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes
of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the
shares of Preferred Stock whichever shall be the earlier.
In case any of the events set forth in Section 11(a)(ii) of
this Agreement shall occur, then, in any such case, (i) the Company
shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with
Section 26 hereof, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be
deemed thereafter to refer to Common Stock and/or, if appropriate,
other securities.
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:
Ault Incorporated
7300 Boone Avenue North
Minneapolis, Minnesota 55428-1028 Attention: Chief
Executive Officer
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or
by the holder of any Rights Certificate to 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:
Norwest Bank Minnesota, N.A.
161 N. Concord Exchange
P.O. Box 738
South St. Paul, Minnesota 55075-0738 Attention:
Stock Transfer Department
Notices or demands authorized by this Agreement to be given or made
by the Company or the Rights Agent to the holder of any 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 and the
Rights Agent shall 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 (i) to cure any ambiguity,
(ii) to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provisions herein,
(iii) prior to the Distribution Date, to change or supplement any
of the provisions hereunder which the Board may deem necessary
ordesirable or (iv) following the Distribution Date, to change or
supplement any of the provisions hereunder in any manner which the
Board may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates (other
than an Acquiring Person or an Affiliate or Associate of an
Acquiring Person); provided, however, that 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
Continuing 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 execute such supplement or amendment unless the Rights Agent
shall have determined in good faith that such supplement or
amendment would adversely affect its interests under this
Agreement. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of
the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give to any Person other than the
Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered
holders of 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, registered holders of the Common Stock).
Section 30. Administration of Agreement. The Board or,
asprovided for herein, the Continuing Directors) shall have the
exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board or
the Company or as may be necessary or advisable in the admini
stration of this Agreement, including without limitation the right
and power to interpret the Agreement and to make all determinations
deemed necessary or advisable for the administration of this
Agreement. All such acts, interpretations and determinations done
or made by the Board in good faith shall be final, conclusive and
binding on the Company, the Rights Agent and the holders of the
Rights. Accordingly, the Board and the Continuing Directors (as
the case may be) shall not be liable to the holders of Rights
Certificates or any other party for any determination made, action
taken, or action omitted to be taken pursuant to the terms of this
Agreement, if such determination, action or omitted action was made
or taken in good faith.
Section 31. Severability. If any term, provision, covenantor
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 32. Governing Law. This Agreement, each Right and
each Rights Certificate issued hereunder shall be deemed to be a
contract made under the laws of the State of Minnesota and for all
purposes shall be governed by and construed in accordance with the
laws of such State applicable to contracts made and to be performed
entirely within such State.
Section 33. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument.
Section 34. Descriptive Headings. Descriptive headings of
the several Sections of this Agreement are inserted 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 as of the day and year
first above written.
Ault Incorporated
Attest:
By___________________ By___________________________
Its Secretary Its Chief Executive Officer
NORWEST BANK MINNESOTA, N.A.
Attest:
By___________________ By____________________________
Its________________ Its_________________________
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
AULT INCORPORATED
Pursuant to Section 302.401 of the Minnesota Business Corporation
Law
We, Frederick M. Green, President, and Richard A. Primuth,
Secretary, of Ault Incorporated, a corporation organized and
existing under the Minnesota Business Corporation Act, in
accordance with the provisions of Section 302A.401 thereof, DO
HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of the said Corporation,
the said Board of Directors on February 13, 1996 adopted the
following resolution creating a series of Fifty Thousand (50,000)
shares of preferred stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that 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 it 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:
Section 1. Designation and Amount. The shares of such
series shall be designated as "Series A Junior Participating
Preferred Stock," no par value, and the number of shares
constituting such series shall be 50,000. 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 Participating Preferred Stock to a number
less than that of the shares then outstanding plus the number of
shares issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the
Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders
of any shares of any series of preferred stock now or hereafter
ranking prior and superior to the shares of Series A Junior
Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock,
in preference to the holders of shares of Common Stock, no par
value (the "Common Stock"), of the Corporation and 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, quarterly dividends payable in cash on the last day of
March, June, September and December in each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fraction of a share of Series A Junior
Participating Preferred Stock, in an amount per whole share
(rounded to the nearest cent), subject to the provision 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 Common
Stock (by reclassification or otherwise), declared on the Common
Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share
of Series A Junior Participating Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision
(by stock split or otherwise) or combination (by reverse stock
split or otherwise) or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such event 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 (and rounding the result to the nearest whole
number); and provided further that if at any time after March 4,
1996 the Corporation shall issue any shares of its capital stock in
a reclassification or change of the outstanding shares of Common
Stock (including any such reclassification or change in connection
with a merger in which the Corporation is the surviving
corporation), then in such event the amount to which holders of
Series A Junior Participating Preferred Stock are entitled shall be
appropriately adjusted to reflect such reclassification or change.
(B) The Corporation shall declare a dividend or distribution
on the Series A Junior Participating Preferred Stock as provided in
paragraph (A) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in
shares of Common Stock).
(C) The holders of shares of Series A Junior Participating
Preferred Stock shall not be entitled to receive any dividends or
other distributions except as provided herein.
Section 3. Voting Rights. The holders of shares of Series A
Junior Participating Preferred Stock shall have the following
voting rights:
(A) Each share of Series A Junior Participating Preferred
Stock shall entitle the holder thereof to one hundred (100) votes,
subject to adjustment in the manner set forth in Section 2(A), on
all matters on which holders of the Common Stock or stockholders
generally are entitled to vote.
(B) Except as otherwise provided herein or by applicable
law, the holders of shares of Series A Junior Participating
Preferred Stock and the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein or by applicable law, holders
of Series A Junior Participating Preferred Stock shall have no
special voting rights and their consent shall not be required
(except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Junior Participating
Preferred Stock as provided in Section 2 are in arrears, thereafter
and until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Junior Participating
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 Participating 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 Participating Preferred
Stock, except dividends paid ratably on the Series A Junior
Participating 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 Participating Preferred Stock, provided
that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange
for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Junior Participating Preferred
Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series A Junior Participating
Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior Participating Preferred Stock, except
in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could,
under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Junior
Participating Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares
shall, upon their cancellation, become authorized but unissued
shares of preferred stock and may be reissued as part of a new
series of preferred stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions
and restrictions on issuance set forth herein or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made 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 Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating
Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the
"Liquidation Preference"). Following the payment of the full
amount of the Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the
"Common Adjustment") equal to the quotient obtained by dividing (i)
the Liquidation Preference by (ii) 100 (as appropriately adjusted
as set forth in subparagraph C below to reflect such events as
stock splits, stock dividends and recapitalization with respect to
the Common Stock) (such number in clause (ii) being herein referred
to as the "Adjustment Number"). Following the payment of the full
amount of the Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Junior Preferred
Stock and Common Stock, respectively, holders of Series A Junior
Participating Preferred Stock and holders of shares of Common Stock
shall proportionately share in the remaining assets in the ratio of
the Adjustment Number (per share of Preferred Stock) to 1 (per
share of Common Stock).
(B) In the event there are not sufficient assets available
to permit payment in full of the Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if
any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their
respective liquidation preferences. In the event there are not
sufficient assets available to permit payment in full of the Common
Adjustment, then such remaining assets shall be distributed ratably
to the holders of Common Stock.
(C) In the event the Corporation shall at any time (i)
declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying
such Adjustment Number by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger etc. In case the
Corporation shall enter into any consolidation, merger combination
or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be,
into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare
or pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series A Junior
Participating Preferred Stock shall not be redeemable.
Section 9. Ranking. The Series A Junior Participating
Preferred Stock shall rank junior to all other series of the
Corporation's preferred stock which may hereafter be authorized as
to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
Section 10. Amendment. The Articles of Incorporation of the
Corporation shall not be amended in any manner which would
materially alter or change the powers, preferences or special
rights of the Series A Junior Participating Preferred Stock so as
to affect them adversely without the affirmative vote of the
holders of two-thirds (2/3) or more of the outstanding shares of
Series A Junior Participating Preferred Stock, voting separately as
a class.
Section 11. Fractional Shares. Series A Junior Participating
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 liquidating distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties
of perjury this ____ day of _______________, 1996.
Attest:
_______________________ ______________________________
Richard A. Primuth, Frederick M. Green,
Secretary President
Exhibit B
[Form of Rights Certificate]
Certificate No. R-
Rights
NOT EXERCISABLE AFTER February 13, 2006, OR EARLIER IF
REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT REFERRED TO
HEREIN. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE
RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
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 RIGHT CERTIFICATE AND THE
RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES
SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.
Rights Certificate
Ault Incorporated
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 February 13, 1996 (the "Rights Agreement"), between Ault
Incorporated, a Minnesota corporation (the "Company"), and Norwest
Bank Minnesota, N.A. (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is
defined in the Rights Agreement) and prior to 5:00 P.M.
Minneapolis, Minnesota time) on February 13, 2006 at the office or
offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-hundredth of a fully paid, non
assessable share of Series A Junior Participating Preferred Stock
(the "Preferred Stock") of the Company, at a purchase price of
Thirty-six Dollars ($36) per one one-hundredth of a share (the
"Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Exercise duly executed.
The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set
forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of February 13, 1996, based on the
Preferred Stock as constituted at such date.
If the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring
Person or Associate or Affiliate of such Acquiring Person except as
provided in Section 4(b) of the Rights Agreement, or (iii) under
certain circumstances, a transferee of persons who became an
Acquiring Person or Affiliate or Associate of such Acquiring Person
following such transfer, such Rights shall become null and void
upon the occurrence of a Flip-In Event described in Section
11(a)(ii) of the Rights Agreement and no holder hereof shall have
any right with respect to such Rights from and after the occurrence
of such event.
As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other
securities 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, which limitations of rights include the temporary
suspension of the exercisability of such Rights under certain
circumstances specified in such Rights Agreement. Copies of the
Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the
Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights
Agent designated for such purpose, may be exchanged for another
Rights Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Preferred Stock as the Rightsevidenced by the
Rights Certificate or Rights Certificates surrendered shall have
entitled such holder to purchase. If this Rights Certificate shall
be exercised (other than pursuant to Section 11(a)(ii) of the
Rights Agreement) in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised. If this
Rights Certificate shall be exercised in whole or in part pursuant
to Section 11(a)(ii) of the Rights Agreement, the holder shall be
entitled to receive this Rights Certificate duly marked to indicate
that such exercise has occurred as set forth in the Rights
Agreement.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its
option at a redemption price of $.001 per Right.
No fractional shares of Preferred Stock 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
share of Preferred Stock, which may, at the election of the
Company, be evidenced by depositary receipts), but in lieu thereof
a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of
shares of Preferred Stock or of any other securities of the Company
which may at any time be issuable on the exercise hereof, nor shall
anything contained in the Rights Agreement or herein be construed
to confer upon the holder hereof, as such, any of the rights of a
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.
Dated: _________________
ATTEST: AULT INCORPORATED
_______________________ By_____________________________
Secretary Title:
Countersigned:
NORWEST BANK MINNESOTA, N.A.
By_____________________
Authorized Signature
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate.)
FOR VALUE RECEIVED ____________________________________ hereby
sells, assigns and transfers unto _____________________
______________________________________________________________
(Please print name and address of transferee) this Rights
Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
_____________________ Attorney, to transfer the within Rights
Certificate on the books of the within-named Company, with full
power of substitution.
The undersigned hereby certifies (after due inquiry and to the
best of its knowledge) by checking the appropriate boxes that:
(1) this Rights Certificate
[ ] is
or
[ ] is not
being sold, assigned and transferred by or on behalf of a Person
who is or was an Acquiring Person or an Affiliate or Associate of
an Acquiring Person (as such terms are defined in the Rights
Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Rights Certificate from any
person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _________________
_______________________________
Signature
Signature Medallion Guaranteed:
NOTICE
The signature to the foregoing Assignment must correspond to
the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change
whatsoever.
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to exercise Rights
represented by the
Rights Certificate.)
To: Ault Incorporated:
The undersigned hereby irrevocably elects to exercise
____________ Rights represented by this Rights Certificate to
purchase the shares of Preferred Stock issuable upon the exercise
of the Rights (or such other securities of the Company or of any
other person which may be issuable upon the exercise of the Rights)
and requests that certificates for such shares be issued
in the name of:
(Please print name and address)
(Please insert social security or other
identifying number)
The Rights Certificate indicating the balance, if any, of such
Rights which may still be exercised pursuant to Section 11(a)(ii)
of the Rights Agreement shall be returned to the undersigned unless
such person requests that the Rights Certifi cate be registered in
the name of and delivered to: (complete only if Rights Certificate
is to be registered in a name other than the undersigned)
(Please print name and address)
(Please insert social security
or other identifying number)
The undersigned hereby certifies (after due inquiry and to the
best of its knowledge) by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate
[ ] are
or
[ ] are not
being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of an Acquiring
Person (as such terms are defined in the Rights Agreement); and
(2) the undersigned
[ ] did
or
[ ] did not
acquire the Rights evidenced by this Rights Certificate from any
person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _________________
________________________________
Signature
Signature Medallion Guaranteed:
NOTICE
The signature to the foregoing Election to Exercise must
correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement
or any change whatsoever.
EXHIBIT C
SUMMARY OF SHAREHOLDER RIGHTS PLAN
On February 13, 1996 the Board of Directors of Ault
Incorporated (the "Company") adopted a shareholder rights plan by
declaring a dividend of one Right for each outstanding share of the
Company's Common Stock, no par value (the "Common Stock"), to the
Company's shareholders of record at the close of business on March
4, 1996 (the "Record Date"). Except as set forth below, each Right
entitles the registered holder to purchase from the Company one one-
hundredth (1/100) of a share of Series A Junior Participating
Preferred Stock, no par value (the "Preferred
Stock"), at a price of $36 per one one-hundredth of a share (the
"Purchase Price"). The terms of the Rights are set forth in a
Rights Agreement dated as of February 13, 1996 (the "Rights
Agreement") between the Company and Norwest Bank Minnesota, N.A.,
as Rights Agent.
Initially, the Rights will be attached implicitly to all
Common Stock certificates representing shares then outstanding, and
no separate Right certificates will be distributed. Until the
earlier to occur of ten days following (i) a public announce ment
that, without the prior consent of the Board of Directors, a person
or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial
ownership of voting securities having 15% or more of the voting
power of the Company (the "Stock Acquisition Date"), or (ii) the
commencement of (or a public announcement of an intention to make)
a tender offer or exchange offer which would result in any person
or group and related persons having beneficial ownership of voting
securities having 15% or more of the voting power of the Company
(the earlier of such dates referred to in (i) and (ii) above being
called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Common Stock certificates outstanding as of
the Record Date, by such Common Stock certificates.
The Rights Agreement provides that, until the Distribution
Date, the Rights will be transferred with and only with Common
Stock certificates. From as soon as practicable after the Record
Date and 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 the Common
Stock will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any
certificates for Common Stock outstanding as of the Record Date
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 certifi cates
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 the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date.
The Rights will expire on February 13, 2006, unless earlier
redeemed by the Company as described below.
In the event that any person becomes the beneficial owner of
15% or more of the voting power of the Company, ten (10) days
thereafter (the "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 (such right
being called the "Flip-Over Right"). The holder of a Right will
continue to have the FlipOver Right whether or not such holder
exercises the Flip-In 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.
For example, at a Purchase Price of $36 per Right, if any
person becomes the beneficial owner of 15% or more of the voting
power of the Company, ten (10) days thereafter each Right other
than a Right owned by such 15% beneficial owner would entitle its
holder to purchase $72 worth of the Company's Common Stock (or
other consideration, as noted above) for $36. Assuming that the
Common Stock had a per share value of $6 at such time, the holder
of each Right would effectively be entitled to purchase 12 shares
of Common Stock for $36.
Similarly, assuming, following the Stock Acquisition Date, the
occurrence of a business combination with another entity in which
the Company's Common Stock is converted or exchanged, or a sale of
50% or more of the Company's assets or earning power, each Right
would entitle its holder to purchase $72 worth of the acquiring
entity's stock for $36.
The Purchase Price payable, and the number of shares of
Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to time
to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the
Preferred Stock or (iii) upon the distribution to holders of the
Preferred Stock of evidences of indebtedness or assets (excluding
regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
At any time after the acquisition by a person or group of
affiliated or associated persons of beneficial ownership of 15% or
more of the voting power of the Company and prior to the
acquisition by such person or group of 50% or more of the voting
power of the Company, 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 1% in the Purchase Price. No fractions of shares will
be issued and, in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Stock on the last
trading date prior to the date of exercise.
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 $.001 per Right (the "Redemption Price"), which
redemption shall be effective at such time as the Board of
Directors shall establish. Additionally, the Continuing Directors
may, following the Stock Acquisition Date, redeem the then
outstanding Rights in whole, but not in part, at the Redemption
Price provided that either (a) the Acquiring Person reduces his
beneficial ownership to less than 15% of the voting power of the
Company in a manner which is satisfactory to the Continuing
Directors and there are no 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.
The Preferred Stock purchasable upon exercise of the Rights
will be nonredeemable. Each share of Preferred Stock will have a
preferential quarterly dividend in an amount equal to 100 times the
dividend declared on each share of Common Stock. In the event of
liquidation, the holders of Preferred Stock will receive a
preferred liquidation payment of $100 per whole share of Preferred
Stock. Each whole share of Preferred Stock will have 100 votes,
voting together with the Common Stock. 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 and type of consideration received per
share of Common Stock. The rights of the Preferred Stock as to
dividends and liquidations, and in the event of mergers and
consolidations, are protected by customary anti-dilution
provisions. Fractional shares of Preferred Stock in integral
multiples of one one-hundredth of a share of Preferred Stock will
be issued unless the Company elects to distribute depositary
receipts in lieu of such fractional shares. In lieu of fractional
shares other than fractions that are multiples of one onehundredth
of a share, an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading date prior to the
date of exercise.
Until a Right is exercised, it will not entitle the holder to
any rights as a shareholder of the Company (other than those as an
existing shareholder), 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 (i) prior to the Distribution Date in any
manner, and (ii) on or after the Distribution Date to cure any
ambiguity, to correct or supplement any provision of the Rights
Agreement which may be defective or inconsistent with any other
provisions, or in any manner not adversely affecting the interests
of the holders of the Rights.
A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration
Statement on Form 8-A. A copy of the Rights Agreement is available
free of charge from the Company. This summary description of the
Rights does not purport to be complete and is qualified in its
entirety by reference to the Rights Agreement.
