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EXHIBIT 1
LNB BANCORP, INC.
AND
REGISTRAR AND TRANSFER COMPANY
Rights Agreement
Dated as of October 24, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
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1. Certain Definitions.....................................................................................1
2. Appointment of Rights Agent.............................................................................5
3. Issuance of Rights Certificates.........................................................................5
4. Form of Rights Certificates.............................................................................7
5. Countersignature and Registration.......................................................................7
6 Transfer, Split-up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates................................................8
7. Exercise of Rights; Purchase Price; Expiration Date of Rights...........................................9
8. Cancellation and Destruction of Rights Certificates....................................................10
9. Reservation and Availability of Capital Stock..........................................................11
10. Preferred Shares Record Date...........................................................................12
11. Adjustment of Purchase Price, Number and Kind of Shares or Number
of Rights..............................................................................................12
12. Certificate of Adjusted Purchase Price or Number of Shares.............................................20
13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...................................20
14 Fractional Rights and Fractional Shares................................................................23
15. Rights of Action.......................................................................................23
16. Agreement of Rights Holders............................................................................24
17. Rights Certificate Holder Not Deemed a Shareholder.....................................................24
18. Concerning the Rights Agent............................................................................25
19. Merger or Consolidation or Change of Name of Rights Agent..............................................25
20. Duties of Rights Agent.................................................................................26
21. Change of Rights Agent.................................................................................28
22. Issuance of New Rights Certificates....................................................................28
23. Redemption and Termination.............................................................................29
24. Notice of Certain Events...............................................................................30
25. Notices................................................................................................31
26. Supplements and Amendments.............................................................................31
</TABLE>
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<TABLE>
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Section Page
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27. Successors..........................................................................................32
28. Determinations and Actions by the Board of Directors, etc...........................................32
29. Benefits of This Agreement..........................................................................32
30. Severability........................................................................................32
31. Governing Law.......................................................................................33
32. Counterparts........................................................................................33
33. Descriptive Headings................................................................................33
</TABLE>
Exhibit A -- Form of Amended Articles of Incorporation
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of October 24, 2000 (the "Agreement"), between LNB
Bancorp, Inc., an Ohio corporation (the "Company"), and Registrar and Transfer
Company, a New Jersey corporation (the "Rights Agent").
WITNESSETH
WHEREAS, on October 24, 2000 (the "Rights Dividend Declaration Date"), the Board
of Directors of the Company authorized and declared a dividend distribution of
one Right for each Common Share (as hereinafter defined) of the Company
outstanding at the close of business on November 6, 2000 (the "Record Date"),
and has authorized the issuance of one Right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(o) hereof) for each Common
Share of the Company issued between the Record Date (whether originally issued
or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined), each Right representing the right to purchase one
one-hundredth of a Series A Voting Preferred Share of the Company having the
rights, powers and preferences set forth in the form of Amended Articles of
Incorporation of the Company attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth (the "Rights");
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) "Act" shall mean the Securities Act of 1933.
(b) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, 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 Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan. Notwithstanding the foregoing, no Person shall become an
Acquiring Person solely as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person, together with
all Affiliates and Associates of such Person, to 15% or more of the Common
Shares then outstanding; provided, however, that if a Person who would be an
Acquiring Person but for this sentence, or such Person's Affiliates or
Associates, shall thereafter become, as a result of actions taken by such Person
or its Affiliates or Associates, the Beneficial Owner of additional Common
Shares equal to 1.0% or more of the then outstanding Common Shares, then such
Person shall thereupon be deemed to be an Acquiring Person.
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(c) "Adjustment Shares" shall have the meaning set forth in
Section 11(a)(ii) hereof.
(d) "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") and in effect on the date of this Agreement.
(e) 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, directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or
options, or otherwise; provided, however, that a Person shall
not be deemed the "Beneficial Owner" of, or to "beneficially
own," (A) securities tendered pursuant to a tender or exchange
offer made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for
purchase or exchange, or (B) securities issuable upon exercise
of Rights at any time prior to the occurrence of a Triggering
Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section
3(a) or Section 22 hereof (the "Original Rights") or pursuant to
Section 11(a)(i) hereof in connection with an adjustment made
with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this
Agreement), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or
to "beneficially own," any security under this subparagraph (ii)
as a result of an agreement, arrangement or understanding to
vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is
not also then reportable by such Person on Schedule 13D or
Schedule 13G 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), to act together for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii)
of this paragraph (d)) or disposing of any voting securities of
the
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Company; provided, however, that nothing in this paragraph
(d) shall cause a person engaged in business as an underwriter
of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such
person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date
of such acquisition.
Notwithstanding anything in this definition of Beneficial Ownership to
the contrary, no Person shall be deemed to be the Beneficial Owner of, or to
beneficially own, any security Beneficially Owned by another Person solely by
reason of any agreement, arrangement or understanding with such other Person
relating to the solicitation of revocable proxies made pursuant to, and in
accordance with, the applicable provisions of the General Rules and Regulations
under the Exchange Act, provided that such other Person retains the right at any
time to withdraw from, revoke or terminate any such agreement, arrangement or
understanding and further provided that such Persons would not otherwise be
deemed to be a group under Section 13(d) of the Exchange Act or otherwise be
deemed to be acting in concert.
(f) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Ohio are
authorized or obligated by law or executive order to close.
(g) "Close of business" on any given date shall mean 5:00 P.M.,
Lorain, Ohio time, on such date; provided however, that if such date is not a
Business Day it shall mean 5:00 P.M., Lorain, Ohio time, on the next succeeding
Business Day.
(h) "Common Shares," each a "Common Share," shall mean the
common shares, par value $1.00 per share, of the Company, except that "Common
Shares" when used with reference to any Person other than the Company shall mean
the capital stock of such Person with the greatest aggregate voting power, or
the equity securities or other equity interest having power to control or direct
the management, of such Person.
(i) "Current market price" shall have the meaning set forth in
Section 11(d)(i) hereof.
(j) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.
(l) "Exchange Act" shall have the meaning set forth in Section
l(d) hereof.
(m) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(n) "Final Expiration Date" shall mean the close of business on
October 23, 2010.
(o) "NASDAQ" shall have the meaning set forth in Section
11(d)(i) hereof.
(p) "Original Rights" shall have the meaning set forth in
Section l(d)(i) hereof.
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(q) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
(r) "Preferred Shares," each a "Preferred Share," shall mean
shares of Series A Voting Preferred Shares, no par value, of the Company and, to
the extent that there is not a sufficient number of Series A Voting Preferred
Shares authorized to permit the full exercise of the Rights, any other series of
Preferred Shares, no par value, of the Company designated for such purpose
containing terms substantially similar to the terms of the Series A Voting
Preferred Shares.
(s) "Preferred share equivalents" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(t) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(u) "Purchase Price" shall have the meaning set forth in
Section 4(a) hereof.
(v) "Record Date" shall have the meaning set forth in the
WHEREAS clause at the beginning of this Agreement.
(w) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.
(x) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Agreement.
(y) "Rights Certificates" shall have the meaning set forth in
Section 3(a) hereof.
(z) "Rights Dividend Declaration Date" shall have the meaning
set forth in Section 3(a) hereof.
(aa) "Section 11(a)(ii) Event" shall have the meaning set forth
in Section 11(a)(ii) hereof.
(bb) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(cc) "Section 13 Event" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof .
(dd) "Spread" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ee) "Share Acquisition Date" shall mean the first date of a
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
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(ff) "Subsidiary" shall mean, with reference to any Person, any
corporation or financial institution of which an amount of voting securities
sufficient to elect at least a majority of the directors of such corporation or
financial institution is beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
(gg) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(hh) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
(ii) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issuance of Rights Certificates.
(a) Until the earlier of (i) the close of business on the tenth
business day after the Share Acquisition Date or (ii) the close of business on
the tenth business day after the latest of (A) the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) that, if consummated,
would result in such Person being an Acquiring Person is first published or sent
or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof, or (B) the
date upon which all regulatory approvals required for the acquisition of shares
pursuant to the tender or exchange offer referred to in clause (A) have been
obtained or waived, or (C) the date upon which any approval required of the
security holders of the Person publishing or sending or giving the tender or
exchange offer referred to in clause (A), for the acquisition of shares pursuant
to such tender or exchange offer, is obtained or waived (the earlier 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 the Common Shares registered in the names of the holders of
the Common Shares (which certificates for Common Shares shall be deemed also to
be certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
Common Shares (including a transfer to the Company). As soon as practicable
after the Distribution Date, the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Shares 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 of the Common Shares so held, subject to adjustment as provided herein. In
the event that an adjustment in the number of Rights per Common Share has
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been made pursuant to Section 11(o) hereof, at the time of distribution of the
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) As promptly as practicable following the Record Date, the
Company will send a copy of a Summary of Rights to Purchase Preferred Shares, in
substantially the form attached hereto as Exhibit C, by first-class, postage
prepaid mail, to each record holder of the Common Shares 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 Shares outstanding
as of the Record Date, until the Distribution Date, the Rights will be evidenced
by such certificates for the Common Shares and the registered holders of the
Common Shares shall also be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the Expiration Date the transfer
of any certificates representing Common Shares in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such Common Shares.
(c) Rights shall be issued in respect of all Common Shares
which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such Common
Shares shall also be deemed 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 LNB Bancorp, Inc. (the
"Company") and Registrar and Transfer Company (the
"Rights Agent") dated as of October 24, 2000 (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 the Company.
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. The Company will mail to the
holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing,
without charge promptly after receipt of a written
request therefor. Under certain circumstances set
forth in the Rights Agreement, Rights issued to, or
held by, any Person who is, was or becomes an
Acquiring Person or any Affiliate or Associate
thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become
null and void.
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or (ii) the Expiration
Date, the Rights associated with the Common Shares represented by such
certificates shall be evidenced by such certificates alone and registered
holders of Common Shares shall also be the registered holders of the associated
Rights, and the transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificates.
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Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this 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 one one-hundredths of a Preferred Share as shall be
set forth therein at the price set forth therein (such exercise price per one
one-hundredth of a share, the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by any Person known
to be: (i) an Acquiring Person or any Associate or Affiliate of an Acquiring
Person; (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such; or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person (or from any such
Associate or Affiliate) to holders of equity interests in such Acquiring Person
(or in any such Associate or Affiliate) or to any Person with whom such
Acquiring Person (or any such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
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
when issued contain (to the extent feasible in the circumstances) the following
legend, modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President, or any Vice President,
either manually or by facsimile signature, and shall have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Treasurer
or an Assistant Treasurer or by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The Rights Certificates
shall be manually
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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 Agent will keep
or cause to be kept, at its office designated as the appropriate place for
surrender of Rights Certificates upon exercise or transfer, 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 certificate number 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 4(b), Section 7(e) and
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 may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a Preferred
Share (or other securities, cash or other assets, as the case may be) as the
Rights Certificate or Certificates surrendered then entitled such holder (or
former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the office of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Rights Certificates, as the case may be, as so requested. The Company may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split-up, combination or
exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and
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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) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-hundredths of a Preferred Share (or other securities, cash or other assets,
as the case may be) as to which such surrendered Rights are then exercisable, at
or prior to the earlier of (i) the Final Expiration Date, or (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the earlier of
(i) and (ii) being herein referred to as the "Expiration Date").
(b) The Purchase Price for each one-hundredth of a Preferred
Share pursuant to the exercise of a Right shall initially be $60 and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-hundredth of a Preferred Share (or other
shares, securities, cash or other assets, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax, the Rights
Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)(A)
requisition from any transfer agent of the Preferred Shares (or make available,
if the Rights Agent is the transfer agent for such shares) certificates for the
total number of one one-hundredths of a Preferred Share to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the total number
of Preferred Shares issuable upon exercise of the Rights hereunder with a
depositary agent, requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a Preferred Share as are to be
purchased (in which case certificates for the Preferred Shares 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) 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) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) may be made in cash or by
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certified bank check or money order payable to the order of the Company. In the
event that the Company is obligated to issue other securities of the Company,
pay cash or distribute other property pursuant to Section 11(a) hereof, the
Company will make all arrangements necessary so that such other securities, cash
or other property are available for distribution by the Rights Agent, if and
when appropriate.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee 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 (or
from any such Associate or Affiliate) to holders of equity interests in such
Acquiring Person (or in any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or any such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined (whether before or after such transfer) is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or any of its 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 upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split-up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of
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this Agreement. The Company shall deliver to the Rights Agent for cancellation,
and the Rights Agent shall so cancel, any other Rights Certificate purchased or
acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares,
the number of Preferred Shares that, as provided in this Agreement, including
Section 11(a)(iii) hereof, will be sufficient to permit the exercise in full of
all outstanding Rights, provided that, prior to the occurrence of a Triggering
Event, the number of such shares to be reserved shall be only that number as
shall be sufficient for that purpose prior to such an event.
(b) So long as the Preferred Shares issuable and deliverable
upon the exercise of the Rights may be listed on any national securities
exchange or The NASDAQ Stock Market, 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 or The NASDAQ Stock
Market upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon
as practicable following the earliest date after the first occurrence of a
Section 11(a )(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration statement under the Act,
with respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities, and (B) the date of the
expiration of the Rights. The Company will also take such action as may be
appropriate under, or to ensure compliance with, the securities or "blue sky"
laws of the various states in connection with the exercisability of the Rights.
The Company may temporarily suspend, for a period of time not to exceed ninety
(90) days after the date set forth in clause (i) of the first sentence of this
Section 9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction, unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
has been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be
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<PAGE> 15
necessary to ensure that all one one-hundredths of a Preferred Share 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 non-assessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one one-hundredths of a
Preferred Share (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 a number of
one one-hundredths of a Preferred Share (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 a number of one one-hundredths of a Preferred Share (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 Share Record Date. Each person in whose name any
certificate for a number of one one-hundredths of a Preferred Share (or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of such fractional
Preferred Shares (or other securities, 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 Share (or other securities, 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 (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Share (or other
securities, 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, as such, 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 Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Shares
payable in Preferred Shares, (B) subdivide the outstanding Preferred
Shares, (C) combine the outstanding Preferred Shares into a smaller
number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in
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<PAGE> 16
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 Preferred Shares or capital stock, as the
case may be, issuable on such date, shall be proportionately adjusted
so that the holder of any Right exercised after such time shall be
entitled to receive, upon payment of the Purchase Price then in effect,
the aggregate number and kind of Preferred Shares 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 Share 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. If an event occurs which would require
an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required
pursuant to Section 11(a)(ii) hereof.
(ii) A Section 11(a)(ii) Event shall be deemed to occur in the
event any Person, alone or together with its Affiliates and Associates,
shall, at any time after the Rights Dividend Declaration Date, become
an Acquiring Person, unless the event causing such Person to become an
Acquiring Person is a transaction set forth in Section 13(a) hereof.
Promptly following the first occurrence of a Section 11(a)(ii)
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 the right to receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu
of a number of one one-hundredths of a Preferred Share, such number of
one one-hundredths of a Preferred Share as shall equal the result
obtained by (x) multiplying the then-current Purchase Price by the
then-number of one one-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to the first occurrence of a
Section 11(a) ii) Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of this Agreement)
by 50% of the current market price (determined pursuant to Section
11(d) hereof) per Common Share on the date of such first occurrence
(such number of shares, the "Adjustment Shares").
(iii) In the event that the number of Preferred Shares which
are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the exercise in
full of the Rights in accordance with the foregoing subparagraph (ii)
of this Section 11(a), the Company shall: (A) determine the excess of
(1) the value of the Adjustment Shares issuable upon the exercise of a
Right (the "Current Value") over (2) the Purchase Price (such excess,
the "Spread"), and (B) with respect to each Right, make adequate
provision to substitute for the Adjustment Shares, upon payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Shares or other equity securities of the Company
(including, without limitation, preferred shares, or units of preferred
shares, which the Board of Directors of the Company has deemed to have
the same value as one one-hundredth of a Preferred Share (such
preferred shares, "preferred share equivalents")), (4) debt securities
of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where
such aggregate
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<PAGE> 17
value has been determined by the Board of Directors of the Company
based upon the advice of one or more investment or financial advisors
selected by the Board of Directors of the Company; provided, however,
if the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty (30) days following the
later of (x) the first occurrence of a Section 11(a)(ii) Event and (y)
the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the
"Section 11(a)(ii) Trigger Date"), then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Preferred Shares (to the
extent available) and then, if necessary, cash, which shares and/or
cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is
likely that sufficient additional Preferred Shares could be authorized
for issuance upon exercise in full of the Rights, the thirty (30) day
period set forth above may be extended to the extent necessary, but not
more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in
order that the Company may seek shareholder approval for the
authorization of such additional shares (such period, as it may be
extended, the "Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares or to
decide the appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the suspension is no
longer in effect. For purposes of this Section 11(a)(iii), the value of
one one-hundredth of a Preferred Share shall be deemed to be the
current market price per Common Share (as determined pursuant to
Section 11(d) hereof) on the Section 11(a)(ii) Trigger Date and the
value of any "preferred share equivalent" shall be deemed to have the
same value as one one-hundredth of a Preferred Share on such date.
(iv) In lieu of issuing Preferred Shares in accordance with
subparagraph (ii) of this Section 11(a), the Company may with respect
to each Right, if a majority of members of the Board of Directors
determine that such action is in the best interests of the Company and
not contrary to the interests of the holders of Rights, make adequate
provision to substitute for the Adjustment Shares, (x) upon the
surrender for exercise of a Right and payment of the applicable
Purchase Price (1) cash, (2) a reduction in Purchase Price, (3) Common
Shares, or other equity securities of the Company (including without
limitation preferred share equivalents), (4) debt securities of the
Company, (5) other assets or (6) any combination of the foregoing
having an aggregate value equal to the Current Value where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of one or more investment or financial
advisers selected by the Board of Directors of the Company or (y) upon
the surrender for exercise of a Right and without requiring payment of
the Purchase Price, (1) cash, (2) Preferred Shares, Common Shares or
other equity securities of the Company (including, without limitation,
preferred share equivalents), (3) debt securities of the Company, (4)
other assets or (5) any combination of
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<PAGE> 18
the foregoing, having an aggregate value equal to the Spread where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of one or more investment or financial
advisors selected by the Board of Directors of the Company.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Shares
entitling them to subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date) Preferred Shares (or
shares having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred shares")) or securities convertible into Preferred
Shares or equivalent preferred shares at a price per Preferred Share or per
share of equivalent preferred shares (or having a conversion price per share, if
a security convertible into Preferred Share or equivalent preferred share) less
than the current market price (as determined pursuant to Section 11(d)(ii)
hereof) per share of Preferred Shares on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of Preferred Shares outstanding on
such record date, plus the number of Preferred Shares which the aggregate
offering price of the total number of Preferred Shares and/or equivalent
preferred shares 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 Preferred
Shares outstanding on such record date, plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Preferred Shares 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 Shares (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 Shares, but
including any dividend payable in shares other than Preferred Shares) or
subscription rights or warrants (excluding those referred to in Section 11(b)
hereof), the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the current market
price (as determined pursuant to Section 11(d) hereof) per share of Preferred
Shares on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Share and the
denominator of which shall be such current market price (as
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<PAGE> 19
determined pursuant to Section 11(d) hereof) per share of Preferred Shares. 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 Shares on any date shall be
deemed to be the average of the daily closing prices per share of such
Common Shares 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 Shares is determined during a period following the
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or
securities convertible into such Common Shares (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common
Shares, and prior to the expiration of the requisite 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 quoted price
or, if not so quoted, the average of the high bid and low asked prices
in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") or
such other system then in use, or, if applicable, 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 Common Shares are not reported by
Nasdaq or such other system then in use and 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
Common Shares are listed or admitted to trading or, if the Common
Shares are not reported by Nasdaq or such other system then in use and
are not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Common Shares
selected by the Board of Directors of the Company. If on any such date
no market maker is making a market in the Common Shares, the fair value
of such shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which
the Common Shares are listed or admitted to trading is open for the
transaction of business or, if the Common Shares are not listed or
admitted to trading on any national securities exchange, a Business
Day. If the Common Shares are not publicly held or not so listed or
traded, "current market price" per share shall mean the fair value per
share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Shares shall be
determined in the same manner as set forth above for the
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Common Shares in clause (i) of this Section 11(d) (other than the last
sentence thereof). If the current market price per share of Preferred
Shares cannot be determined in the manner provided above or if the
Preferred Shares are not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "current market
price" per share of Preferred Shares shall be conclusively deemed to be
an amount equal to 100 (as such number may be appropriately adjusted
for such events as stock splits, stock dividends and recapitalizations
with respect to the Common Shares occurring after the date of this
Agreement) multiplied by the current market price per share of the
Common Shares. If neither the Common Shares nor the Preferred Share are
publicly held or so listed or traded, "current market price" per share
of the Preferred Shares shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For all purposes
of this Agreement, the "current market price" of one one-hundredth of a
Preferred Share shall be equal to the "current market price" of one
Preferred Share divided by 100.
(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 Common
Share or other share or one-millionth of a Preferred Share, 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)(ii) or Section 13 (a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Shares, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Shares contained in
Sections 11(a), (b), (c), (e), (g), (h), (i), (j), and (l), and the provisions
of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11 (i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11 (b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one one-hundredths
of a share covered by a Right immediately prior
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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 lieu of any
adjustment in the number of one one-hundredths of a Preferred Share 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-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Company shall make a public announcement of its election to adjust the number of
Rights, indicating the record date for the adjustment, and, if known at the
time, the amount of the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereafter, but, if the
Rights Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates 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-hundredths of a Preferred Share issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredth of a
share and the number of one one-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) 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 number of one one-hundredths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one one-hundredths of a Preferred Share and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
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(l) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance wholly for cash of any
Preferred Shares at less than the current market price, (iii) issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, (iv) share 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 Shares shall not be taxable to such
shareholders.
(m) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(n)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(n) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(n) hereof), if (x) at the time of or immediately after
such consolidation, merger, sale or transfer there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale or transfer, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(n) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(o) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time on or after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding Common Shares payable in Common Shares, (ii) subdivide the
outstanding shares of Common Shares, or (iii) combine the outstanding shares of
Common Shares into a smaller number of shares, the number of Rights associated
with each Common Share then outstanding, or issued or delivered thereafter but
prior to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each Common Share following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each Common Share immediately prior to such event by a fraction
the numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Shares outstanding immediately
following the occurrence of such event.
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Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Shares and the Common Shares, a copy of such certificate, and (c) mail
a brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing Common
Shares) in accordance with Section 25 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of such adjustment unless
and until it shall have received such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Share Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(n) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(n) hereof) 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 Common Shares shall be changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or (z) the Company shall sell or otherwise transfer (or one or more of its
Subsidiaries shall sell or otherwise transfer), in one transaction or a series
of related transactions, assets or earning power aggregating more than 50% of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section 11(n)
hereof), then, and in each such case, proper provision shall be made so that:
(i) each holder of a Right, except holders described in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, non-assessable and freely
tradeable Common Shares of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of one one-hundredths
of a Preferred Share for which a Right is exercisable immediately prior to the
first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has
occurred prior to the first occurrence of a Section 13 Event, multiplying the
number of such one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Section 11(a)(ii)
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the current market price
(determined pursuant to Section 13(d) hereof) per Common Share of such Principal
Party on the date of consummation of such Section 13 Event; (ii) such Principal
Party shall thereafter be liable for, and shall assume, by virtue of such
Section 13 Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall
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apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of its Common Shares) in
connection with the consummation of any such transaction as may be necessary to
assure that the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer
of any securities into which Common Shares of the Company are converted
in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving
the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that
in any such case, (1) if the Common Shares of such Person are 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
Shares of which are and have been so registered, "Principal Party"
shall refer to such other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common
Shares 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 Shares having the greatest aggregate market value.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized Common Shares which have not been issued or reserved for issuance to
permit the exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement 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, sale or transfer 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; and
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(ii) deliver to holders of the Rights historical financial statements
for the Principal Party and each of its Affiliates which comply in all
respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
(d) For purposes of Section 13(a), the "current market price" per
Common Share of a Principal Party shall be deemed to be the average of the daily
closing prices per Common Share 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
Principal Party's Common Shares is determined during a period following the
announcement by the issuer of such Common Shares of (A) a dividend or
distribution on such Common Shares payable in such Common Shares or securities
convertible into such Common Shares (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Shares, and prior to
the expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, 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 quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the Nasdaq or such other system then in use, or, if applicable, 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 Principal Party's Common Shares are not reported by Nasdaq or such other
system then in use and 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 Common Shares are listed or admitted to trading or, if the
Common Shares are not reported by Nasdaq or such other system then in use and
are not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Common Shares selected by the Board of
Directors of the Company. If on any such date no market maker is making a market
in the Principal Party's Common Shares, the fair value of such shares on such
date as determined in good faith by the Board of Directors of the Company shall
be used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of the Principal Party's Common Shares
are listed or admitted to trading is open for the transaction of business or, if
the Common Shares are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Principal Party's Common Shares are
not publicly held or not so listed or traded, "current market price" per share
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be conclusive for all purposes.
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<PAGE> 26
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(o) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there may 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 quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use, or, if applicable, 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
reported by Nasdaq or such other system then in use and 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 reported by Nasdaq or such other
system then in use and are not listed or admitted to trading on any national
securities exchange, or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Rights selected by the
Board of Directors of the Company. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred
Shares (other than fractions which are integral multiples of one one-hundredth
of a Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share). In lieu of
fractional Preferred Shares that are not integral multiples of one one-hundredth
of a Preferred Share, 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 Preferred Share. For purposes of this Section 14(b), the
current market value of one one-hundredth of a Preferred Share shall be the
current market price of a Common Share (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior to the date of such
exercise.
(c) 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, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the
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<PAGE> 27
registered holders of the Common Shares); and any registered holder of any
Rights Certificate (or, prior to the Distribution Date, of the Common Shares),
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 Shares), 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.
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 Shares;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) subject to Section 6 (a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a 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 number of one one-hundredths of a
Preferred Share or any other securities of the
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<PAGE> 28
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 24 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 in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Shares 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.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the 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
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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 (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) 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 Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, 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 Section 11 or
Section 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
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Rights evidenced by Rights Certificates after receipt of the certificate
described in Section 12 hereof setting forth 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 Common Shares or Preferred Shares to be
issued pursuant to this Agreement or any Rights Certificate or as to whether any
Common Shares or Preferred Shares will, when so issued, be validly authorized
and issued, fully paid and non-assessable.
(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
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Rights
Agreement and the date on or after which such action shall be taken or such
omission shall be effective. The Rights Agent shall not be liable for any action
taken by, or omission of, the Rights Agent in accordance with a proposal
included in any such application on or after the date specified in such
application (which date shall not be less than five Business Days after the date
the Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be
taken or omitted.
(i) 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.
(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.
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(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and thereby 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 Share and Preferred Shares, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
Shares and Preferred Shares, by registered or certified mail, and to the holders
of the Rights Certificates by first-class mail. If the Rights Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any 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 or financial institution
organized and doing business under the laws of the United States or of the State
of Ohio (or of any other state of the United States so long as such corporation
is authorized to act as Rights Agent in the State of Ohio), in good standing,
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 $100,000,000 or (b) an affiliate of a corporation or
financial institution 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 Share and the
Preferred Share, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of Common
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Shares following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (a) shall, with respect to Common Shares so issued or
sold pursuant to the exercise of stock options or under any employee benefit
plan or arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. Redemption and Termination.
(a)(i) The Board of Directors of the Company may, at its
option, at any time prior to the earlier of (x) the close of
business on the tenth Business Day following the Share
Acquisition Date (or, if the Share Acquisition Date shall have
occurred prior to the Record Date, the close of business on
the tenth Business Day following the Record Date), or (y) the
Final Expiration Date, redeem all but not less than all the
then outstanding Rights at a redemption price of $.001 per
Right, as such amount may be appropriately adjusted, as
determined by the Board of Directors, 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").
(ii) If, following the occurrence of a Share
Acquisition Date or following the expiration of the right of
redemption hereunder but prior to any Triggering Event, (x) a
Person who is an Acquiring Person shall have transferred or
otherwise disposed of a number of Common Shares in one
transaction or series of transactions, not directly or
indirectly involving the Company or any of its Subsidiaries,
which did not result in the occurrence of a Triggering Event
such that such Person, together with such Person's, Affiliates
and Associates, is thereafter a Beneficial Owner of less than
15% of the outstanding Common Shares, and (y) there are no
other Persons, immediately following the occurrence of the
event described in clause (x), who are Acquiring Persons, then
the right of redemption shall be reinstated and thereafter be
subject to the provisions of this Section 23.
(iii) Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of an event described in Section
11(a)(ii) until such time as the Company's right of redemption
hereunder has expired.
(iv) The Company may, at its option, pay the
Redemption Price in cash, Common Shares (based on the "current
market price," as defined in Section 11(d)(i) hereof, of the
Common Shares at the time of redemption) or any other form of
consideration deemed appropriate by the Board of Directors.
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<PAGE> 33
(c) 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 for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Distribution Date, on
the registry books of the transfer agent for the Common Shares. 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. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in shares of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular quarterly cash dividend out of earnings
or retained earnings of the Company), or (ii) to offer to the holders of
Preferred Shares rights or warrants to subscribe for or to purchase any
additional shares of Preferred Shares or shares of stock of any class or any
other securities, rights or options, or (iii) to effect any reclassification of
its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), or (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Company in a transaction which complies with Section 11(n) hereof), or to
effect any sale or other transfer (or to permit one or more of its Subsidiaries
to effect any sale or other transfer), in one transaction or a series of related
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Company or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(n) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such share 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 Preferred Shares, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days prior
to the record date for determining holders of the Preferred Shares 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 Preferred Shares, whichever shall be
the earlier.
(b) In case any of the events set forth in Section 11(a)(ii) hereof
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 25 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
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<PAGE> 34
to Preferred Shares shall be deemed thereafter to refer to Common Shares and/or,
if appropriate, other securities.
Section 25. 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 delivered by hand, sent
by overnight courier or sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the Rights Agent) as follows:
LNB Bancorp, Inc.
457 Broadway
Lorain, Ohio 44052
Attention: Corporate Secretary
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
delivered by hand, sent by overnight courier or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Attention: Vice President, Corporate Relations
800-866-1340
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Share) 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 26. Supplements and Amendments. Prior to the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Share. From and after the Distribution Date and
subject to the penultimate sentence of this Section 26, the Company and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of any Acquiring Person); provided, this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed at such time as
the Rights are not then
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<PAGE> 35
redeemable, or (B) any other time period unless such lengthening of such other
time period is for the purpose of protecting, enhancing or clarifying the rights
of, and/or the benefits to, the holders of Rights. 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
26, the Rights Agent shall execute such supplement or amendment. Notwithstanding
anything contained in this Agreement to the contrary, no supplement or amendment
shall be made which changes the Redemption Price, the Final Expiration Date, the
Purchase Price or the number of one one-hundredths of a Preferred Share for
which a Right is exercisable. Prior to the Distribution Date, the interests of
the holders of Rights shall be deemed coincident with the interests of the
holders of Common Shares.
Section 27. 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 28. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act
as in effect on the date hereof. The Board of Directors of the Company (or, as
set forth herein, certain specified members thereof) shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including, but
not limited to, a determination to redeem or not redeem the Rights or to amend
this Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors of
the Company in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject the Board to any liability to the holders of the Rights.
Section 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 Shares) 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 Shares).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however,
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<PAGE> 36
that notwithstanding anything in this Agreement to the contrary, if any such
term, provision, covenant or restriction is held by such court or authority to
be invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language from
this Agreement would adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the close of business on the tenth business day following
the date of such determination by the Board of Directors of the Company.
Section 31. 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 Ohio 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 32. 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 33. 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.
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<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: LNB BANCORP, INC.
By /s/ Thomas P. Ryan By /s/ Gary C. Smith
------------------ -----------------
Thomas P. Ryan Gary C. Smith
Secretary President and Chief
Executive Officer
Attest: REGISTRAR AND TRANSFER COMPANY
By /s/ William P. Tatler By /s/ Diane Sayek
--------------------- ---------------
Name: William P. Tatler Name: Diane Sayek
Title: Vice President & Assistant Secretary Title: Vice President
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<PAGE> 38
EXHIBIT A
SECOND AMENDED ARTICLES OF INCORPORATION
OF
LNB BANCORP, INC.
These Second Amended Articles of Incorporation (the "Articles") of LNB
Bancorp, Inc. ("Corporation") hereby supersede Corporation's existing Amended
Articles of Incorporation and shall read as follows:
FIRST. The name of Corporation shall be LNB Bancorp, Inc.
SECOND. The place in Ohio where Corporation's principal office is to be
located is the City of Lorain, Lorain County.
THIRD. The purpose for which Corporation is formed is to engage in any
lawful act or activity for which corporations may be formed under Sections
1701.01 through 1701.98, inclusive, of the Ohio Revised Code, including (but not
limited to) to qualify and act as a "financial holding company" as defined by
the Gramm-Leach-Bliley Act of 1999.
FOURTH. The number of shares (collectively, the "Shares") which
Corporation is authorized to have outstanding is 16,000,000 Shares consisting
of: (i) 15,000,000 of common Shares, One Dollar ($1.00) par value (the "Common
Shares"); and (ii) 1,000,000 of voting preferred Shares, no par value (the
"Voting Preferred Shares") as follows:
A. COMMON SHARES:
The holders of the Common Shares are entitled at all times to
one (1) vote for each Share and to such dividends as the Board of Directors
(herein called the "Board") may in its discretion periodically declare, subject,
however, to the voting and dividend rights of the holders of the Voting
Preferred Shares. In the event of any liquidation, dissolution or winding up of
Corporation, the remaining assets of Corporation after the payment of all debts
and necessary expenses shall be distributed among the holders of the Common
Shares pro rata in accordance with their respective Share holdings, subject,
however, to the rights of the holders of the Voting Preferred Shares then
outstanding. The Common Shares are subject to all of the terms and provisions of
the Voting Preferred Shares as established by the Board in accordance with this
Article FOURTH.
B. VOTING PREFERRED SHARES:
The Board is hereby expressly authorized in its discretion to
adopt amendments to the Articles to provide for the issuance of one (1) or more
series of Voting Preferred Shares; to establish periodically the number of
Shares to be included in each such series; and to fix the designation, powers,
preferences, dividend rights and other rights of the Voting Preferred Shares of
each such series and any qualifications, limitations or restrictions thereof, to
the fullest extent permitted by law. When voting as a class, the holders of the
Voting Preferred Shares shall be entitled at all times to one (1) vote for each
Voting Preferred Share. Voting Preferred Shares
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<PAGE> 39
redeemed or otherwise acquired by Corporation shall become authorized but
unissued Voting Preferred Shares, shall be unclassified as to series, and may
thereafter be reissued in the same manner as other authorized but unissued
Voting Preferred Shares.
C. SERIES A VOTING PREFERRED SHARES:
From the authorized number of Voting Preferred Shares of
Corporation, a series of Voting Preferred Shares designated as "Series A Voting
Preferred Shares" is hereby created and shall consist of 750,000 Shares, without
par value, of which the preferences, relative and other rights, and the
qualifications, limitations or restrictions thereof shall be (in addition to
those set forth elsewhere in these Articles) as follows:
1. Dividends and Distribution.
(a) In preference to the holders of Common Shares and
of any outstanding junior Shares of Corporation, but subject to the prior and
superior rights of the holders of any Shares of any series of Voting Preferred
Shares ranking prior and superior to the Shares of Series A Voting Preferred
Shares with respect to dividends, the holders of Series A Voting Preferred
Shares shall be entitled to receive (when, as and if declared by the Board) from
funds legally available for the purpose, quarterly dividends payable in cash on
the first Business Day of January, April, July and October in each year (each
such date being referenced herein as a "Quarterly Dividend Payment Date", and
"Business Day" meaning any day other than a Saturday, Sunday or a day on which
banking institutions in the State of Ohio are authorized or obligated by law or
executive order to close), commencing on the first Quarterly Dividend Payment
Date after the first issuance of a Share or fraction of a Share of Series A
Voting Preferred Shares. Such dividends shall be in an amount per Share (rounded
to the nearest cent) equal to the greater of: (a) One Dollar ($1.00), or (b)
subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per Share amount of all cash dividends and 100 times the aggregate per
Share amount (payable in kind) of all non-cash dividends or other distributions
(other than a dividend payable in Common Share or other subdivision of the
outstanding Common Shares, by reclassification or otherwise, declared on the
Common Shares) 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 Voting Preferred
Shares. If Corporation shall, on or after November 6, 2000 (the "Rights
Declaration Date"), (i) declare any dividend on Common Shares payable in Common
Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the
outstanding Common Shares into a smaller number of Shares, then (in each such
case) the amount to which holders of Series A Voting Preferred Shares were
entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares
outstanding immediately prior to such event.
(b) The Board shall declare a dividend or distribution on
the Series A Voting Preferred Shares as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common Shares
(other than a dividend payable in Shares of Common Shares); provided that,
subject to the requirements of applicable law, in the event no dividend or
distribution has been declared on the Common Shares during the period between
any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of
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One Dollar ($1.00) per Share on the Series A Voting Preferred Shares shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall accrue and be cumulative on outstanding
Series A Voting Preferred Shares from the Quarterly Dividend Payment Date next
preceding the date of issue of such Shares of Series A Voting Preferred Shares,
unless: (i) the date of issue of such Shares is prior to the record date for the
first Quarterly Dividend Payment Date, in which case dividends on such Shares
shall accrue from the date of issue of such Shares, or (ii) the date of issue is
a Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Voting Preferred Shares entitled to receive
a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on Series A Voting Preferred Shares in an amount less
than the total amount of such dividends at the time accrued and payable on such
Shares shall be allocated pro rata on a Share-by-Share basis among all such
Shares at the time outstanding. The Board may fix a record date for the
determination of holders of Series A Voting Preferred Shares entitled to receive
payment of a dividend or distribution declared thereon, which record date shall
be no more than sixty (60) days prior to the date fixed for the payment thereof.
2. Voting Rights. The holders of Series A Voting Preferred
Shares shall have the following voting rights, in addition to those set forth
elsewhere in this Article FOURTH:
(a) Subject to the provision for adjustment hereinafter set
forth, each Series A Voting Preferred Share shall entitle the holder thereof to
one hundred (100) votes on all matters submitted to a vote of the shareholders
of Corporation. If Corporation shall at any time on or after the Rights
Declaration Date: (i) declare any dividend on Common Shares payable in Common
Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine the
outstanding Common Shares into a small number of Shares, then (in each such
case) the number of votes per Share to which holders of Series A Voting
Preferred Shares were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares outstanding immediately prior to such
event.
(b) Except as otherwise provided herein or by law, the
holders of Series A Voting Preferred Shares and the holders of Common Shares
shall vote together as one class on all matters submitted to a vote of
shareholders of Corporation.
(c) Except as set forth herein, the holders of Series A
Voting Preferred Shares shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote as set
forth in these Articles or by law) for taking any corporate action.
3. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Voting Preferred Shares as provided in
Section 1 of paragraph C. (Series A Voting Preferred Shares) of Article FOURTH
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions (whether or not declared) on Series A Voting Preferred Shares
outstanding shall have been paid in full, the Corporation shall not:
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<PAGE> 41
(i) declare or pay dividends or make any other
distributions on Shares ranking junior
(either as to dividends or upon
liquidation, dissolution or winding up) to
the Series A Voting Preferred Shares;
(ii) declare or pay dividends or make any other
distributions on any Shares ranking on a parity
(either as to dividends or upon liquidation,
dissolution or winding up) with the Series A
Voting Preferred Shares, except dividends paid
ratably on the Series A Voting Preferred Shares
and all such parity Shares 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 ranking junior (either as to
dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Voting
Preferred Shares; provided, however, that
Corporation may at any time redeem, purchase or
otherwise acquire any such junior Shares in
exchange for any Shares of Corporation ranking
junior (either as to dividends or upon
dissolution, liquidation or winding up) to the
Series A Voting Preferred Shares; and
(iv) purchase or otherwise acquire for consideration
any Series A Voting Preferred Shares or any Shares
ranking on a parity with the Series A Voting
Preferred Shares, except in accordance with a
purchase offer made in writing or by publication
(as determined by the Board) to all holders of
such Shares upon such terms as the Board, after
consideration of the respective annual dividend
rates and other relative rights and preferences of
the respective series and classes, determines in
good faith will result in fair and equitable
treatment among the respective series or classes.
(b) Corporation shall not permit any subsidiary of
Corporation to purchase or otherwise acquire for consideration any Shares of
Corporation unless, pursuant to paragraph (a) of this Section 3, Corporation
could purchase or otherwise acquire such Shares at such time and in such manner.
4. Reacquired Shares. Any Series A Voting Preferred Shares
purchased or otherwise acquired by Corporation in any manner whatsoever shall be
retired and cancelled promptly after such acquisition. All such Shares, upon
their cancellation, shall become authorized but unissued Voting Preferred
Shares, without designation as to series, and may be reissued as part of any
series of Voting Preferred Shares created by the Board (including Series A
Voting Preferred Shares) subject to the condition and restrictions on issuance
set forth herein.
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<PAGE> 42
5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of Corporation, no distribution shall be
made to:
(a) The holder of Shares ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A Voting
Preferred Shares, unless (prior thereto) the holders of Series A Voting
Preferred Shares have received the greater of: (i) One Dollar ($1.00) per Share
($0.001 per one one-hundredth of a Share), plus an amount equal to accrued and
unpaid dividends and distributions thereon (whether or not declared) to the date
of such payment, or (ii) an aggregate amount per Share, subject to the provision
for adjustment herein set forth, equal to 100 times the aggregate amount to be
distributed per Share to holders of Common Shares; or
(b) The holders of Shares ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the Series
A Voting Preferred Shares, except distributions made ratably on the Series A
Voting Preferred Shares and all other such parity Shares in proportion to the
total amounts to which the holders of all such Shares are entitled upon such
liquidation, dissolution or winding up.
If Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a subdivision or
combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise) into a greater or lesser number of Common Shares,
then (and in each such event) the aggregate amount to which the holder of each
Share of Series A Voting Preferred Shares was entitled immediately prior to such
event under paragraph (a) of this Section 5 shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
6. Combination. If Corporation shall enter into any
consolidation, merger, combination or other transaction in which the Common
Shares are exchanged for or changed into other stock, securities, cash or any
other property, then (in each such event) the Series A Voting Preferred Shares
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 or any other property
(payable in kind), as the case may be, into which or for which each Common Share
is changed or exchanged. If, at any time on or after the Rights Declaration
Date, Corporation (i) declares any dividend on Common Shares payable in Common
Shares, (ii) subdivides the outstanding Common Shares; or (iii) combines the
outstanding Common Shares into a smaller number of Shares, then (in each such
case) the amount set forth in the preceding sentence with respect to the
exchange or change of Series A Voting Preferred Shares shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
Common Shares outstanding immediately after such event and the denominator of
which is the number of Common Shares that were outstanding immediately prior to
such event.
7. No Redemption. The Series A Voting Preferred Shares
shall not be redeemable; provided, however, that Corporation may acquire Series
A Voting Preferred Shares in any other manner permitted by law or these
Articles.
8. Ranking. Unless otherwise provided in these Articles or
any subsequent amendment of these Articles relating to a subsequent series of
preferred Shares of Corporation, the
5
<PAGE> 43
Series A Voting Preferred Shares shall rank junior to all other series of
Corporation's Voting Preferred Shares as to the payment of dividends and the
distribution of assets on liquidation, dissolution or winding up and shall rank
senior to the Common Shares.
9. Amendment. These Articles shall not be further amended in
any manner which would materially and adversely alter or change the powers,
preference or special rights of the Series A Voting Preferred Shares without the
affirmative vote of the holders of at least a majority of the outstanding Series
A Voting Preferred Shares, voting together as a single series.
10. Fractional Shares. Series A Voting Preferred Shares may be
issued in fractions of a Share (in one one-hundredth (1/100) of a Share and
integral multiples thereof) that shall entitle the holder (in proportion to such
holder's fractional Shares) to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Voting Preferred Shares.
FIFTH. Except as otherwise provided in these Articles, Corporation is
hereby authorized to purchase through action of the Board, without the approval
of the holders of any Shares of any class and upon such terms and conditions as
the Board determines: (1) Shares of any class or series issued by Corporation,
subject to express terms of such Shares; (2) any security or other obligation of
the Corporation which may confer upon the holder thereof the right to convert
such security or obligation into Shares of any class or series authorized by
these Articles; (3) any security or other obligation which may confer upon the
holder thereof the right to purchase Shares of any class or series authorized by
these Articles; and (4) Shares of any class issued by Corporation if and when
any holder of such Shares desires to (or, upon the happening of any event, is
required to) sell such Shares.
SIXTH. No holder of any Shares of any class shall have the right to
vote cumulatively in the election of Directors to the Board.
SEVENTH. No holder of the Shares of any class shall have any
preemptive right to subscribe for or to purchase any Shares of any class whether
now or hereafter authorized.
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<PAGE> 44
EXHIBIT B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER OCTOBER 23, 2010 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (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 RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*
Rights Certificate
LNB BANCORP, INC.
This certifies that , or registered assigns, is the registered owner of
the number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions and conditions of the Rights Agreement, dated
as of October 24, 2000 (the "Rights Agreement"), between LNB Bancorp, Inc., an
Ohio corporation (the "Company"), and Registrar and Transfer Company, a New
Jersey corporation, (the "Rights Agent"), to purchase from the Company at any
time prior to 5:00 P.M. (Lorain, Ohio time) on October 24, 2000 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 Voting Preferred Shares (the "Preferred Shares") of the Company, at a purchase
price of $60 per one one-hundredth of a share (the "Purchase Price"), upon
presentation and surrender of this Rights Certificate with the Form of Election
to Purchase and related Certificate duly executed. The Purchase Price may be
paid in cash or by certified bank check or money order payable to the order of
the Company. 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 October 23, 2010, based on the Preferred Shares as constituted at
such date.
------
* The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.
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Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified in the Rights
Agreement, a transferee of a person who, after such transfer, became an
Acquiring Person or an Affiliate or Associate of any Acquiring Person, such
Rights shall become null and void and no holder hereof shall have any right with
respect to such Rights from and after the occurrence of such Section 11(a)(ii)
Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares 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, including
Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions, and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are available upon written request to the
Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-hundredths of a Preferred Share as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth business day following the Share Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. After the expiration of the redemption period, the
Company's right of redemption may be reinstated if an Acquiring Person reduces
his beneficial ownership to less than 15% of the outstanding Common Shares in a
transaction or series of transactions not involving the Company and there are no
other Acquiring Persons.
The Company may (but shall not be required to) issue fractional
Preferred Shares upon the exercise of any Right or Rights evidenced hereby
(other than fractions which are integral multiples of one one-hundredth of a
Preferred Shares, which may, at the election of the Company, be evidenced by
depositary receipts), and in lieu thereof a cash payment may be made, as
provided in the Rights Agreement.
2
<PAGE> 46
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Shares 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
and its corporate seal.
Dated as of
--------------- --,-----
ATTEST: LNB BANCORP, INC.
------------------------------ By:
Secretary Name:
Title:
Countersigned:
REGISTRAR AND TRANSFER COMPANY
By:
-----------------------
Authorized Signature
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<PAGE> 47
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Rights
Certificate.)
FOR VALUE RECEIVED hereby
-----------------------------------------------------
sells, assigns and transfers unto
--------------------------------------------------------------------------------
(Please print name and address of transferee)
--------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
-------------------------
------------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
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<PAGE> 48
Dated: --------------------
-----------------,---- Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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<PAGE> 49
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: LNB BANCORP, INC.
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of and
delivered to:
Please insert social security or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
Dated: ------------------------------
-------------------,---- Signature
Signature Guaranteed:
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<PAGE> 50
Certification
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: -----------------------------
-------------------,---- Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
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<PAGE> 51
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On October 24, 2000, the Board of Directors of LNB Bancorp, Inc. (the
"Company") declared a dividend distribution of one Right for each outstanding
Common Share of the Company to shareholders of record at the close of business
on November 6, 2000. One Right will also be distributed for each Common Share
issued after November 6, 2000 until the Distribution Date (which is described in
the next paragraph). Each Right entitles the registered holder to purchase from
the Company units ("Units") of Series A Voting Preferred Shares, no par value
(the "Preferred Shares"), at an exercise price of $60 per Right. The description
and terms of the Rights are set forth in a Rights Agreement dated as of October
24, 2000 (the "Rights Agreement") between the Company and Registrar and Transfer
Company as Rights Agent. The exercise price has been set at $60 based upon the
advice of the Company's financial adviser.
The Rights Agreement provides that the Rights will be evidenced by the
share certificates representing the Common Shares and no separate Rights
Certificates will be distributed until the "Distribution Date" which will be the
earlier to occur of (i) the close of business 10 business days following a
public announcement that a person or group of affiliated or associated persons
has acquired beneficial ownership of 15% or more of the outstanding Common
Shares (an "Acquiring Person") or (ii) the close of business 10 business days
after the latest of (A) the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result in
a person or group becoming an Acquiring Person, (B) the date on which all
regulatory approvals required for the acquisition of shares pursuant to the
tender or exchange offer have been obtained or waived, or (C) the date on which
any approval required of shareholders of the person making the tender or
exchange offer is obtained. The definition of Acquiring Person excludes the
Company, any subsidiary of the Company or any of the Company's employee benefit
plans.
Until the Distribution Date (A) the Rights will be evidenced by the
Common Share certificates and will be transferred with and only with the Common
Share certificates, (B) new Common Share certificates issued after November 6,
2000 will contain a notation incorporating the Rights Agreement by reference and
(C) the surrender for transfer of any certificates for Common Shares outstanding
will also constitute the transfer of the Rights associated with the Common
Shares represented by the certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 23, 2010, unless the Company redeems
them at an earlier date. The Company's ability to redeem the Rights is described
below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and
<PAGE> 52
thereafter, the separate Rights Certificates alone will represent the Rights.
Except for the issuance of Common Shares in connection with outstanding options,
convertible securities and as otherwise determined by the Board of Directors,
only Common Shares issued prior to the Distribution Date will be issued with
Rights.
Subject to the right of the Company to redeem the Rights as explained
below, in the event that any person becomes an Acquiring Person, each holder of
a Right, other than the Acquiring Person, will then have the right (the "Flip-In
Right") to receive upon exercise the Units of Preferred Shares (or, in certain
circumstances, other securities of the Company) having a value (immediately
prior to such triggering event) equal to two times the exercise price of the
Right. For this purpose, a Unit of Preferred Shares is deemed to have the same
value as the market price of the Company's Common Shares at that time. One Unit
of Preferred Shares has rights which are comparable in terms of dividends and
voting power and upon liquidation to one Common Share. Each Flip-In Right will
entitle the holder, other than the Acquiring Person, to purchase from the
Company Units of Preferred Shares at 50% of market value.
All Rights that are beneficially owned by any Acquiring Person will be
null and void.
In the event that, at any time following the acquisition of 15% or more
of the Company's Common Shares by a person or group, (i) the Company is acquired
in a merger or other business combination transaction in which the Company is
not the surviving corporation, or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right, other than the
Acquiring Person, will then have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times the exercise
price of the Right.
A person or group of affiliated persons will not trigger the separation
and exercisability of the Rights if that person or group becomes the beneficial
owner of 15% or more of the Common Shares solely as a result of the Company's
reducing the number of outstanding shares, unless that person or group
subsequently acquires an additional 1.0% or more of the then outstanding Common
Shares.
The Company may redeem the Rights in whole, but not in part, at a price
of $.001 per Right, at any time until the close of business 10 business days
following acquisition of 15% or more of the Company's Common Shares by a person
or group.
Until a Right is exercised, the holder of the Right, as such, will have
no rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the interests of any
Acquiring Person), or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made when the Rights are not redeemable.
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<PAGE> 53
The inability of a person or group that acquires 15% or more of the
Company's Common Shares to exercise the Rights will result in a substantial
dilution of that person's ownership level and voting power if there is any
significant exercise of the Rights by other shareholders. The ability of the
Board of Directors to redeem the Rights, and other provisions of the Rights
Plan, will enable the Board of Directors to avoid the effect of the Rights in
any negotiated acquisition of the Company that is first approved by the Board of
Directors.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
3
