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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF
SECURITIES PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
GLIATECH INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 34-1587242
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(State of incorporation or organization) (IRS Employer Identification No.)
23420 Commerce Park Road, Cleveland, Ohio 44122
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(Address of principal executive offices) (Zip Code)
If this form relates to the If this form relates to the
registration of a class of registration of a class of
debt securities and is debt securities and is to
effective upon filing become effective
pursuant to General simultaneously with the
Instruction A(c)(1) please effectiveness of a
check the following box. [ ] concurrent registration
statement under the
Securities Act of 1933
pursuant to General
Instruction A(c)(2) please
check the following box. [ ]
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered pursuant to Section 12(g) of the Act:
Rights to Purchase Preferred Shares
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Title of class
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Title of class
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ITEM 1. DESCRIPTION OF SECURITIES TO BE REGISTERED.
On July 1, 1997, the Board of Directors of Gliatech Inc. (the
"Company") declared a dividend distribution of one right (a "Right") for each
share of Common Stock, par value $.01 per share (the "Common Shares"), of the
Company outstanding at the close of business on July 11, 1997 (the "Record
Date"), pursuant to the terms of a Rights Agreement, dated as of July 1, 1997
(the "Rights Agreement"), between the Company and American Stock Transfer &
Trust Company, as Rights Agent. The Rights Agreement also provides, subject to
specified exceptions and limitations, that Common Shares issued or delivered
from the Company's treasury after the Record Date will be entitled to and
accompanied by Rights. The Rights are in all respects subject to and governed
by the provisions of the Rights Agreement, a copy of which (including all
exhibits thereto) is filed as Exhibit 1 hereto and incorporated herein by this
reference. A summary description of the Rights is set forth in Exhibit C to
the Rights Agreement.
ITEM 2. EXHIBITS.
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<CAPTION>
Exhibit
Number Exhibit
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<S> <C>
1 Rights Agreement (including a Form of
Certificate of Designation of Series A
Junior Participating Preferred Stock as
Exhibit A thereto, a Form of Right
Certificate as Exhibit B thereto and a
Summary of Rights to Purchase Preferred
Stock as Exhibit C thereto)
2 Form of letter to stockholders, dated July
1997
3 Press release, dated July 1, 1997
</TABLE>
2
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
GLIATECH INC.
By: /s/ Rodney E. Dausch
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Name: Rodney E. Dausch
Title: Vice President, Chief
Financial Officer and
Secretary
Dated: July 2, 1997
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER Exhibit
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<S> <C>
1 Rights Agreement (including a Form of Certificate
of Designation of Series A Junior Participating
Preferred Stock as Exhibit A thereto, a Form of
Right Certificate as Exhibit B thereto and a
Summary of Rights to Purchase Preferred Stock as
Exhibit C thereto)
2 Form of letter to stockholders, dated July 1997
3 Press release, dated July 1, 1997
</TABLE>
4
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EXHIBIT 1
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RIGHTS AGREEMENT
Dated as of July 1, 1997
By and Between
GLIATECH INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Rights Agent
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TABLE OF CONTENTS
<TABLE>
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Page
<S> <C> <C>
1. Certain Definitions......................................................................................1
2. Appointment of Rights Agent..............................................................................5
3. Issue of Right Certificates..............................................................................5
4. Form of Right Certificates...............................................................................7
5. Countersignature and Registration........................................................................7
6. Transfer, Split Up, Combination and Exchange
of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates........................................................................8
7. Exercise of Rights; Purchase Price; Expiration
Date of Rights...........................................................................................9
8. Cancellation and Destruction of Right Certificates......................................................10
9. Company Covenants Concerning Securities and Rights......................................................11
10. Record Date.............................................................................................12
11. Adjustment of Purchase Price, Number and Kind
of Securities or Number of Rights.......................................................................13
12. Certificate of Adjusted Purchase Price
or Number of Securities.................................................................................23
13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power..............................................................................23
14. Fractional Rights and Fractional Securities.............................................................26
15. Rights of Action........................................................................................28
16. Agreement of Rights Holders.............................................................................29
17. Right Certificate Holder Not Deemed a Stockholder.......................................................29
18. Concerning the Rights Agent.............................................................................30
19. Merger or Consolidation or Change
of Name of Rights Agent.................................................................................30
20. Duties of Rights Agent..................................................................................31
21. Change of Rights Agent..................................................................................33
22. Issuance of New Right Certificates......................................................................34
</TABLE>
(i)
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<TABLE>
<CAPTION>
Page
<S> <C>
23. Redemption..............................................................................................35
24. Exchange................................................................................................36
25. Notice of Certain Events................................................................................37
26. Notices.................................................................................................38
27. Supplements and Amendments..............................................................................38
28. Successors; Certain Covenants...........................................................................39
29. Benefits of This Agreement..............................................................................39
30. Governing Law...........................................................................................39
31. Severability............................................................................................40
32. Descriptive Headings, Etc...............................................................................40
33. Determinations and Actions by the Board.................................................................40
34. Counterparts............................................................................................40
Exhibit A................................................................................................. A-1
Exhibit B................................................................................................. B-1
Exhibit C................................................................................................. C-1
</TABLE>
(ii)
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RIGHTS AGREEMENT
This RIGHTS AGREEMENT, dated as of July 1, 1997 (this "Agreement"), is
made and entered into by and between Gliatech Inc., a Delaware corporation (the
"Company"), and American Stock Transfer & Trust Company (the "Rights Agent").
RECITALS
WHEREAS, on July 1, 1997, the Board of Directors of the Company
authorized and declared a dividend distribution of one right (a "Right") for
each share of Common Stock, par value $.01 per share, of the Company (a "Common
Share") outstanding as of the Close of Business (as hereinafter defined) on
July 11, 1997 (the "Record Date"), each Right initially representing the right
to purchase one one-hundredth of a Preferred Share (as hereinafter defined), on
the terms and subject to the conditions herein set forth, and further
authorized and directed the issuance of one Right (subject to adjustment as
provided herein) with respect to each Common Share issued or delivered by the
Company (whether originally issued or delivered from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date (as
hereinafter defined) and the Expiration Date (as hereinafter defined) or as
provided in Section 22.
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto hereby agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
terms have the meanings indicated:
(a) "Acquiring Person" means any Person (other than the Company or any
Related Person) who or which, together with all Affiliates and Associates of
such Person, is the Beneficial Owner of 15% or more of the then-outstanding
Common Shares; provided, however, that a Person will not be deemed to have
become an Acquiring Person solely as a result of a reduction in the number of
Common Shares outstanding unless and until such time as (i) such Person or any
Affiliate or Associate of such Person thereafter becomes the Beneficial Owner
of additional Common Shares representing 1% or more of the then-outstanding
Common Shares, other than as a result of a stock dividend, stock split or
similar transaction effected by the Company in which all holders of Common
Shares are treated equally, or (ii) any other Person who is the Beneficial
Owner of Common Shares representing 1% or more of the then-outstanding Common
Shares thereafter becomes an Affiliate or Associate of such Person.
Notwithstanding the foregoing, if the Board of Directors of the Company
determines in good faith that a Person who would otherwise be an "Acquiring
Person" as defined pursuant to the foregoing provisions of this paragraph (a),
has become such inadvertently, and such Person divests as promptly as
practicable a sufficient number of Common Shares so that such Person would no
longer be an "Acquiring Person" as defined pursuant to the foregoing provisions
of this paragraph (a), then such Person
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shall not be deemed to be an "Acquiring Person" for any purposes of this
Agreement.
(b) "Affiliate" and "Associate" will have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act, as in effect on the date of this Agreement, provided however,
that a Person will not be deemed to be the Affiliate or Associate of another
Person solely because either or both Persons are or were Directors of the
Company.
(c) A Person will be deemed the "Beneficial Owner" of, and to
"Beneficially Own," any securities:
(i) the beneficial ownership of 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, warrants, options or other rights
(in each case, other than upon exercise or exchange of the Rights);
provided, however, that a Person will not be deemed the Beneficial
Owner of, or to Beneficially Own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of
such Person's Affiliates or Associates until such tendered securities
are accepted for purchase or exchange; or
(ii) which such Person or any of such Person's Affiliates
or Associates, directly or indirectly, has or shares the right to vote
or dispose of, including pursuant to any agreement, arrangement or
understanding (whether or not in writing); or
(iii) of which any other Person is the Beneficial Owner, if
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing)
with such other Person (or any of such other Person's Affiliates or
Associates) with respect to acquiring, holding, voting or disposing of
any securities of the Company;
provided, however, that a Person will not be deemed the Beneficial Owner of, or
to Beneficially Own, any security (A) if such Person has the right to vote such
security pursuant to an agreement, arrangement or understanding (whether or not
in writing) which (1) arises solely from a revocable proxy given to such Person
in response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations of the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report), or (B) if such beneficial ownership arises
solely as a result of such Person's status as a
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"clearing agency," as defined in Section 3(a)(23) of the Exchange Act; provided
further, however, that nothing in this paragraph (c) will 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 an underwriting syndicate until the expiration
of 40 calendar days after the date of such acquisition, or such later date as
the Board of Directors of the Company may determine in any specific case.
(d) "Business Day" means any day other than a Saturday, Sunday or a
day on which banking institutions in the State of New York (or such other state
in which the principal office of the Rights Agent is located) are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date means 5:00 P.M., Eastern
time, on such date; provided, however, that if such date is not a Business Day
it means 5:00 P.M., Eastern time, on the next succeeding Business Day.
(f) "Common Shares" when used with reference to the Company means the
shares of Common Stock, par value $.01 per share, of the Company; provided,
however, that, if the Company is the continuing or surviving corporation in a
transaction described in Section 13(a)(ii), "Common Shares" when used with
reference to the Company means shares of the capital stock or units of the
equity interests with the greatest aggregate voting power of the Company.
"Common Shares" when used with reference to any corporation or other legal
entity other than the Company, including an Issuer, means shares of the capital
stock or units of the equity interests with the greatest aggregate voting power
of such corporation or other legal entity.
(g) "Company" means Gliatech Inc., a Delaware corporation.
(h) "Distribution Date" means the earlier of: (i) the Close of
Business on the Share Acquisition Date, or (ii) the Close of Business on the
tenth Business Day (or, unless the Distribution Date shall have previously
occurred, such later date as may be specified by the Board of Directors of the
Company) after the commencement of a tender or exchange offer by any Person
(other than the Company or any Related Person), if upon the consummation
thereof such Person would be the Beneficial Owner of 15% or more of the
then-outstanding Common Shares.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Expiration Date" means the earliest of (i) the Close of Business
on the Final Expiration Date, (ii) the time at which the Rights are redeemed as
provided in Section 23, and (iii) the time at which all exercisable Rights are
exchanged as provided in Section 24.
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(k) "Final Expiration Date" means the tenth anniversary of the Record
Date.
(l) "Flip-in Event" means any event described in clauses (A), (B) or
(C) of Section 11(a)(ii).
(m) "Flip-over Event" means any event described in clauses (i), (ii)
or (iii) of Section 13(a).
(n) "Issuer" has the meaning set forth in Section 13(b).
(o) "Nasdaq" means The NASDAQ Stock Market.
(p) "Person" means any individual, firm, corporation or other legal
entity, and includes any successor (by merger or otherwise) of such entity.
(q) "Preferred Shares" means shares of Series A Junior Participating
Preferred Stock, par value $.01 per share, of the Company having the rights and
preferences set forth in the form of Certificates of Designation of Series A
Junior Participating Preferred Stock attached as Exhibit A.
(r) "Purchase Price" means initially $65.00 per one one-hundredth of a
Preferred Share, subject to adjustment from time to time as provided in this
Agreement.
(s) "Record Date" has the meaning set forth in the Recitals to this
Agreement.
(t) "Redemption Price" means $.01 per Right, subject to adjustment by
resolution of the Board of Directors of the Company to reflect any stock split,
stock dividend or similar transaction occurring after the Record Date.
(u) "Related Person" means (i) any Subsidiary of the Company or (ii)
any employee benefit or stock ownership plan of the Company or of any
Subsidiary of the Company or any entity holding Common Shares for or pursuant
to the terms of any such plan.
(v) "Right" has the meaning set forth in the Recitals to this
Agreement.
(w) "Right Certificates" means certificates evidencing the Rights, in
substantially the form attached as Exhibit B.
(x) "Rights Agent" means American Stock Transfer & Trust Company,
unless and until a successor Rights Agent has become such pursuant to the terms
of this Agreement, and thereafter, "Rights Agent" means such successor Rights
Agent.
(y) "Securities Act" means the Securities Act of 1933, as amended.
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(z) "Share Acquisition Date" means the first date of public
announcement by the Company (by press release, filing made with the Securities
and Exchange Commission or otherwise) that an Acquiring Person has become such.
(aa) "Subsidiary" when used with reference to any Person means any
corporation or other legal entity of which a majority of the voting power of
the voting equity securities or equity interests is owned, directly or
indirectly, by such Person; provided, however, that for purposes of Section
13(b), "Subsidiary" when used with reference to any Person means any
corporation or other legal entity of which at least 20% of the voting power of
the voting equity securities or equity interests is owned, directly or
indirectly, by such Person.
(bb) "Trading Day" means any 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.
(cc) "Triggering Event" means any Flip-in Event or Flip-over Event.
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, will also be, prior to the Distribution Date, the
holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment and hereby
certifies that it complies with the requirements of the New York Stock Exchange
governing transfer agents and registrars. The Company may from time to time act
as co-Rights Agent or appoint such co-Rights Agents as it may deem necessary or
desirable. Any actions which may be taken by the Rights Agent pursuant to the
terms of this Agreement may be taken by any such co-Rights Agent. To the extent
that any co-Rights Agent takes any action pursuant to this Agreement, such
co-Rights Agent will be entitled to all of the rights and protections of, and
subject to all of the applicable duties and obligations imposed upon, the
Rights Agent pursuant to the terms of this Agreement.
3. Issue of Right Certificates. (a) Until the Distribution Date, (i)
the Rights will be evidenced by the certificates representing Common Shares
registered in the names of the record holders thereof (which certificates
representing Common Shares will also be deemed to be Right Certificates), (ii)
the Rights will be transferable only in connection with the transfer of the
underlying Common Shares, and (iii) the surrender for transfer of any
certificates evidencing Common Shares in respect of which Rights have been
issued will also constitute the transfer of the Rights associated with the
Common Shares evidenced by such certificates. On or as promptly as practicable
after the Record Date, the Company will send by first class, postage prepaid
mail, to each record holder of Common Shares as
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of the Close of Business on the Record Date, at the address of such holder
shown on the records of the Company as of such date, a copy of a Summary of
Rights to Purchase Preferred Stock in substantially the form attached as
Exhibit C.
(b) Rights will be issued by the Company in respect of all Common
Shares (other than Common Shares issued upon the exercise or exchange of any
Right) issued or delivered by the Company (whether originally issued or
delivered from the Company's treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. Certificates
evidencing such Common Shares will have stamped on, impressed on, printed on,
written on, or otherwise affixed to them the following legend or such similar
legend as the Company may deem appropriate and as is 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 or transaction reporting system on
which the Common Shares may from time to time be listed or quoted, or to
conform to usage:
This Certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement between Gliatech
Inc. and American Stock Transfer & Trust Company, dated as of July 1,
1997 (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of Gliatech Inc. The Rights are not
exercisable prior to the occurrence of certain events specified in the
Rights Agreement. Under certain circumstances, as set forth in the
Rights Agreement, such Rights may be redeemed, may expire, may be
amended, or may be evidenced by separate certificates and no longer be
evidenced by this Certificate. Gliatech Inc. will mail to the holder
of this Certificate a copy of the Rights Agreement, as in effect on
the date of mailing, without charge promptly after receipt of a
written request therefor. Under certain circumstances as set forth in
the Rights Agreement, Rights that are or were beneficially owned by an
Acquiring Person or any Affiliate or Associate of an Acquiring Person
(as such terms are defined in the Rights Agreement) may become null
and void.
(c) As promptly as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign and the
Company will send or cause to be sent (and the Rights Agent will, if requested,
send), by first class, insured, postage prepaid mail, to each record holder of
Common Shares as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a Right Certificate
evidencing one Right for each Common Share so held, subject to adjustment as
provided herein. As of and after
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the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.
(d) In the event that the Company purchases or otherwise acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares will be deemed canceled and retired
so that the Company will not be entitled to exercise any Rights associated with
the Common Shares so purchased or acquired.
4. Form of Right Certificates. The Right Certificates (and the form of
election to purchase and the form of assignment to be printed on the reverse
thereof) will be substantially in the form attached as Exhibit B with such
changes and 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 or transaction
reporting system on which the Rights may from time to time be listed or quoted,
or to conform to usage. Subject to the provisions of Section 22, the Right
Certificates, whenever issued, on their face will entitle the holders thereof
to purchase such number of one one-hundredths of a Preferred Share as are set
forth therein at the Purchase Price set forth therein, but the Purchase Price,
the number and kind of securities issuable upon exercise of each Right and the
number of Rights outstanding will be subject to adjustment as provided herein.
5. Countersignature and Registration. (a) The Right Certificates will
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
will have affixed thereto the Company's seal or a facsimile thereof which will
be attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Right Certificates will be manually
countersigned by the Rights Agent and will not be valid for any purpose unless
so countersigned. In case any officer of the Company who signed any of the
Right Certificates ceases to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect
as though the person who signed such Right Certificates had not ceased to be
such officer of the Company; and any Right Certificate may be signed on behalf
of the Company by any person who, at the actual date of the execution of such
Right Certificate, is a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at the principal office of the Rights
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Agent designated for such purpose and at such other offices as may be required
to comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or any transaction
reporting system on which the Rights may from time to time be listed or quoted,
books for registration and transfer of the Right Certificates issued hereunder.
Such books will show the names and addresses of the respective holders of the
Right Certificates, the number of Rights evidenced on its face by each of the
Right Certificates and the date of each of the Right Certificates.
6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) Subject to the
provisions of Sections 7(d) and 14, at any time after the Close of Business on
the Distribution Date and prior to the Expiration Date, any Right Certificate
or Right Certificates representing exercisable Rights may be transferred, split
up, combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share (or other securities, as the case may be) as the Right
Certificate or Right 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 such Right Certificate
or Rights Certificates must make such request in a writing delivered to the
Rights Agent and must surrender the Right Certificate or Right Certificates to
be transferred, split up, combined or exchanged at the principal office of the
Rights Agent designated for such purpose. Thereupon or as promptly as
practicable thereafter, subject to the provisions of Sections 7(d) and 14, the
Company will prepare, execute and deliver to the Rights Agent, and the Rights
Agent will countersign and deliver, a Right Certificate or Right Certificates,
as the case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Right Certificate and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and, if requested by the Company,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will prepare, execute and
deliver a new Right Certificate of like tenor to the Rights Agent and the
Rights Agent will countersign and deliver such new Right Certificate to the
registered holder in lieu of the Right Certificate so lost, stolen, destroyed
or mutilated.
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7. Exercise of Rights; Purchase Price; Expiration Date of Rights. (a)
The registered holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein) in whole or in part at
any time after the Distribution Date and prior to the Expiration Date, upon
surrender of the Right Certificate, with the form of election to purchase on
the reverse side thereof duly executed, to the Rights Agent at the office or
offices of the Rights Agent designated for such purpose, together with payment
in cash, in lawful money of the United States of America by certified check or
bank draft payable to the order of the Company, equal to the sum of (i) the
exercise price for the total number of securities as to which such surrendered
Rights are exercised and (ii) an amount equal to any applicable transfer tax
required to be paid by the holder of such Right Certificate in accordance with
the provisions of Section 9(c).
(b) Upon receipt of a Right Certificate representing exercisable
Rights with the form of election to purchase duly executed, accompanied by
payment as described above, the Rights Agent will promptly (i) requisition from
any transfer agent of the Preferred Shares (or make available, if the Rights
Agent is the transfer agent) certificates representing the number of one
one-hundredths of a Preferred Share to be purchased (and the Company hereby
irrevocably authorizes and directs its transfer agent to comply with all such
requests), or, if the Company elects to deposit 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 (and the Company
hereby irrevocably authorizes and directs such depositary agent to comply with
all such requests), (ii) after receipt of such certificates (or depositary
receipts, as the case may be), cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, (iii) when appropriate,
requisition from the Company or any transfer agent therefor (or make available,
if the Rights Agent is the transfer agent) certificates representing the number
of equivalent common shares to be issued in lieu of the issuance of Common
Shares in accordance with the provisions of Section 11(a)(iii), (iv) when
appropriate, after receipt of such certificates, cause the same to be delivered
to or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder, (v) when
appropriate, requisition from the Company the amount of cash to be paid in lieu
of the issuance of fractional shares in accordance with the provisions of
Section 14 or in lieu of the issuance of Common Shares in accordance with the
provisions of Section 11(a)(iii), (vi) when appropriate, after receipt, deliver
such cash to or upon the order of the registered holder of such Right
Certificate, and (vii) when appropriate, deliver any due bill or other
instrument provided to the Rights Agent by the Company for delivery to the
registered holder of such Right Certificate as provided by Section 11(l).
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(c) In case the registered holder of any Right Certificate exercises
less than all the Rights evidenced thereby, the Company will prepare, execute
and deliver a new Right Certificate evidencing Rights equivalent to the Rights
remaining unexercised and the Rights Agent will countersign and deliver such
new Right Certificate to the registered holder of such Right Certificate or to
his duly authorized assigns, subject to the provisions of Section 14.
(d) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company will be obligated to undertake any
action with respect to any purported transfer, split up, combination or
exchange of any Right Certificate pursuant to Section 6 or exercise of a Right
Certificate as set forth in this Section 7 unless the registered holder of such
Right Certificate has (i) completed and signed the certificate following the
form of assignment or the form of election to purchase, as applicable, set
forth on the reverse side of the Right Certificate surrendered for such
transfer, split up, combination, exchange or 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 may
reasonably request.
8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange will, if surrendered to the Company or to any of its
stock transfer agents, be delivered to the Rights Agent for cancellation or in
canceled form, or, if surrendered to the Rights Agent, will be canceled by it,
and no Right Certificates will be issued in lieu thereof except as expressly
permitted by the provisions of this Agreement. The Company will deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent will so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent will deliver
all canceled Right Certificates to the Company, or will, at the written request
of the Company, destroy such canceled Right Certificates, and in such case will
deliver a certificate of destruction thereof to the Company.
9. Company Covenants Concerning Securities and Rights. The Company
covenants and agrees that:
(a) It will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares or any Preferred Shares
held in its treasury, a number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7.
(b) So long as the Preferred Shares (and, following the
occurrence of a Triggering Event, Common Shares and/or other
securities) issuable upon the exercise of the Rights may be listed on
a national securities exchange, or quoted on NASDAQ, it will endeavor
to cause, from and after such
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<PAGE> 14
time as the Rights become exercisable, all securities reserved for
issuance upon the exercise of Rights to be listed on such exchange, or
quoted on NASDAQ, upon official notice of issuance upon such exercise.
(c) It will take all such action as may be necessary to
ensure that all Preferred Shares (and, following the occurrence of a
Triggering Event, Common Shares and/or other securities) delivered
upon exercise of Rights, at the time of delivery of the certificates
for such securities, will be (subject to payment of the Purchase
Price) duly authorized, validly issued, fully paid and nonassessable
securities.
(d) It will pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the
issuance or delivery of the Right Certificates and of any certificates
representing securities issued upon the exercise of Rights; provided,
however, that the Company will not be required to pay any transfer tax
or charge which may be payable in respect of any transfer or delivery
of Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts representing
securities issued upon the exercise of Rights in a name other than
that of, the registered holder of the Right Certificate evidencing
Rights surrendered for exercise, or to issue or deliver any
certificates or depositary receipts representing securities issued
upon the exercise of any Rights until any such tax or charge has been
paid (any such tax or charge being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established
to the Company's reasonable satisfaction that no such tax is due.
(e) It will use its best efforts (i) to file on an
appropriate form, as soon as practicable following the later of the
Share Acquisition Date and the Distribution Date, a registration
statement under the Securities Act with respect to the securities
issuable upon exercise of the Rights, (ii) to cause such registration
statement to become effective as soon as practicable after such
filing, and (iii) to cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of
the Securities Act) until the earlier of (A) the date as of which the
Rights are no longer exercisable for such securities and (B) the
Expiration Date. 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 after the date set forth in clause (i) of the first
sentence of this Section 9(e), the exercisability of the Rights in
order to prepare and file such registration statement and to permit it
to become effective. Upon any such suspension, the Company will issue
a public announcement stating that the exercisability of the Rights
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<PAGE> 15
has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect. In addition, if
the Company determines that a registration statement should be filed
under the Securities Act or any state securities laws following the
Distribution Date, the Company may temporarily suspend the
exercisability of the Rights in each relevant jurisdiction until such
time as a registration statement has been declared effective and, upon
any such suspension, the Company will 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 anything in this
Agreement to the contrary, the Rights will not be exercisable in any
jurisdiction if the requisite registration or qualification in such
jurisdiction has not been effected or the exercise of the Rights is
not permitted under applicable law.
(f) Notwithstanding anything in this Agreement to the
contrary, after the later of the Share Acquisition Date and the
Distribution Date it will not 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 eliminate or otherwise diminish the
benefits intended to be afforded by the Rights.
(g) In the event that the Company is obligated to issue other
securities of the Company and/or pay cash pursuant to Sections 11, 13,
14 or 24 it will make all arrangements necessary so that such other
securities and/or cash are available for distribution by the Rights
Agent, if and when appropriate.
10. Record Date. Each Person in whose name any certificate
representing Preferred Shares (or Common Shares and/or other securities, as the
case may be) is issued upon the exercise of Rights will for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate will be dated, the date upon which the Right 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 transfer books of
the Company for the Preferred Shares (or Common Shares and/or other securities,
as the case may be) are closed, such Person will be deemed to have become the
record holder of such securities on, and such certificate will be dated, the
next succeeding Business Day on which the transfer books of the Company for the
Preferred Shares (or Common Shares and/or other securities, as the case may be)
are open. Prior to the exercise of the Rights evidenced thereby, the holder of
a Right Certificate will not be entitled to any rights of a holder of any
security for which the Rights are or may become exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions, or
to
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<PAGE> 16
exercise any preemptive rights, and will not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
11. Adjustment of Purchase Price, Number and Kind of Securities or
Number of Rights. The Purchase Price, the number and kind of securities
issuable upon exercise of 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 that the Company at any time after the Record
Date (A) declares a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivides the outstanding Preferred Shares, (C)
combines the outstanding Preferred Shares into a smaller number of
Preferred Shares, or (D) issues 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), the Purchase Price in effect
at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification and/or the
number and/or kind of shares of capital stock issuable on such date
upon exercise of a Right, will be proportionately adjusted so that the
holder of any Right exercised after such time is entitled to receive
upon payment of the Purchase Price then in effect the aggregate number
and kind of shares of capital stock which, if such Right had been
exercised immediately prior to such date and at a time when the
transfer books of the Company for the Preferred Shares were open, the
holder of such Right would have owned upon such exercise (and, in the
case of a reclassification, would have retained after giving effect to
such reclassification) and would have been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification;
provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock issuable upon exercise of one Right. If an
event occurs which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) or Section 13, the adjustment provided
for in this Section 11(a)(i) will be in addition to, and will be made
prior to, any adjustment required pursuant to Section 11(a)(ii) or
Section 13.
(ii) Subject to the provisions of Section 24, if:
(A) any Person becomes an Acquiring Person; or
(B) any Acquiring Person or any Affiliate or Associate of any
Acquiring Person, directly or indirectly, (1) merges into the Company
or otherwise combines with the Company and the Company is the
continuing or surviving corporation of such merger or combination
(other than in a transaction
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<PAGE> 17
subject to Section 13), (2) merges or otherwise combines with any
Subsidiary of the Company, (3) in one or more transactions (otherwise
than in connection with the exercise, exchange or conversion of
securities exercisable or exchangeable for or convertible into shares
of any class of capital stock of the Company or any of its
Subsidiaries) transfers cash, securities or any other property to the
Company or any of its Subsidiaries in exchange (in whole or in part)
for shares of any class of capital stock of the Company or any of its
Subsidiaries or for securities exercisable or exchangeable for or
convertible into shares of any class of capital stock of the Company
or any of its Subsidiaries, or otherwise obtains from the Company or
any of its Subsidiaries, with or without consideration, any additional
shares of any class of capital stock of the Company or any of its
Subsidiaries or securities exercisable or exchangeable for or
convertible into shares of any class of capital stock of the Company
or any of its Subsidiaries (otherwise than as part of a pro rata
distribution to all holders of shares of any class of capital stock of
the Company, or any of its Subsidiaries), (4) sells, purchases,
leases, exchanges, mortgages, pledges, transfers or otherwise disposes
(in one or more transactions) to, from, with or of, as the case may
be, the Company or any of its Subsidiaries (otherwise than in a
transaction subject to Section 13), any property, including
securities, on terms and conditions less favorable to the Company than
the Company would be able to obtain in an arm's-length transaction
with an unaffiliated third party, (5) receives any compensation from
the Company or any of its Subsidiaries other than compensation as a
director or a regular full-time employee, in either case at rates
consistent with the Company's (or its Subsidiaries') past practices,
or (6) receives the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or any tax credits or other tax
advantage provided by the Company or any of its Subsidiaries; or
(C) during such time as there is an Acquiring Person,
there is any reclassification of securities of the Company (including
any reverse stock split), or any recapitalization of the Company, or
any merger or consolidation of the Company with any of its
Subsidiaries, or any other transaction or series of transactions
involving the Company or any of its Subsidiaries (whether or not with
or into or otherwise involving an Acquiring Person), other than a
transaction subject to Section 13, which has the effect, directly or
indirectly, of increasing by more than 1% the proportionate share of
the outstanding shares of any class of equity securities of the
Company or any of its Subsidiaries, or of securities exercisable or
exchangeable for or convertible into equity securities of the Company
or any of its Subsidiaries, of which an Acquiring Person, or
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<PAGE> 18
any Affiliate or Associate of any Acquiring Person, is the Beneficial
Owner;
then, and in each such case, proper provision will be made so that
each holder of a Right, except as provided below, will thereafter have
the right to receive, upon exercise thereof in accordance with the
terms of this Agreement at an exercise price per Right equal to the
product of the then-current Purchase Price multiplied by the number of
one one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the date of the occurrence of such
Flip-in Event (or, if any other Flip-in Event shall have previously
occurred, the product of the then-current Purchase Price multiplied by
the number of one one-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to the date of the first
occurrence of a Flip-in Event), in lieu of Preferred Shares, such
number of Common Shares as equals the result obtained by (x)
multiplying the then-current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the occurrence of such Flip-in Event
(or, if any other Flip-in Event shall have previously occurred,
multiplying the then-current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the first occurrence of a Flip-in
Event), and dividing that product by (y) 50% of the current per share
market price of the Common Shares (determined pursuant to Section
11(d)) on the date of the occurrence of such Flip-in Event.
Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Flip-in Event, any Rights that are
Beneficially Owned by (A) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (B) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who becomes a transferee
after the occurrence of a Flip-in Event, or (C) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a
transferee prior to or concurrently with the occurrence of a Flip-in
Event pursuant to either (1) a transfer from an Acquiring Person to
holders of its equity securities or to any Person with whom it has any
continuing agreement, arrangement or understanding regarding the
transferred Rights or (2) a transfer which the Board of Directors of
the Company has determined is part of a plan, arrangement or
understanding which has the purpose or effect of avoiding the
provisions of this Section 11(a)(ii), and subsequent transferees of
any of such Persons, will be void without any further action and any
holder of such Rights will thereafter have no rights whatsoever with
respect to such Rights under any provision of this Agreement. The
Company will use all reasonable efforts to ensure that the provisions
of this Section 11(a)(ii) are complied with, but will have no
liability to any holder of Right Certificates or any other Person as a
result of its failure to make any determinations with
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<PAGE> 19
respect to an Acquiring Person or its Affiliates, Associates or
transferees hereunder. Upon the occurrence of a Flip-in Event, no
Right Certificate that represents Rights that are or have become void
pursuant to the provisions of this Section 11(a)(ii) will thereafter
be issued pursuant to Section 3 or Section 6, and any Right
Certificate delivered to the Rights Agent that represents Rights that
are or have become void pursuant to the provisions of this Section
11(a)(ii) will be canceled. Upon the occurrence of a Flip-over Event,
any Rights that shall not have been previously exercised pursuant to
this Section 11(a)(ii) shall thereafter be exercisable only pursuant
to Section 13 and not pursuant to this Section 11(a)(ii).
(iii) Upon the occurrence of a Flip-in Event, if there are
not sufficient Common Shares authorized but unissued or issued but not
outstanding to permit the issuance of all the Common Shares issuable
in accordance with Section 11(a)(ii) upon the exercise of a Right, the
Board of Directors of the Company will use its best efforts promptly
to authorize and, subject to the provisions of Section 9(e), make
available for issuance additional Common Shares or other equity
securities of the Company having equivalent voting rights and an
equivalent value (as determined in good faith by the Board of
Directors of the Company) to the Common Shares (for purposes of this
Section 11(a)(iii), "equivalent common shares"). In the event that
equivalent common shares are so authorized, upon the exercise of a
Right in accordance with the provisions of Section 7, the registered
holder will be entitled to receive (A) Common Shares, to the extent
any are available, and (B) a number of equivalent common shares, which
the Board of Directors of the Company has determined in good faith to
have a value equivalent to the excess of (x) the aggregate current per
share market value on the date of the occurrence of the most recent
Flip-in Event of all the Common Shares issuable in accordance with
Section 11(a)(ii) upon the exercise of a Right (the "Exercise Value")
over (y) the aggregate current per share market value on the date of
the occurrence of the most recent Flip-in Event of any Common Shares
available for issuance upon the exercise of such Right; provided,
however, that if at any time after 90 calendar days after the latest
of the Share Acquisition Date, the Distribution Date and the date of
the occurrence of the most recent Flip-in Event, there are not
sufficient Common Shares and/or equivalent common shares available for
issuance upon the exercise of a Right, then the Company will be
obligated to deliver, upon the surrender of such Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available), equivalent common shares (to the extent available) and
then cash (to the extent permitted by applicable law and any
agreements or instruments to which the Company is a party in effect
immediately prior to the Share Acquisition Date), which securities and
cash have an aggregate value equal to the excess of (1) the Exercise
Value over (2) the product of
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<PAGE> 20
the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the occurrence of the most recent
Flip-in Event (or, if any other Flip-in Event shall have previously
occurred, the product of the then-current Purchase Price multiplied by
the number of one one-hundredths of a Preferred Share for which a
Right would have been exercisable immediately prior to the date of the
occurrence of such Flip-in Event if no other Flip-in Event had
previously occurred). To the extent that any legal or contractual
restrictions prevent the Company from paying the full amount of cash
payable in accordance with the foregoing sentence, the Company will
pay to holders of the Rights as to which such payments are being made
all amounts which are not then restricted on a pro rata basis and will
continue to make payments on a pro rata basis as promptly as funds
become available until the full amount due to each such Rights holder
has been paid.
(b) In the event that the Company fixes a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling
them (for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Shares (or securities having equivalent
rights, privileges and preferences as the Preferred Shares (for purposes of
this Section 11(b), "equivalent preferred shares")) or securities convertible
into Preferred Shares or equivalent preferred shares at a price per Preferred
Share or equivalent preferred share (or having a conversion price per share, if
a security convertible into Preferred Shares or equivalent preferred shares)
less than the current per share market price of the Preferred Shares
(determined pursuant to Section 11(d)) on such record date, the Purchase Price
to be in effect after such record date will be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which is 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 per
share market price and the denominator of which is 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); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock issuable upon exercise of
one Right. In case such subscription price may be paid in a consideration part
or all of which is in a form other than cash, the value of such consideration
will be as determined in good faith by the Board of Directors of the Company,
whose determination will be described in a statement filed with the Rights
Agent. Preferred Shares owned by or held
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<PAGE> 21
for the account of the Company will not be deemed outstanding for the purpose
of any such computation. Such adjustment will be made successively whenever
such a record date is fixed, and in the event that such rights, options or
warrants are not so issued, the Purchase Price will be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In the event that the Company fixes a record date for the making
of 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 or surviving corporation) of evidences of
indebtedness, cash (other than a regular periodic cash dividend), assets, stock
(other than a dividend payable in Preferred Shares) or subscription rights,
options or warrants (excluding those referred to in Section 11(b)), the
Purchase Price to be in effect after such record date will be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which is the current per share market price of
the Preferred Shares (as determined pursuant to Section 11(d)) on such record
date or, if earlier, the date on which Preferred Shares begin to trade on an
ex-dividend or when issued basis for such distribution, less the fair market
value (as determined in good faith by the Board of Directors of the Company,
whose determination will be described in a statement filed with the Rights
Agent) of the portion of the evidences of indebtedness, cash, assets or stock
so to be distributed or of such subscription rights, options or warrants
applicable to one Preferred Share, and the denominator of which is such current
per share market price of the Preferred Shares; provided, however, that in no
event shall the consideration to be paid upon the exercise of one Right be less
than the aggregate par value of the shares of capital stock issuable upon
exercise of one Right. Such adjustments will be made successively whenever such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase Price will again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of Common Shares on any date will be deemed to be
the average of the daily closing prices per share of such Common
Shares for the 30 consecutive Trading Days immediately prior to such
date; provided, however, that in the event that the current per share
market price 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
30 Trading Days after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision,
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<PAGE> 22
combination or reclassification, then, and in each such case, the
current per share market price will be appropriately adjusted to take
into account ex-dividend trading or to reflect the current per share
market price per Common Share equivalent. The closing price for each
day will be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if
the Common Shares 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 listed
or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by Nasdaq or
such other system then in use, or, if on any such date the Common
Shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market
maker making a market in the Common Shares selected by the Board of
Directors of the Company. If the Common Shares are not publicly held
or not so listed or traded, or are not the subject of available bid
and asked quotes, "current per share market price" will mean the fair
value per share as determined in good faith by the Board of Directors
of the Company, whose determination will be described in a statement
filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the
"current per share market price" of the Preferred Shares will be
determined in the same manner as set forth above for Common Shares in
Section 11(d)(i), other than the last sentence thereof. If the current
per share market price of the Preferred Shares cannot be determined in
the manner provided above, the "current per share market price" of the
Preferred Shares will be conclusively deemed to be an amount equal to
the current per share market price of the Common Shares multiplied by
one hundred (as such number may be appropriately adjusted to reflect
events such as stock splits, stock dividends, recapitalizations or
similar transactions relating to the Common Shares occurring after the
date of this Agreement). If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, or the
subject of available bid and asked quotes, "current per share market
price" of the Preferred Shares will mean the fair value per share as
determined in good faith by the Board of Directors of the Company,
whose determination will be described in a statement filed with the
Rights Agent. For all purposes of this Agreement, the current per
share market price of one one-hundredth of a
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<PAGE> 23
Preferred Share will be equal to the current per share market price of
one Preferred Share divided by one hundred.
(e) Except as set forth below, no adjustment in the Purchase Price
will be required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, however, that any adjustments which by
reason of this Section 11(e) are not required to be made will be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 will be made to the nearest cent or to the nearest one
one-millionth of a Preferred Share or one ten-thousandth of a Common Share or
other security, as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 will be made no later
than the earlier of (i) three years from the date of the transaction which
requires such adjustment and (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a),
the holder of any Right thereafter exercised becomes entitled to receive any
securities of the Company other than Preferred Shares, thereafter the number
and/or kind of such other securities so receivable upon exercise of any Right
(and/or the Purchase Price in respect thereof) will 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 (and the Purchase Price
in respect thereof) contained in this Section 11, and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares (and the
Purchase Price in respect thereof) will apply on like terms to any such other
securities (and the Purchase Price in respect thereof).
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder will evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
Preferred Share issuable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company has exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price pursuant to Section
11(b) or Section 11(c), each Right outstanding immediately prior to the making
of such adjustment will 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 one-millionth of a Preferred Share) obtained by
(i) multiplying (x) the number of one one-hundredths of a Preferred Share
issuable upon exercise of a Right immediately prior to such adjustment of the
Purchase Price 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.
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<PAGE> 24
(i) The Company may elect, on or after the date of any adjustment of
the Purchase Price, to adjust the number of Rights in substitution for any
adjustment in the number of one one-hundredths of a Preferred Share issuable
upon the exercise of a Right. Each of the Rights outstanding after such
adjustment of the number of Rights will 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 will 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 will 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. Such record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Right Certificates have been issued, will be at least 10 calendar
days later than the date of the public announcement. If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company will, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date
Right Certificates evidencing, subject to the provisions of Section 14, the
additional Rights to which such holders are entitled as a result of such
adjustment, or, at the option of the Company, will cause to be distributed to
such holders of record in substitution and replacement for the Right
Certificates held by such holders prior to the date of adjustment, and upon
surrender thereof if required by the Company, new Right Certificates evidencing
all the Rights to which such holders are entitled after such adjustment. Right
Certificates so to be distributed will 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 will be registered in the names of the holders
of record of Right Certificates on the record date specified in the public
announcement.
(j) Without respect to any adjustment or change in the Purchase Price
and/or the number and/or kind of securities issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue
to express the Purchase Price and the number and kind of securities which were
expressed in the initial Right Certificate issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below one one-hundredth of the then par value, if any, of
the Preferred Shares or below the then par value, if any, of any other
securities of the Company issuable upon exercise of the Rights, the Company
will take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully paid
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<PAGE> 25
and nonassessable Preferred Shares or such other securities, as the case may
be, at such adjusted Purchase Price.
(l) In any case in which this Section 11 otherwise requires 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 Preferred Shares or other securities of the Company, if any,
issuable upon such exercise over and above the number of Preferred Shares or
other 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 delivers to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional Preferred Shares or other securities upon the occurrence of the
event requiring such adjustment.
(m) Notwithstanding anything in this Agreement to the contrary, the
Company will be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in its good faith judgment the Board of Directors of the
Company determines to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance wholly for cash of Preferred
Shares at less than the current per share market price therefor, (iii) issuance
wholly for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares, (iv) stock dividends, or
(v) issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Shares is not taxable
to such stockholders.
(n) Notwithstanding anything in this Agreement to the contrary, in the
event that the Company at any time after the Record Date prior to the
Distribution Date (i) pays a dividend on the outstanding Common Shares payable
in Common Shares, (ii) subdivides the outstanding Common Shares, (iii) combines
the outstanding Common Shares into a smaller number of shares, or (iv) issues
any shares of its capital stock in a reclassification of the outstanding Common
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation), the
number of Rights associated with each Common Share then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, will be
proportionately adjusted so that the number of Rights thereafter associated
with each Common Share following any such event equals 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 is the total number of
Common Shares outstanding immediately prior to the occurrence of the event and
the denominator of which is the total number of Common Shares outstanding
immediately following the occurrence of such event.
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<PAGE> 26
The adjustments provided for in this Section 11(n) will be made successively
whenever such a dividend is paid or such a subdivision, combination or
reclassification is effected.
12. Certificate of Adjusted Purchase Price or Number of Securities.
Whenever an adjustment is made as provided in Section 11 or Section 13, the
Company will promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) file
with the Rights Agent and with each transfer agent for the Preferred Shares and
the Common Shares a copy of such certificate, and (c) if such adjustment is
made after the Distribution Date, mail a brief summary of such adjustment to
each holder of a Right Certificate in accordance with Section 26.
13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that:
(i) at any time after a Person has become an Acquiring
Person, the Company consolidates with, or merges with or into, any
other Person and the Company is not the continuing or surviving
corporation of such consolidation or merger; or
(ii) at any time after a Person has become an Acquiring
Person, any Person consolidates with the Company, or merges with or
into the Company, and the Company is the continuing or surviving
corporation of such merger or consolidation and, in connection with
such merger or consolidation, all or part of the Common Shares is
changed into or exchanged for stock or other securities of any other
Person or cash or any other property; or
(iii) at any time after a Person has become an Acquiring
Person, the Company, directly or indirectly, sells or otherwise
transfers (or one or more of its Subsidiaries sells or otherwise
transfers), in one or more transactions, assets or earning power
(including without limitation securities creating any obligation on
the part of the Company and/or any of its Subsidiaries) representing
in the aggregate 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 one or more of its wholly owned
Subsidiaries;
then, and in each such case, proper provision will be made so that from and
after the latest of the Share Acquisition Date, the Distribution Date and the
date of the occurrence of such Flip-over Event (A) each holder of a Right
thereafter has the right to receive, upon the exercise thereof in accordance
with the terms of this Agreement at an exercise price per Right equal to the
product of the then-current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the Share Acquisition Date, such number of duly
authorized, validly issued, fully paid, nonassessable and freely tradeable
Common Shares of the Issuer,
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<PAGE> 27
free and clear of any liens, encumbrances and other adverse claims and not
subject to any rights of call or first refusal, as equals the result obtained
by (x) 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 Share Acquisition Date and dividing that product by
(y) 50% of the current per share market price of the Common Shares of the
Issuer (determined pursuant to Section 11(d)), on the date of the occurrence of
such Flip-over Event; (B) the Issuer will thereafter be liable for, and will
assume, by virtue of the occurrence of such Flip-over Event, all the
obligations and duties of the Company pursuant to this Agreement; (C) the term
"Company" will thereafter be deemed to refer to the Issuer; and (D) the Issuer
will take such steps (including without limitation the reservation of a
sufficient number of its Common Shares to permit the exercise of all
outstanding Rights) in connection with such consummation as may be necessary to
assure that the provisions hereof are thereafter applicable, as nearly as
reasonably may be possible, in relation to its Common Shares thereafter
deliverable upon the exercise of the Rights.
(b) For purposes of this Section 13, "Issuer" means (i) in the case of
any Flip-over Event described in Sections 13(a)(i) or (ii) above, the Person
that is the continuing, surviving, resulting or acquiring Person (including the
Company as the continuing or surviving corporation of a transaction described
in Section 13(a)(ii) above), and (ii) in the case of any Flip-over Event
described in Section 13(a)(iii) above, the Person that is the party receiving
the greatest portion of the assets or earning power (including without
limitation securities creating any obligation on the part of the Company and/or
any of its Subsidiaries) transferred pursuant to such transaction or
transactions; provided, however, that, in any such case, (A) if (1) no class of
equity security of such Person is, at the time of such merger, consolidation or
transaction and has been continuously over the preceding 12-month period,
registered pursuant to Section 12 of the Exchange Act, and (2) such Person is a
Subsidiary, directly or indirectly, of another Person, a class of equity
security of which is and has been so registered, the term "Issuer" means such
other Person; and (B) in case such Person is a Subsidiary, directly or
indirectly, of more than one Person, a class of equity security of two or more
of which are and have been so registered, the term "Issuer" means whichever of
such Persons is the issuer of the equity security having the greatest aggregate
market value. Notwithstanding the foregoing, if the Issuer in any of the
Flip-over Events listed above is not a corporation or other legal entity having
outstanding equity securities, then, and in each such case, (x) if the Issuer
is directly or indirectly wholly owned by a corporation or other legal entity
having outstanding equity securities, then all references to Common Shares of
the Issuer will be deemed to be references to the Common Shares of the
corporation or other legal entity having outstanding equity securities which
ultimately controls the Issuer, and (y) if there is no such corporation or
other legal entity having outstanding equity securities, (I)
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<PAGE> 28
proper provision will be made so that the Issuer creates or otherwise makes
available for purposes of the exercise of the Rights in accordance with the
terms of this Agreement, a kind or kinds of security or securities having a
fair market value at least equal to the economic value of the Common Shares
which each holder of a Right would have been entitled to receive if the Issuer
had been a corporation or other legal entity having outstanding equity
securities; and (II) all other provisions of this Agreement will apply to the
issuer of such securities as if such securities were Common Shares.
(c) The Company will not consummate any Flip-over Event if, (i) at the
time of or immediately after such Flip-over Event, there are or would be any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements in effect which would eliminate or substantially diminish the
benefits intended to be afforded by the Rights, (ii) prior to, simultaneously
with or immediately after such Flip-over Event, the stockholders of the Person
who constitutes, or would constitute, the Issuer for purposes of Section 13(a)
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates, or (iii) the form or nature of the
organization of the Issuer would preclude or limit the exercisability of the
Rights. In addition, the Company will not consummate any Flip-over Event unless
the Issuer has a sufficient number of authorized Common Shares (or other
securities as contemplated in Section 13(b) above) 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 to such consummation the
Company and the Issuer have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in subsections (a) and
(b) of this Section 13 and further providing that as promptly as practicable
after the consummation of any Flip-over Event, the Issuer will:
(A) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities issuable
upon exercise of the Rights on an appropriate form, and 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
Securities Act) until the Expiration Date;
(B) take all 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;
and
(C) deliver to holders of the Rights historical financial
statements for the Issuer and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under
the Exchange Act.
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<PAGE> 29
(d) The provisions of this Section 13 will similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Flip-over Event occurs at any time after the occurrence of a Flip-in
Event, except for Rights that have become void pursuant to Section 11(a)(ii),
Rights that shall not have been previously exercised will cease to be
exercisable in the manner provided in Section 11(a)(ii) and will thereafter be
exercisable in the manner provided in Section 13(a).
14. Fractional Rights and Fractional Securities. (a) The Company will
not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, the Company will pay as promptly as practicable to the registered
holders of the Right Certificates with regard to which such fractional Rights
otherwise would be issuable, an amount in cash equal to the same fraction of
the current market value of one Right. For the purposes of this Section 14(a),
the current market value of one Right is the closing price of the Rights for
the Trading Day immediately prior to the date on which such fractional Rights
otherwise would have been issuable. The closing price for any day is the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or,
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by Nasdaq
or such other system then in use, or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If the Rights are not
publicly held or are not so listed or traded, or are not the subject of
available bid and asked quotes, the current market value of one Right will mean
the fair value thereof as determined in good faith by the Board of Directors of
the Company, whose determination will be described in a statement filed with
the Rights Agent.
(b) The Company will 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). Fractions of
Preferred Shares in integral multiples of one one-hundredth of a Preferred
Share may, at the election of
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<PAGE> 30
the Company, be evidenced by depositary receipts pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement provides that the holders of such depositary receipts have all
the rights, privileges and preferences to which they are entitled as beneficial
owners of the Preferred Shares represented by such depositary receipts. In lieu
of fractional Preferred Shares that are not integral multiples of one
one-hundredth of a Preferred Share, the Company may pay to any Person to whom
or which such fractional Preferred Shares would otherwise be issuable an amount
in cash equal to the same fraction of the current market value of one Preferred
Share. For purposes of this Section 14(b), the current market value of one
Preferred Share is the closing price of the Preferred Shares (as determined in
the same manner as set forth for Common Shares in the second sentence of
Section 11(d)(i)) for the Trading Day immediately prior to the date of such
exercise; provided, however, that if the closing price of the Preferred Shares
cannot be so determined, the closing price of the Preferred Shares for such
Trading Day will be conclusively deemed to be an amount equal to the closing
price of the Common Shares (determined pursuant to the second sentence of
Section 11(d)(i)) for such Trading Day multiplied by one hundred (as such
number may be appropriately adjusted to reflect events such as stock splits,
stock dividends, recapitalizations or similar transactions relating to the
Common Shares occurring after the date of this Agreement); provided further,
however, that if neither the Common Shares nor the Preferred Shares are
publicly held or listed or admitted to trading on any national securities
exchange, or the subject of available bid and asked quotes, the current market
value of one Preferred Share will mean the fair value thereof as determined in
good faith by the Board of Directors of the Company, whose determination will
be described in a statement filed with the Rights Agent.
(c) Following the occurrence of a Triggering Event, the Company will
not be required to issue fractions of Common Shares or other securities
issuable upon exercise or exchange of the Rights or to distribute certificates
which evidence any such fractional securities. In lieu of issuing any such
fractional securities, the Company may pay to any Person to whom or which such
fractional securities would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of one such security. For
purposes of this Section 14(c), the current market value of one Common Share or
other security issuable upon the exercise or exchange of Rights is the closing
price thereof (as determined in the same manner as set forth for Common Shares
in the second sentence of Section 11(d)(i)) for the Trading Day immediately
prior to the date of such exercise or exchange; provided, however, that if
neither the Common Shares nor any such other securities are publicly held or
listed or admitted to trading on any national securities exchange, or the
subject of available bid and asked quotes, the current market value of one
Common Share or such other security will mean the fair value thereof as
determined in good faith by the Board of Directors of the Company, whose
determination will mean the fair
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<PAGE> 31
value thereof as will be described in a statement filed with the
Rights Agent.
15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Shares); and any registered holder of any Right 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 Right Certificate (or, prior to
the Distribution Date, of the holder of any 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 Right
Certificate in the manner provided in such Right Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under this
Agreement, and injunctive relief against actual or threatened violations of the
obligations of any Person subject to this Agreement.
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 are
transferable only in connection with the transfer of the Common
Shares;
(b) After the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if
surrendered at the principal office of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of
transfer;
(c) The Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced
thereby (notwithstanding any notations of ownership or writing on the
Right Certificate or the associated Common 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 will be
affected by any notice to the contrary;
(d) Such holder expressly waives any right to receive any
fractional Rights and any fractional securities upon exercise or
exchange of a Right, except as otherwise provided in Section 14.
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<PAGE> 32
(e) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent will have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or
any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation; provided, however, that
the Company will use its best efforts to have any such order, decree
or ruling lifted or otherwise overturned as soon as possible.
17. Right Certificate Holder Not Deemed a Stockholder. No holder, as
such, of any Right Certificate will be entitled to vote, receive dividends, or
be deemed for any purpose the holder of Preferred Shares or any other
securities of the Company which may at any time be issuable upon the exercise
of the Rights represented thereby, nor will anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of Directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
of this Agreement or exchanged pursuant to the provisions of Section 24.
18. Concerning the Rights Agent. (a) The Company will pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company will also indemnify the Rights Agent for, and hold it
harmless against, any loss, liability, suit, action, proceeding or expense,
incurred without negligence, bad faith, or willful misconduct on the part of
the Rights Agent, for anything done or omitted to be done by the Rights Agent
in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly.
(b) The Rights Agent will be protected and will 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 Right
Certificate or certificate evidencing Preferred Shares or Common Shares or
other securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
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<PAGE> 33
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.
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 is a party, or any corporation succeeding to the corporate trust business
of the Rights Agent or any successor Rights Agent, will be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21. If at the time such successor Rights Agent
succeeds to the agency created by this Agreement any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Right Certificates so countersigned; and if at that time any of
the Right Certificates shall not have been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Right Certificates will have the full force provided in the
Right Certificates and in this Agreement.
(b) If at any time the name of the Rights Agent changes and at such
time any of the Right Certificates have been countersigned but not delivered,
the Rights Agent may adopt the countersignature under its prior name and
deliver Right Certificates so countersigned; and if at that time any of the
Right Certificates have not been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates will have the full force
provided in the Right Certificates and in this Agreement.
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 Right Certificates, by their
acceptance thereof, will 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
will 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 deems it necessary or
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<PAGE> 34
desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact
or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the
Board, the President, any Vice President, the Secretary or the
Treasurer of the Company and delivered to the Rights Agent, and such
certificate will 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 will be liable hereunder only for its
own negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement
or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals
are and will be deemed to have been made by the Company only.
(e) The Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and
delivery hereof (except the due execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Right
Certificate (except its countersignature thereof); nor will it be
responsible for any breach by the Company of any covenant contained in
this Agreement or in any Right Certificate; nor will it be responsible
for any adjustment required under the provisions of Sections 11 or 13
(including any adjustment which results in Rights becoming void) or
responsible for the manner, method or amount of any such adjustment or
the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment); nor
will it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of stock
or other securities to be issued pursuant to this Agreement or any
Right Certificate or as to whether any shares of stock or other
securities will, when issued, be duly authorized, validly issued,
fully paid and nonassessable.
(f) The Company 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.
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<PAGE> 35
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties
hereunder from any one of the Chairman of the Board, the President,
any Vice President, the Secretary or the Treasurer of the Company, and
to apply to such officers for advice or instructions in connection
with its duties, and it will not be liable for any action taken or
suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the
Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested,
or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein will preclude the Rights Agent from acting
in any other capacity for the Company or for any other Person.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights
Agent will not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss
to the Company resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection
and continued employment thereof. The Rights Agent will not be under
any duty or responsibility to ensure compliance with any applicable
federal or state securities laws in connection with the issuance,
transfer or exchange of Right Certificates.
(j) If, with respect to any Right Certificate surrendered to
the Rights Agent for exercise, transfer, split up, combination or
exchange, either (i) the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to
clause 1 or 2 thereof, or (ii) any other actual or suspected
irregularity exists, the Rights Agent will not take any further action
with respect to such requested exercise, transfer, split up,
combination or exchange without first consulting with the Company, and
will thereafter take further action with respect thereto only in
accordance with the Company's written instructions.
21. Change of Rights Agent. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
calendar days' notice in writing mailed to the Company and to each transfer
agent of the Preferred Shares or the Common Shares by registered or certified
mail, and to the holders of the Right Certificates by first class mail. The
Company may remove the Rights Agent or any successor
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<PAGE> 36
Rights Agent upon 30 calendar 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 Preferred Shares and the Common Shares by registered or certified mail,
and to the holders of the Right Certificates by first class mail. If the Rights
Agent resigns or is removed or otherwise becomes incapable of acting, the
Company will appoint a successor to the Rights Agent. If the Company fails to
make such appointment within a period of 30 calendar 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
Right Certificate (who will, with such notice, submit his Right Certificate for
inspection by the Company), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, will be a corporation or other legal entity organized and
doing business under the laws of the United States or of the State of New York
(or of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of New York),
in good standing, having a principal office in the State of New York, which is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50 million. After appointment, the successor Rights Agent
will 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 will 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 will file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Preferred Shares or the Common Shares, and mail a notice thereof
in writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
will not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price per share and the number or kind of securities issuable
upon exercise of the Rights made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale by the Company
of Common Shares following the Distribution Date and prior to the Expiration
Date, the Company (a) will, with respect to Common Shares so issued or sold
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<PAGE> 37
pursuant to the exercise, exchange or conversion of securities (other than
Rights) issued prior to the Distribution Date which are exercisable or
exchangeable for, or convertible into Common Shares, and (b) may, in any other
case, if deemed necessary, appropriate or desirable by the Board of Directors
of the Company, issue Right Certificates representing an equivalent number of
Rights as would have been issued in respect of such Common Shares if they had
been issued or sold prior to the Distribution Date, as appropriately adjusted
as provided herein as if they had been so issued or sold; provided, however,
that (i) no such Right Certificate will be issued if, and to the extent that,
in its good faith judgment the Board of Directors of the Company determines
that the issuance of such Right Certificate could have a material adverse tax
consequence to the Company or to the Person to whom or which such Right
Certificate otherwise would be issued and (ii) no such Right Certificate will
be issued if, and to the extent that, appropriate adjustment otherwise has been
made in lieu of the issuance thereof.
23. Redemption. (a) Prior to the Expiration Date, the Board of
Directors of the Company may, at its option, redeem all but not less than all
of the then-outstanding Rights at the Redemption Price at any time prior to the
Close of Business on the Share Acquisition Date. Any such redemption will be
effective immediately upon the action of the Board of Directors of the Company
ordering the same, unless such action of the Board of Directors of the Company
expressly provides that such redemption will be effective at a subsequent time
or upon the occurrence or nonoccurrence of one or more specified events (in
which case such redemption will be effective in accordance with the provisions
of such action of the Board of Directors of the Company).
(b) Immediately upon the effectiveness of the redemption of the Rights
as provided in Section 23(a), 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 will be to receive the Redemption Price,
without interest thereon. Promptly after the effectiveness of the redemption of
the Rights as provided in Section 23(a), the Company will publicly announce
such redemption and, within 10 calendar days thereafter, will give notice of
such redemption to the holders of the then-outstanding Rights by mailing such
notice to all such holders at their last addresses as they appear upon the
registry books of the Company; provided, however, that the failure to give, or
any defect in, any such notice will not affect the validity of the redemption
of the Rights. Any notice which is mailed in the manner herein provided will be
deemed given, whether or not the holder receives the notice. The notice of
redemption mailed to the holders of Rights will state the method by which the
payment of the Redemption Price will be made. The Company may, at its option,
pay the Redemption Price in cash, Common Shares (based upon the current per
share market price of the Common Shares (determined pursuant to Section 11(d))
at the time of redemption), or any other form of consideration deemed
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<PAGE> 38
appropriate by the Board of Directors of the Company (based upon the fair
market value of such other consideration, determined by the Board of Directors
of the Company in good faith) or any combination thereof. The Company may, at
its option, combine the payment of the Redemption Price with any other payment
being made concurrently to holders of Common Shares and, to the extent that any
such other payment is discretionary, may reduce the amount thereof on account
of the concurrent payment of the Redemption Price. If legal or contractual
restrictions prevent the Company from paying the Redemption Price (in the form
of consideration deemed appropriate by the Board of Directors) at the time of
redemption, the Company will pay the Redemption Price, without interest,
promptly after such time as the Company ceases to be so prevented from paying
the Redemption Price.
(c) At any time following the Share Acquisition Date, the Board of
Directors of the Company may relinquish the right to redeem the Rights under
this Section 23 by duly adopting a resolution to that effect. Immediately upon
adoption of such resolution, the rights of the Board of Directors of the
Company to redeem the Rights will terminate without further action and without
any notice. Promptly after adoption of such a resolution, the Company will
publicly announce such action; provided, however, that the failure to give, or
any defect in, any such notice will not affect the validity of the action of
the Board of Directors of the Company.
24. Exchange. (a) The Board of Directors of the Company may, at its
option, at any time after the later of the Share Acquisition Date and the
Distribution Date, exchange all or part of the then-outstanding and exercisable
Rights (which will not include Rights that have become void pursuant to the
provisions of Section 11(a)(ii)) for Common Shares at an exchange ratio of one
Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the Record Date (such
exchange ratio being hereinafter referred to as the "Exchange Ratio"). Any such
exchange will be effective immediately upon the action of the Board of
Directors of the Company ordering the same, unless such action of the Board of
Directors of the Company expressly provides that such exchange will be
effective at a subsequent time or upon the occurrence or nonoccurrence of one
or more specified events (in which case such exchange will be effective in
accordance with the provisions of such action of the Board of Directors of the
Company). Notwithstanding the foregoing, the Board of Directors of the Company
will not be empowered to effect such exchange at any time after any Person
(other than the Company or any Related Person), who or which, together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50%
or more of the then-outstanding Common Shares.
(b) Immediately upon the effectiveness of the exchange of any Rights
as provided in Section 24(a), and without any further action and without any
notice, the right to exercise such Rights will terminate and the only right
with respect to such Rights
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<PAGE> 39
thereafter of the holder of such Rights will be to receive that number of
Common Shares equal to the number of such Rights held by such holder multiplied
by the Exchange Ratio. Promptly after the effectiveness of the exchange of any
Rights as provided in Section 24(a), the Company will publicly announce such
exchange and, within 10 calendar days thereafter, will give notice of such
exchange to all of the holders of such Rights at their last addresses as they
appear upon the registry books of the Rights Agent; provided, however, that the
failure to give, or any defect in, such notice will not affect the validity of
such exchange. Any notice which is mailed in the manner herein provided will be
deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares
for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange will be effected
pro rata based on the number of Rights (other than Rights which have become
void pursuant to the provisions of Section 11(a)(ii)) held by each holder of
Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute for any Common Share exchangeable for a Right (i)
equivalent common shares (as such term is used in Section 11(a)(iii)), (ii)
cash, (iii) debt securities of the Company, (iv) other assets, or (v) any
combination of the foregoing, in any event having an aggregate value, as
determined in good faith by the Board of Directors of the Company (whose
determination will be described in a statement filed with the Rights Agent),
equal to the current market value of one Common Share (determined pursuant to
Section 11(d)) on the Trading Day immediately preceding the date of the
effectiveness of the exchange pursuant to this Section 24.
25. Notice of Certain Events. (a) If, after the Distribution Date, the
Company proposes (i) to pay any dividend payable in stock 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 periodic cash dividend), (ii) to offer
to the holders of Preferred Shares rights, options or warrants to subscribe for
or to purchase any additional Preferred Shares or shares of stock of any class
or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of assets or earning power
(including, without limitation, securities creating any obligation on the part
of the Company and/or any of its Subsidiaries) representing more than 50% of
the assets and earning power of the Company and its Subsidiaries, taken as a
whole, to any other Person or Persons other than the Company or one or more of
its wholly owned Subsidiaries, (v) to effect the liquidation, dissolution or
winding up of the Company, or (vi) to declare or pay any dividend
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<PAGE> 40
on the Common Shares payable in Common Shares or to effect a subdivision,
combination or reclassification of the Common Shares then, in each such case,
the Company will give to each holder of a Right Certificate, to the extent
feasible and in accordance with Section 26, a notice of such proposed action,
which specifies the record date for the purposes of such stock dividend,
distribution or offering of rights, options or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred Shares, if any
such date is to be fixed, and such notice will be so given, in the case of any
action covered by clause (i) or (ii) above, at least 10 calendar 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 10 calendar
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever is the earlier.
(b) In case any Triggering Event occurs, then, in any such case, the
Company will as soon as practicable thereafter give to the Rights Agent and
each holder of a Right Certificate, in accordance with Section 26, a notice of
the occurrence of such event, which specifies the event and the consequences of
the event to holders of Rights.
26. Notices. (a) Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company will be sufficiently given or made if sent by first class
mail, postage prepaid, addressed (until another address is filed in writing
with the Rights Agent) as follows:
Gliatech Inc.
23420 Commerce Park Road
Cleveland, Ohio 44122
Attention: Rodney E. Dausch,
Chief Financial Officer,
Secretary and Vice President
(b) Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Right Certificate to or on the Rights Agent will be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Barry Rosenthal
(c) Notices or demands authorized by this Agreement to be given or
made by the Company or the Rights Agent to the holder of
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<PAGE> 41
any Right Certificate (or, if prior the Distribution Date, to the holder of any
certificate evidencing Common Shares) will 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.
27. Supplements and Amendments. Prior to the time at which the Rights
cease to be redeemable pursuant to Section 23, and subject to the last sentence
of this Section 27, the Company may in its sole and absolute discretion, and
the Rights Agent will if the Company so directs, supplement or amend any
provision of this Agreement in any respect without the approval of any holders
of Rights or Common Shares. From and after the time at which the Rights cease
to be redeemable pursuant to Section 23, and subject to the last sentence of
this Section 27, the Company may, and the Rights Agent will if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights or Common Shares 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 supplement or amend the provisions hereunder
in any manner which the Company may deem desirable; provided that no such
supplement or amendment shall adversely affect the interests of the holders of
Rights as such (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person), and no such supplement or amendment shall cause the
Rights again to become redeemable or cause this Agreement again to become
supplementable or amendable otherwise than in accordance with the provisions of
this sentence. Without limiting the generality or effect of the foregoing, this
Agreement may be supplemented or amended to provide for such voting powers for
the Rights and such procedures for the exercise thereof, if any, as the Board
of Directors of the Company may determine to be appropriate. Upon the delivery
of a certificate from an officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent will execute such supplement or amendment; provided, however, that
the failure or refusal of the Rights Agent to execute such supplement or
amendment will not affect the validity of any supplement or amendment adopted
by the Board of Directors of the Company, any of which will be effective in
accordance with the terms thereof. Notwithstanding anything in this Agreement
to the contrary, no supplement or amendment may be made which decreases the
stated Redemption Price to an amount less than $0.01 per Right.
28. Successors; Certain Covenants. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Rights Agent will be
binding on and inure to the benefit of their respective successors and assigns
hereunder.
29. Benefits of This Agreement. Nothing in this Agreement will be
construed to give to any Person other than the Company, the Rights Agent, and
the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common
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<PAGE> 42
Shares) any legal or equitable right, remedy or claim under this Agreement.
This Agreement will be for the sole and exclusive benefit of the Company, the
Rights Agent, and the registered holders of the Right Certificates (or prior to
the Distribution Date, the Common Shares).
30. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder will be deemed to be a contract made under the
internal substantive laws of the State of Delaware and for all purposes will be
governed by and construed in accordance with the internal substantive laws of
such State applicable to contracts to be made and performed entirely within
such State.
31. 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 will remain in full force and
effect and will in no way be affected, impaired or invalidated; provided,
however, that nothing contained in this Section 31 will affect the ability of
the Company under the provisions of Section 27 to supplement or amend this
Agreement to replace such invalid, void or unenforceable term, provision,
covenant or restriction with a legal, valid and enforceable term, provision,
covenant or restriction.
32. Descriptive Headings, Etc. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and will not
control or affect the meaning or construction of any of the provisions hereof.
Unless otherwise expressly provided, references herein to Articles, Sections
and Exhibits are to Articles, Sections and Exhibits of or to this Agreement.
33. Determinations and Actions by the Board. 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, will be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act. The
Board of Directors of the Company will 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 any determination as to whether
particular Rights shall have become void). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y)
below, any omission with respect to any of the foregoing) which are done or
made by the Board of Directors of the Company in good faith will (x) be final,
conclusive and
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<PAGE> 43
binding on the Company, the Rights Agent, the holders of the Rights and all
other parties and (y) not subject the Board of Directors of the Company to any
liability to any Person, including without limitation the Rights Agent and the
holders of the Rights.
34. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts will for all purposes be deemed to
be an original, and all such counterparts will together constitute but one and
the same instrument.
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<PAGE> 44
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.
[SEAL]
Attest: GLIATECH INC.
/s/ Thomas O. Oesterling By: /s/ Rodney E. Dausch
- ------------------------------ --------------------------
Thomas O. Oesterling, Ph.D. Rodney E. Dausch
President and Chief Executive Chief Financial Officer,
Officer Secretary and
Vice President
[SEAL]
Attest: AMERICAN STOCK TRANSFER
& TRUST COMPANY
/s/ Susan Silber By: /s/ Herbert J. Lemmer
- ------------------------------ --------------------------
Name: Susan Silber Name: Herbert J. Lemmer
Title: Assistant Secretary Title: Vice President
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<PAGE> 45
EXHIBIT A
FORM
of
CERTIFICATE OF DESIGNATION
of
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
of
GLIATECH INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Gliatech Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (hereinafter called the "Company"),
DOES HEREBY CERTIFY:
That, pursuant to authority vested in the Board of Directors of the
Company by its Certificate of Incorporation, and pursuant to the provisions of
Section 151 of the General Corporation Law, the Board of Directors of the
Company has adopted the following resolution providing for the issuance of a
series of Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Company (hereinafter called the "Board
of Directors" or the "Board") by the Certificate of Incorporation of the
Company, a series of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), of the Company be, and it hereby is, created, and that the designation
and amount thereof and the powers, designations, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
I. Designation and Amount
The shares of such series will be designated as Series A Junior
Participating Preferred Stock (the "Series A Preferred") and the number of
shares constituting the Series A Preferred is 300,000. Such number of shares
may be increased or decreased by resolution of the Board; provided, however,
that no decrease will reduce the number of shares of Series A Preferred to a
number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights
or warrants or upon the conversion of any outstanding securities issued by the
Company convertible into Series A Preferred.
A-1
<PAGE> 46
II. Dividends and Distributions
(a) Subject to the rights of the holders of any shares of any series
of Preferred Stock ranking prior to the Series A Preferred with respect to
dividends, the holders of shares of Series A Preferred, in preference to the
holders of Common Stock, par value $.01 per share (the "Common Stock"), of the
Company, and of any other junior stock, will be entitled to receive, when, as
and if declared by the Board out of funds legally available for the purpose,
dividends payable in cash (except as otherwise provided below) on such dates as
are from time to time established for the payment of dividends on the Common
Stock (each such date being referred to herein as a "Dividend Payment Date"),
commencing on the first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred (the "First Dividend Payment
Date"), in an amount per share (rounded to the nearest cent) equal to the
greater of (i) $1.00 or (ii) subject to the provision for adjustment
hereinafter set forth, one hundred times the aggregate per share amount of all
cash dividends, and one hundred times the aggregate per share amount (payable
in kind) of all non-cash dividends, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Dividend Payment Date or, with respect to the First
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Preferred. In the event that the Company at any time (i)
declares a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii)
combines the outstanding shares of Common Stock into a smaller number of
shares, or (iv) issues any shares of its capital stock in a reclassification of
the outstanding shares of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case and regardless of
whether any shares of Series A Preferred are then issued or outstanding, the
amount to which holders of shares of Series A Preferred would otherwise be
entitled immediately prior to such event under clause (ii) of the preceding
sentence will be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Company will declare a dividend on the Series A Preferred as
provided in the immediately preceding paragraph immediately after it declares a
dividend on the Common Stock (other than a dividend payable in shares of Common
Stock). Each such dividend on the Series A Preferred will be payable
immediately prior to the time at which the related dividend on the Common Stock
is payable.
A-2
<PAGE> 47
(c) Dividends will accrue on outstanding shares of Series A Preferred
from the Dividend Payment Date next preceding the date of issue of such shares,
unless (i) the date of issue of such shares is prior to the record date for the
First Dividend Payment Date, in which case dividends on such shares will accrue
from the date of the first issuance of a share of Series A Preferred or (ii)
the date of issue is a Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred entitled to
receive a dividend and before such Dividend Payment Date, in either of which
events such dividends will accrue from such Dividend Payment Date. Accrued but
unpaid dividends will cumulate from the applicable Dividend Payment Date but
will not bear interest. Dividends paid on the shares of Series A Preferred in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares will 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 shares of Series A Preferred entitled to
receive payment of a dividend or distribution declared thereon, which record
date will be not more than 60 calendar days prior to the date fixed for the
payment thereof.
III. Voting Rights
The holders of shares of Series A Preferred will have the following
voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred will entitle the holder
thereof to one hundred votes on all matters submitted to a vote of the
stockholders of the Company. In the event the Company at any time (i)
declares a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (ii) subdivides the outstanding shares of
Common Stock, (iii) combines the outstanding shares of Common Stock
into a smaller number of shares, or (iv) issues any shares of its
capital stock in a reclassification of the outstanding shares of
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or
surviving corporation), then, in each such case and regardless of
whether any shares of Series A Preferred are then issued or
outstanding, the number of votes per share to which holders of shares
of Series A Preferred would otherwise be entitled immediately prior to
such event will be adjusted by multiplying such number by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Except as otherwise provided herein, in any other
Preferred Stock Designation creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares
A-3
<PAGE> 48
of Series A Preferred and the holders of shares of Common Stock and
any other capital stock of the Company having general voting rights
will vote together as one class on all matters submitted to a vote of
stockholders of the Company.
(c) Except as set forth in the Certificate of Incorporation
or herein, or as otherwise provided by law, holders of shares of
Series A Preferred will have no voting rights.
IV. Certain Restrictions
(a) Whenever dividends or other dividends or distributions payable on
the Series A Preferred are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on shares of
Series A Preferred outstanding have been paid in full, the Company will not:
(i) Declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the shares
of Series A Preferred;
(ii) Declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
shares of Series A Preferred, except dividends paid ratably on the
shares of Series A Preferred and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts
to which the holders of all such shares are then entitled;
(iii) Redeem, purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the shares
of Series A Preferred; provided, however, that the Company may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Company ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the shares of Series A Preferred; or
(iv) Redeem, purchase or otherwise acquire for consideration
any shares of Series A Preferred, or any shares of stock ranking on a
parity with the shares of Series A Preferred, 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,
may determine in good faith will result in fair and equitable treatment
among the respective series or classes.
A-4
<PAGE> 49
(b) The Company will not permit any majority-owned subsidiary of the
Company to purchase or otherwise acquire for consideration any shares of stock
of the Company unless the Company could, under paragraph (a) of this Article
IV, purchase or otherwise acquire such shares at such time and in such manner.
V. Reacquired Shares
Any shares of Series A Preferred purchased or otherwise acquired by
the Company in any manner whatsoever will be retired and cancelled promptly
after the acquisition thereof. All such shares will upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Certificate of Incorporation
of the Company, or in any other Preferred Stock Designation creating a series
of Preferred Stock or any similar stock or as otherwise required by law.
VI. Liquidation, Dissolution or Winding Up
Upon any liquidation, dissolution or winding up of the Company, no
distribution will be made (a) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
shares of Series A Preferred unless, prior thereto, the holders of shares of
Series A Preferred have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided, however, that the holders of
shares of Series A Preferred will be entitled to receive an aggregate amount
per share, subject to the provision for adjustment hereinafter set forth, equal
to one hundred times the aggregate amount to be distributed per share to
holders of shares of Common Stock or (b) to the holders of shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the shares of Series A Preferred, except distributions made
ratably on the shares of Series A Preferred and all such parity stock in
proportion to the total amounts to which the holders of all such shares are
entitled upon such liquidation, dissolution or winding up. In the event the
Company at any time (i) declares a dividend on the outstanding shares of Common
Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares
of Common Stock, (iii) combines the outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues any shares of its capital stock in a
reclassification of the outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such case
and regardless of whether any shares of Series A Preferred are then issued or
outstanding, the aggregate amount to which each holder of shares of Series A
Preferred would otherwise be entitled immediately prior to such event under the
proviso in clause (a) of the preceding sentence will be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of
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<PAGE> 50
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
VII. Consolidation, Merger, Etc.
In the event that the Company enters into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then, in each such case, each share of Series A Preferred will at the
same time be similarly exchanged for or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to one
hundred times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. In the event the Company at any
time (a) declares a dividend on the outstanding shares of Common Stock payable
in shares of Common Stock, (b) subdivides the outstanding shares of Common
Stock, (c) combines the outstanding shares of Common Stock in a smaller number
of shares, or (d) issues any shares of its capital stock in a reclassification
of the outstanding shares of Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), then, in each such case and regardless of
whether any shares of Series A Preferred are then issued or outstanding, the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred will be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
VIII. Redemption
The shares of Series A Preferred are not redeemable.
IX. Rank
The Series A Preferred rank, with respect to the payment of dividends
and the distribution of assets, junior to all other series of the Company's
Preferred Stock.
X. Amendment
Notwithstanding anything contained in the Certificate of Incorporation
of the Company to the contrary and in addition to any other vote required by
applicable law, the Certificate of Incorporation of the Company may not be
amended in any manner that would materially alter or change the powers,
preferences or special rights of the Series A Preferred so as to affect them
adversely without the affirmative vote of the holders of at least
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<PAGE> 51
80% of the outstanding shares of Series A Preferred, voting together as a
single series.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its Secretary and attested by its [ ] this ____ day of
July, 1997.
-------------------------------
Rodney E. Dausch
Chief Financial Officer,
Secretary and Vice President
Attest:
- --------------------
A-7
<PAGE> 52
EXHIBIT B
FORM OF RIGHT CERTIFICATE
Certificate No. R- __________ Rights
NOT EXERCISABLE AFTER JULY 11, 1997 (SUBJECT TO POSSIBLE EXTENSION AT
THE OPTION OF THE COMPANY) OR EARLIER IF REDEEMED, EXCHANGED OR
AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT
AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS
AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF MAY
BECOME NULL AND VOID.
Right Certificate
GLIATECH 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 July 1, 1997 (the "Rights Agreement"),
between Gliatech Inc., a Delaware corporation (the "Company"), and American
Stock Transfer & Trust Company (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to 5:00 P.M. (Eastern time) on the Expiration Date
(as such term is defined in the Rights Agreement) at the principal office or
offices of the Rights Agent designated for such purpose, one one-hundredth of a
fully paid nonassessable share of Series A Junior Participating Preferred
Stock, par value $.01 per share (the "Preferred Shares"), of the Company, at a
purchase price of $65.00 per one one-hundredth of a Preferred Share (the
"Purchase Price"), upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase and related Certificate duly executed. If
this Right Certificate is exercised in part, the holder will be entitled to
receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised. The number of Rights evidenced by
this Right Certificate (and the number of one one-hundredths of a Preferred
Share which may be purchased upon exercise thereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of the
date of the Rights Agreement, based on the Preferred Shares as constituted at
such date.
As provided in the Rights Agreement, the Purchase Price and/or the
number and/or kind of securities issuable upon the
B-1
<PAGE> 53
exercise of the Rights evidenced by this Right Certificate are subject to
adjustment upon the occurrence of certain events.
This Right 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 of the Rights Agent,
the Company and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of the Rights
under the circumstances specified in the Rights Agreement. Copies of the Rights
Agreement are on file at the above-mentioned office of the Rights Agent and can
be obtained from the Company without charge upon written request therefor.
Terms used herein with initial capital letters and not defined herein are used
herein with the meanings ascribed thereto in the Rights Agreement.
Pursuant to the Rights Agreement, from and after the occurrence of a
Flip-in Event, any Rights that are Beneficially Owned by (i) any Acquiring
Person (or any Affiliate or Associate of any Acquiring Person), (ii) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
becomes a transferee after the occurrence of a Flip-in Event, or (iii) a
transferee of any Acquiring Person (or any such Affiliate or Associate) who
became a transferee prior to or concurrently with the Flip-in Event pursuant to
either (a) a transfer from an Acquiring Person to holders of its equity
securities or to any Person with whom it has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (b) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has the purpose or effect of avoiding
certain provisions of the Rights Agreement, and subsequent transferees of any
of such Persons, will be void without any further action and any holder of such
Rights will thereafter have no rights whatsoever with respect to such Rights
under any provision of the Rights Agreement. From and after the occurrence of a
Flip-in Event, no Right Certificate will be issued that represents Rights that
are or have become void pursuant to the provisions of the Rights Agreement, and
any Right Certificate delivered to the Rights Agent that represents Rights that
are or have become void pursuant to the provisions of the Rights Agreement will
be canceled.
This Right Certificate, with or without other Right Certificates, may
be transferred, split up, combined or exchanged for another Right Certificate
or Right Certificates entitling the holder to purchase a like number of one
one-hundredths of a Preferred Share (or other securities, as the case may be)
as the Right Certificate or Right Certificates surrendered entitled such holder
(or former holder in the case of a transfer) to purchase, upon presentation and
surrender hereof at the principal office of the Rights Agent designated for
such purpose, with the Form of
B-2
<PAGE> 54
Assignment (if appropriate) and the related Certificate duly executed.
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 $.01 per Right or may be exchanged in whole or in part. The
Rights Agreement may be supplemented and amended by the Company, as provided
therein.
The Company is not required to issue fractions of Preferred Shares
(other than fractions which are integral multiples of one one-hundredth of a
Preferred Share, which may, at the option of the Company, be evidenced by
depositary receipts) or other securities issuable upon the exercise of any
Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred
Shares or other securities, the Company may make a cash payment, as provided in
the Rights Agreement.
No holder of this Right Certificate, as such, will be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company which may at any time be
issuable upon the exercise of the Right or Rights represented hereby, nor will
anything contained herein or in the Rights Agreement be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting stockholders (except as provided in the Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Right Certificate have been exercised in accordance
with the provisions of the Rights Agreement.
This Right Certificate will not be valid or obligatory for any purpose
until it has been countersigned by the Rights Agent.
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<PAGE> 55
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of __________, 1997.
[SEAL]
ATTEST: GLIATECH INC.
By:
- -------------------------- -------------------------
Rodney E. Dausch
Chief Financial Officer,
Secretary and
Vice President
Countersigned:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By:
------------------------------
Authorized Signature
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<PAGE> 56
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, _______________ hereby sells, assigns and
transfers unto _____________________________________________________________
____________________________________________________________________________
(Please print name and address of transferee)
_____________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: __________, ____
---------------------------
Signature
Signature Guaranteed:
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<PAGE> 57
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, ____
---------------------------
Signature
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<PAGE> 58
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise the Right Certificate)
To Gliatech Inc.:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Right Certificate to purchase the one one-hundredths
of a Preferred Share or other securities issuable upon the exercise of such
Rights and requests that certificates for such securities be issued in the name
of and delivered to:
Please insert social security
or other identifying number: __________________________________________________
____________________________________________________________________________
(Please print name and address of transferee)
_____________________________________________________________________________
If such number of Rights is not all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
will be registered in the name of and delivered to:
Please insert social security
or other identifying number: __________________________________________________
____________________________________________________________________________
(Please print name and address of transferee)
_____________________________________________________________________________
Dated: __________, ____
---------------------------
Signature
Signature Guaranteed:
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<PAGE> 59
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person
or an Affiliate or Associate of any such Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Right Certificate from
any Person who is, was, or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: __________, ____
---------------------------
Signature
NOTICE
SIGNATURES ON THE FOREGOING FORM OF ASSIGNMENT AND FORM OF ELECTION TO
PURCHASE AND IN THE RELATED CERTIFICATES MUST CORRESPOND TO THE NAME AS WRITTEN
UPON THE FACE OF THIS RIGHT CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE PROGRAM) PURSUANT TO RULE 17AD-15
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
B-8
<PAGE> 60
EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK
The Board of Directors (the "Board") of Gliatech Inc. (the "Company")
has declared a dividend distribution of one right (a "Right") for each
outstanding share of Common Stock, par value $.01 per share (the "Common
Shares"), of the Company. The distribution is payable on July 11, 1997 (the
"Record Date") to the stockholders of record as of the close of business on the
Record Date. Each Right entitles the registered holder thereof to purchase from
the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, par value $.01 per share (the "Preferred Shares"), of the
Company at a price (the "Purchase Price") of $65.00 per one one-hundredth of a
Preferred Share, subject to adjustment. The description and terms of the Rights
are set forth in a Rights Agreement, dated as of July 1, 1997 (the "Rights
Agreement"), between the Company and American Stock Transfer & Trust Company,
as Rights Agent (the "Rights Agent").
Under the Rights Agreement, the Rights will be evidenced by the
certificates evidencing Common Shares until the earlier (the "Distribution
Date") of: (i) the close of business on the first date (the "Share Acquisition
Date") of public announcement that a person (other than the Company, a
subsidiary or employee benefit or stock ownership plan of the Company or any of
its affiliates or associates), together with its affiliates and associates, has
acquired beneficial ownership of 15% or more of the outstanding Common Shares
(any such person being hereinafter called an "Acquiring Person") or (ii) the
close of business on the tenth business day (or such later date as may be
specified by the Board) following the commencement of a tender offer or
exchange offer by any person (other than the Company, a subsidiary or employee
benefit or stock ownership plan of the Company or any of its affiliates or
associates), the consummation of which would result in beneficial ownership by
such person 15% or more of the outstanding Common Shares.
The Rights Agreement provides that, until the Distribution Date, the
Rights may be transferred with and only with the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights), any
certificate evidencing Common Shares of the Company issued upon transfer or new
issuance of the Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates
evidencing Common Shares will also constitute the transfer of the Rights
associated with such certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of Common Shares as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights. No Right is exercisable at any time prior to
the Distribution Date. The Rights will expire on the tenth anniversary of the
Record Date (the "Final Expiration Date") unless earlier
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<PAGE> 61
redeemed, exchanged or amended by the Company as described below. Until a Right
is exercised, the holder thereof, as such, will have no rights as a stockholder
of the Company, including the right to vote or to receive dividends.
The Purchase Price payable, and the number of the Preferred Shares or
other securities issuable, upon exercise of the Rights will be subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of Preferred Shares of certain
rights or warrants to subscribe for or purchase the Preferred Shares at a
price, or securities convertible into the Preferred Shares with a conversion
price, less than the then-current market price of the Preferred Shares, or
(iii) upon the distribution to holders of the Preferred Shares of evidences of
indebtedness, cash (excluding regular periodic cash dividends), assets, stock
(excluding dividends payable in the Preferred Shares) or subscription rights or
warrants (other than those referred to above). The number of outstanding Rights
and the number of one one-hundredths of the Preferred Shares issuable upon
exercise of each Right will be subject to adjustment in the event of a stock
dividend on the Common Shares payable in Common Shares or a subdivision,
combination or reclassification of Common Shares occurring, in any such case,
prior to the Distribution Date.
The Preferred Shares issuable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled, in connection with the
declaration of a dividend on the Common Shares, to a preferential dividend
payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to
100 times the related dividend declared per Common Share. Subject to customary
anti-dilution provisions, in the event of liquidation, the holders of Preferred
Shares will be entitled to a preferential liquidation payment equal to the
greater of (a) $100 per share and (b) an amount equal to 100 times the
liquidation payment made per Common Share. Because of the nature of the
Preferred Shares' dividend, voting and liquidation rights, the value of the one
one-hundredth interest in a Preferred Share purchasable upon exercise of a
Right should approximate the value of one Common Share.
Rights will be exercisable to purchase Preferred Shares only after the
Distribution Date occurs and prior to the occurrence of a Flip-in Event as
described below. A Distribution Date resulting from the commencement of a
tender offer or exchange offer described in clause (ii) of the second paragraph
of this summary could precede the occurrence of a Flip-in Event and thus result
in the Rights being exercisable to purchase Preferred Shares. A Distribution
Date resulting from any occurrence described in clause (i) of the second
paragraph of this summary would necessarily follow the occurrence of a Flip-in
Event and thus result in the Rights being exercisable to purchase Common Shares
or other securities as described below.
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<PAGE> 62
Under the Rights Agreement, in the event (a "Flip-in Event") that (i)
any person, together with its affiliates and associates, becomes the beneficial
owner of 15% or more of the outstanding Common Shares, (ii) any Acquiring
Person or any affiliate or associate thereof merges into or combines with the
Company and the Company is the surviving corporation, (iii) any Acquiring
Person or any affiliate or associate thereof effects certain other transactions
with the Company, or (iv) during such time as there is an Acquiring Person the
Company effects certain transactions, in each case as described in the Rights
Agreement, then, in each such case, proper provision will be made so that from
and after the latest of the Share Acquisition Date, the Distribution Date and
the date of the occurrence of such Flip-in Event each holder of a Right, other
than Rights that are or were owned beneficially by an Acquiring Person (which,
from and after the date of a Flip-in Event, will be void), will have the right
to receive, upon exercise thereof at the then-current exercise price of the
Right, that number of Common Shares (or, under certain circumstances, an
economically equivalent security or securities of the Company) that at the time
of such Flip-in Event have a market value of two times the exercise price of
the Right.
In the event (a "Flip-over Event") that, at any time after a person
has become an Acquiring Person, (i) the Company merges with or into any person
and the Company is not the surviving corporation, (ii) any person merges with
or into the Company and the Company is the surviving corporation, but all or
part of the Common Shares are changed or exchanged for stock or other
securities of any other person or cash or any other property, or (iii) 50% or
more of the Company's assets or earning power, including securities creating
obligations of the Company, are sold, in each case as described in the Rights
Agreement, then, and in each such case, proper provision will be made so that
each holder of a Right, other than Rights which have become void, will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the Right, that number of shares of common stock
(or, under certain circumstances, an economically equivalent security or
securities) of such other person that at the time of such Flip-over Event have
a market value of two times the exercise price of the Right.
From and after the later of the Share Acquisition Date and the
Distribution Date, Rights (other than any Rights that have become void) will be
exercisable as described above, upon payment of the aggregate exercise price in
cash. In addition, at any time after the later of the Share Acquisition Date
and the Distribution Date and prior to the acquisition by any person or group
of affiliated or associated persons of 50% or more of the outstanding Common
Shares, the Company may exchange the Rights (other than any rights that have
become void), in whole or in part, at an exchange ratio of one Common Share per
Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an
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<PAGE> 63
adjustment in the Purchase Price of at least 1%. The Company will not be
required to issue fractional Preferred Shares (other than fractions that are
integral multiples of one one-hundredth of a Preferred Share, which may, at the
option of the Company, be evidenced by depositary receipts) or fractional
Common Shares or other securities issuable upon the exercise of Rights. In lieu
of issuing such securities, the Company may make a cash payment, as provided in
the Rights Agreement.
The Company may, at its option, redeem the Rights in whole, but not in
part, at a price of $.01 per Right, subject to adjustment (the "Redemption
Price"), at any time prior to the close of business on the Share Acquisition
Date. Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The Rights Agreement may be amended by the Company without the
approval of any holders of Rights Certificates, including amendments that
increase or decrease the Purchase Price, that add other events requiring
adjustment to the Purchase Price payable and the number of the Preferred Shares
or other securities issuable upon the exercise of the Rights or that modify
procedures relating to the redemption of the Rights, except that no amendment
may be made that decreases the stated Redemption Price to an amount less than
$.01 per Right.
The Board will have the exclusive power and authority to administer
the Rights Agreement and to exercise all rights and powers specifically granted
to the Board or to the Company therein, or as may be necessary or advisable in
the administration of the Rights Agreement, including without limitation the
right and power to interpret the provisions of the Rights Agreement and to make
all determinations deemed necessary or advisable for the administration of the
Rights Agreement (including any determination to redeem or not redeem the
Rights or to amend or not amend the Rights Agreement). All such actions,
calculations, interpretations and determinations (including any omission with
respect to any of the foregoing) which are done or made by the Board in good
faith will be final, conclusive and binding on the Company, the Rights Agent,
the holders of the Rights and all other parties and will not subject the Board
to any liability to any person, including without limitation the Rights Agent
and the holders of the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.
This summary description of the Rights is as of the Record Date, does
not purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is incorporated herein by this reference.
C-4
<PAGE> 1
EXHIBIT 2
[GLIATECH INC. LETTERHEAD]
July __, 1997
To Our Stockholders:
We are pleased to inform you that Gliatech Inc. has adopted a share
purchase rights plan.
This action was taken after long and careful study and was not taken
in response to any pending takeover or proposed change in control of the
Company. The plan is intended to protect the Company and its stockholders from
potentially coercive takeover practices or takeover bids which are inconsistent
with the interests of the Company and its stockholders. The plan is not
intended to deter unsolicited offers that would provide superior long-term
value to all of the Company's stockholders. The adoption of a share purchase
rights plan has become common practice in major American companies and a well
accepted approach to ensuring that all stockholders receive a fair price and
are treated equally in the event of a takeover.
To effect the plan, the Board of Directors declared a dividend of one
share purchase right for each outstanding share of the Company's common stock.
The distribution is being made to stockholders of record as of the close of
business today.
Under the plan, the rights will initially trade together with the
Company's common stock and will not be exercisable. In the absence of further
board action, the rights generally will become exercisable and allow the holder
to acquire the Company's common stock at a discounted price if a person or
group acquires 15 percent or more of the Company's common stock. Rights held by
persons who exceed the applicable threshold will be void. Under certain
circumstances, the rights will entitle the holder to buy shares in an acquiring
entity at a discounted price.
The plan also includes an exchange option. In general, after the
rights become exercisable, the Board of Directors may, at its option, effect an
exchange of part or all of the rights (other than rights that have become void)
for shares of the Company's common stock. Under this option, the Company would
issue one share of common stock for each right, subject to adjustment in
certain circumstances.
The Company's Board of Directors may, at its option, redeem all rights
for $.01 per right, generally at any time prior to the rights becoming
exercisable. The rights will expire July 11, 2007, unless earlier redeemed,
exchanged or amended by the Board of Directors.
<PAGE> 2
The issuance of the rights is not a taxable event, will not affect the
Company's reported financial condition or results of operations (including
earnings per share), should not interfere with the Company's operating,
financing or investing activities and will not change the way in which the
Company's common stock is currently traded.
A summary of the share purchase rights plan (which explains the terms
and nature of the rights) is enclosed. Stockholders are urged to review the
summary carefully and retain it with their permanent records.
In adopting the share purchase rights plan, the Board has expressed
its confidence in the Company's future and its determination that you, our
stockholders, be given every opportunity to participate fully in that future.
On Behalf of the Board of Directors,
[NAME]
[TITLE]
-2-
<PAGE> 1
EXHIBIT 3
GLIATECH INC. ANNOUNCES
SHARE PURCHASE RIGHTS PLAN
FOR IMMEDIATE RELEASE Contact: Thomas O. Oesterling, Ph.D.
President and Chief Executive Officer
Gliatech Inc. (216) 831-3200
CLEVELAND, OHIO, July 1, 1997 -- Gliatech Inc. (NASD: GLIA) announced today
board action adopting a share purchase rights plan that provides for rights to
be issued to stockholders of record on July 11, 1997.
According to Thomas O. Oesterling, Ph.D., President and Chief Executive Officer
of Gliatech Inc., "This action was taken after long and careful study, and was
not taken in response to any pending takeover or proposed change in control of
the Company. The Rights Plan is intended to protect the Company and its
stockholders from potentially coercive takeover practices or takeover bids that
are inconsistent with the interests of the Company and its stockholders. The
adoption of a share purchase rights plan has become common practice in major
American companies and a well-accepted approach to ensuring that all
stockholders receive a fair price and are treated equally in the event of a
takeover."
Under the plan, the rights will initially trade together with Gliatech Inc.
common stock and will not be exercisable. In the absence of further board
action, the rights generally will become exercisable and allow the holder to
acquire Gliatech Inc. common stock at a discounted price if a person or group
acquires 15 percent or more of the outstanding shares of Gliatech Inc. common
stock. Rights held by persons who exceed the applicable threshold will be void.
Under certain circumstances, the rights will entitle the holder to buy shares
in an acquiring entity at a discounted price.
The plan also includes an exchange option. In general, after the rights become
exercisable, the Board of Director may, at its option, effect an exchange of
part or all of the rights -- other than rights that have become void -- for
shares of Gliatech Inc. common stock. Under this option, Gliatech Inc. would
issue one share of common stock for each right, subject to adjustment in
certain circumstances.
Gliatech Inc.'s Board of Directors may, at its option, redeem all rights for
$.01 per right, generally at any time prior to the rights becoming exercisable.
The rights will expire July 11,
<PAGE> 2
2007, unless earlier redeemed, exchanged or amended by the Board
of Directors.
The issuance of the rights is not a taxable event, will not affect Gliatech
Inc. reported financial condition or results of operations (including earnings
per share) and will not change the manner in which Gliatech Inc. common stock
is currently traded.
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