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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): June 18, 1998
SI DIAMOND TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in its Charter)
Texas
(State or Other Jurisdiction of Incorporation)
1-11602 76-0273345
(Commission File No.) (I.R.S. Employer Identification No.)
3006 Longhorn Boulevard
Suite 107
Austin, Texas 78758
(Address of Principal Executive Offices)
(512) 339-5070
(Registrant's Telephone Number, Including Area Code)
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Item 5. Other Events
On June 18, 1998, the Board of Directors of SI Diamond Technology,
Inc. (the "Company") declared a dividend of one Right for each outstanding
common share, $.001 par value, of the Company (the "Common Shares"), payable on
June 18, 1998, to shareholders of record at the close of business on that date.
Each Right entitles the registered holder to purchase from the Company a unit
(the "Unit") consisting of one-one-hundredth of a Series H Junior Partic
ipating Preferred Share, stated value $1.00 per share (the "Preferred Shares"),
at a Purchase Price of $1.00 per Unit, subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement dated as of June
18, 1998 (the "Rights Agreement") between the Company and American Securities
Transfer, Incorporated, as Rights Agent.
Initially, the Rights will be attached to all certificates
representing outstanding Common Shares, and no separate Rights Certificates
will be distributed. The Rights will separate from the Common Shares and a
"Distribution Date" will occur upon the earlier of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding Common Shares (the date
of the announcement being the "Shares Acquisition Date"), or (ii) ten business
days (or such later date as may be determined by the Company's Board of
Directors (with the concurrence of a majority of the Continuing Directors (as
defined below)) before the Distribution Date occurs) following the commencement
of a tender offer or exchange offer that would result in a person's becoming an
Acquiring Person. Until the Distribution Date, (a) the Rights will be evidenced
by the Common Shares certificates (together with a copy of this Summary of
Rights or bearing the notation referred to below) and will be transferred with
and only with such Common Share certificates, (b) new Common Share certificates
issued after June 18, 1998 will contain a notation incorporating the Rights
Agreement by reference and (c) the surrender for transfer of any certificate
for Common Shares outstanding (with or without a copy of this Summary of
Rights) will also constitute the transfer of the Rights associated with the
Common Shares represented by such certificate. The Company, its subsidiaries
and their employee benefit plans will not at any time be deemed Acquiring
Persons.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on June 18, 2008, unless earlier redeemed or
exchanged by the Company as described below. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole Preferred Shares will be issued.
As soon as practicable after the Distribution Date, Rights
Certificates will be mailed to holders of record of the Common Shares as of the
close of business on the Distribution Date and, from and after the Distribution
Date, the separate Rights Certificates alone will represent the Rights. All
Common Shares issued prior to the Distribution Date will be issued with Rights.
Common Shares issued after the Distribution Date in connection with certain
employee benefit plans or upon exercise or conversion of certain securities
will be issued with Rights. Except as
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otherwise determined by the Board of Directors, no other Common Shares issued
after the Distribution Date will be issued with Rights.
In the event that a Person becomes an Acquiring Person, each holder of
a Right will there after have the right to receive, upon exercise of such Right,
a number of Common Shares (or, in certain circumstances, cash, property or other
securities of the Company) having a Current Market Price (as defined in the
Rights Agreement) equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any such
event, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person (or by
certain related parties) will be null and void in the circumstances set forth in
the Rights Agreement. However, Rights are not exercisable following the
occurrence of any such event until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, at the exercise price of $1.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $2.00
worth of the Common Shares (or other consideration, as noted above), based upon
their Current Market Price, for $1.00. Assuming that the Common Shares had a
Current Market Price of $0.40 per share at such time, the holder of each valid
Right would be entitled to purchase 5 Common Shares for $1.00.
In the event that, at any time on or after the Shares Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction or (ii) 50% or more of the Company's assets or earning power is sold
or transferred, each holder of a Right (except Rights that previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, a number of common shares of the acquiring company having a Current
Market Price equal to two times the exercise price of the Right. The events
described in this and the two preceding paragraphs are collectively referred to
as "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) if holders of the Preferred Shares are granted certain
rights or warrants to subscribe for Preferred Shares or convertible securities
at less than the current market price of the Preferred Shares, or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
The number of outstanding Rights and the number of Units issuable upon
exercise of each Right are also subject to adjustment in the event of a stock
split of the Common Shares or a stock dividend on the Common Shares payable in
Common Shares or subdivisions, consolidations or combinations of the Common
Shares occurring, in any such case, prior to the Distribution Date.
The Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of
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$.01 per share but will be entitled to an aggregate dividend of 100 times the
dividend declared per Common Share. In the event of liquidation, the holders of
the Preferred Shares will be entitled to a minimum preferential liquidation
payment of $1.00 per share.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Shares on the last
trading date prior to the date of exercise.
At any time until ten days following the Shares Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right, payable, at the option of the Company, in cash, Common Shares or such
other consideration as the Board of Directors may determine. Under certain
circumstances set forth in the Rights Agreement, the decision to redeem the
Rights will require the concurrence of a majority of the Continuing Directors
(as defined below). After the redemption period has expired, the Company's
right of redemption may be reinstated (with the concurrence of the Continuing
Directors) if an Acquiring Person reduces his beneficial ownership to 20% or
less of the outstanding Common Shares in a transaction or series of
transactions not involving the Company and there are no other Acquiring
Persons. Immediately upon the effectiveness of the action of the Board of
Directors ordering redemption of the Rights, the Rights will terminate and the
only right of the holders of Rights will be to receive the $.01 redemption
price.
The term "Continuing Director" means (i) any member of the Board of
Directors of the Company who was a member of the Board as of June 18, 1998, and
(ii) any person who is subsequently elected to the Board, if such person is
recommended or approved by a majority of the Continuing Directors then on the
Board of Directors, and such person is not an Acquiring Person or an affiliate,
associate, representative or nominee of an Acquiring Person.
At any time after a Person becomes an Acquiring Person, the Company
may exchange the Rights (other than Rights owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one Common Share, and/or other
equity securities deemed to have the same value as one Common Share, per Right,
subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights
will not be taxable to shareholders or to the Company, shareholders may,
depending upon the circumstances, recognize taxable income in the event that
the Rights become exercisable for Common Shares (or other consideration) of the
Company or for common shares of the acquiring company as set forth above or are
exchanged as provided in the preceding paragraph.
Other than those provisions relating to the principal economic terms
of the Rights, any of the provisions of the Rights Agreement may be amended by
the Board of Directors (but only with the concurrence of a majority of the
Continuing Directors) of the Company prior to the Shares
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Acquisition Date. Thereafter, the provisions of the Rights Agreement may be
amended by the Board of Directors (but only with the concurrence of a majority
of the Continuing Directors) in order to cure any ambiguity, defect or
inconsistency, to make changes that do not materially adversely effect the
interests of holders of Rights (excluding the interests of any Acquiring Person
and certain related parties), or to shorten or lengthen any time period under
the Rights Agreement; provided, however, that no amendment to lengthen the time
period governing redemption shall be made at such time as the Rights are not
redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to the Company's Current Report on Form 8-K
dated June 25, 1998. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
4.1 Form of Rights Agreement dated as of June 18, 1998 between The
Company and American Securities Transfer, Incorporated, as Rights Agent, which
includes as Exhibit A the form of Statement of Resolutions establishing and
designating Series of Preferred Stock as "Series H Junior Participating
Preferred Stock" and fixing and determining the relative rights and preferences
thereof, as Exhibit B the form of Rights Certificate and as Exhibit C the
Summary of Rights to Purchase Preferred Shares.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SI DIAMOND TECHNOLOGY, INC.
By /s/ Douglas P. Baker
--------------------------------------
Douglas P. Baker
Vice President and
Chief Financial Officer
Dated: June 25, 1998
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EXHIBIT 4.1
SI DIAMOND TECHNOLOGY, INC.
AND
AMERICAN SECURITIES TRANSFER, INCORPORATED
RIGHTS AGENTS
RIGHTS AGREEMENT
DATED AS OF JUNE 18, 1998
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Section 1. CERTAIN DEFINITIONS.............................................................................1
Section 2. APPOINTMENT OF RIGHTS AGENT.....................................................................6
Section 3. ISSUE OF RIGHTS CERTIFICATES....................................................................7
Section 4. FORM OF RIGHTS CERTIFICATES.....................................................................8
Section 5. COUNTERSIGNATURE AND REGISTRATION...............................................................9
Section 6. TRANSFER, SPLIT UP, COMBINATION, AND EXCHANGE OF RIGHTS CERTIFICATES;
MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.......................................10
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS..................................11
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES............................................13
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL SHARES.................................................13
Section 10. PREFERRED SHARE RECORD DATE....................................................................14
Section 11. ADJUSTMENT OF PURCHASE PRICE...................................................................15
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.....................................23
Section 13. CONSOLIDATION, MERGER OR SALE OF TRANSFER OF ASSETS OR EARNING POWER...........................23
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES........................................................26
Section 15. RIGHTS OF ACTION...............................................................................26
Section 16. AGREEMENT OF RIGHTS HOLDERS....................................................................27
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER.............................................28
Section 18. CONCERNING THE RIGHTS AGENT....................................................................28
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENTS.....................................29
Section 20. DUTIES OF RIGHTS AGENT.........................................................................29
</TABLE>
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<TABLE>
<S> <C>
Section 21. CHANGE OF RIGHTS AGENT.........................................................................31
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES............................................................32
Section 23. REDEMPTION AND TERMINATION.....................................................................32
Section 24. EXCHANGE.......................................................................................34
Section 25. NOTICE OF CERTAIN EVENTS.......................................................................35
Section 26. NOTICES........................................................................................36
Section 27. SUPPLEMENTS AND AMENDMENTS.....................................................................36
Section 28. SUCCESSORS.....................................................................................37
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC......................................37
Section 30. BENEFITS OF THIS AGREEMENT.....................................................................38
Section 31. SEVERABILITY...................................................................................38
Section 32. GOVERNING LAW..................................................................................38
Section 33. COUNTERPARTS...................................................................................38
Section 34. DESCRIPTIVE HEADINGS...........................................................................38
Exhibits
</TABLE>
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RIGHTS AGREEMENT
This Rights Agreement, dated as of June 18, 1998 (the "Agreement"),
between SI Diamond Technology, Inc., a Texas corporation (the "Company"), and
American Securities Transfer, Incorporated, a Delaware corporation (the "Rights
Agent"),
W I T N E S S E T H:
WHEREAS, on June 18, 1998 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend of one
Right for each common share of $.001 par value, of the Company (the "Common
Shares") outstanding at the close of business on June 18, 1998 (the "Record
Date"), and has authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of this Agreement) for each
Common Share of the Company issued (whether originally issued or delivered from
the Company's treasury) between the Record Date and the earlier of the
Distribution Date (as hereinafter defined) and the expiration or redemption of
the Rights, and, in certain circumstances, after the Distribution Date, each
Right initially representing the right to purchase one one-hundredth of a Series
H Junior Participating Preferred Share of the Company, upon the terms and
subject to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the meanings indicated:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
twenty percent (20%) or more of the Common Shares then outstanding, but shall
not include any Exempt Person; provided, however, that if the Board of Directors
of the Company determines in good faith that a Person who would otherwise be an
"Acquiring Person" became such inadvertently (including, without limitation,
because (i) such Person was unaware that it beneficially owned a percentage of
the outstanding Common Shares that would otherwise cause such Person to be an
"Acquiring Person" or (ii) such Person was aware of the extent of its Beneficial
Ownership of the Common Shares but had no actual knowledge of the consequences
of such Beneficial Ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and if such Person as promptly
as practicable divested or divests itself of Beneficial Ownership of a
sufficient number of the Common Shares so that such Person would no longer be an
"Acquiring Person," then such Person shall not be deemed to be or to have become
an "Acquiring Person" for any purposes of this Agreement. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person"
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as the result of an acquisition of the Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
the Common Shares beneficially owned by such Person to twenty percent (20%) or
more, of the Common Shares then out standing, provided, however, that if a
Person shall become the Beneficial Owner of twenty percent (20%) or more of the
Common Shares then outstanding by reason of such share acquisitions by the
Company and shall thereafter become the Beneficial Owner of any additional
Common Shares, then such Person shall be deemed to be an "Acquiring Person"
unless upon the consummation of the acquisition of such additional Common Shares
such Person does not beneficially own twenty percent (20%) or more of the Common
Shares then outstanding.
"Adjustment Shares" shall have the meaning set forth in Section
11(a)(ii) hereof.
"Affiliate" and "Associate" shall 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.
A Person shall be deemed the "Beneficial Owner" of, and shall be deemed
to "beneficially own," any securities:
(i) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, is the "beneficial owner" of (as
determined pursuant to Rule 13d-3 of the General Rules and Regulations
under the Exchange Act, as in effect on the date of this Agreement) or
otherwise has the right to vote or dispose of, including pursuant to
any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (i) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable provisions of the General Rules
and Regulations under the Exchange Act and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report);
(ii) that such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right or obligation to
acquire (whether such right or obligation is exercisable or effective
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing) or
upon the exercise of conversion rights, exchange rights, other rights,
war rants or options, or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," (A) securities tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for pur chase or exchange,
or (B) securities issuable upon exercise of Rights at any time
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prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof (the "Original
Rights") or pursuant to Section 11(i) or Section 11(p) hereof in
connection with an adjustment made with respect to any Original Rights;
or
(iii) that are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which
such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not in writing) for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (i) of this
definition) or disposing of any voting securities of the Company;
provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty days after the date of such acquisition.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of Texas are authorized or
obligated by law or executive order to close.
"Close of business" on any given date shall mean 5:00 p.m., Houston,
Texas time, on such date; provided, however, that if such date is not a Business
Day, shall mean 5:00 p.m., Houston, Texas time, on the next succeeding Business
Day.
"Closing Price" of a security for any day shall mean the last sales
price, regular way, on such day or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, on such day,
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 such security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such security is listed or admitted to trading, or,
if such security is not listed or admitted to trading on any national securities
exchange, the last quoted sales price on such day or, if not so quoted, the
average of the high bid and low asked prices in the over the counter market on
such day, as reported by the Nasdaq Stock Market or such other self regulatory
organization or registered securities information processor (as such terms are
used under the Exchange Act) that then reports information concerning such
security or, if on such day such security is not quoted by any such entity, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such security selected by the Board of Directors
of the Company. If on such day no market maker is making a market in such
security, the fair value of such security on such day as determined in good
faith by the Board of Directors of the Company shall be used.
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"Common Shares" shall mean the common shares, $.001 par value, of the
Company, except that "Common Shares" when used with reference to shares issued
by any Person other than the Company shall mean the capital shares of such
Person with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
"Common Share Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Company" shall mean the Person named as the "Company" in the preamble
of this Agreement until a successor Person shall have become such or until a
Principal Party shall assume, and thereafter be liable for, all obligations and
duties of the Company hereunder, pursuant to the applicable provisions of this
Agreement, and thereafter "Company" shall mean such successor Person or
Principal Party.
"Continuing Director" shall mean any member of the Board of Directors
of the Company (while such person is a member of such Board of Directors) who
either (i) was a member of such Board of Directors as of the date hereof or (ii)
is not an Acquiring Person, an Affiliate or Associate of an Acquiring Person,
or a representative or nominee of an Acquiring Person or of any such Affiliate
or Associate, and subsequently became a member of such Board of Directors, and
whose nomination for election or election thereto was recommended or approved by
a majority of the Continuing Directors then on such Board of Directors.
"Current Market Price" shall have the meaning set forth in Section
11(d) hereof.
"Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
"Distribution Date" shall mean the earliest of (i) the close of
business on the tenth day after the Shares Acquisition Date (or, if the tenth
day after the Shares Acquisition Date occurs before the Record Date, the close
of business on the Record Date) or (ii) the close of business on the tenth
Business Day (or such later date as may be determined by the Company's Board of
Directors (which determination shall be effective only with the concurrence of a
majority of the Continuing Directors) before the Distribution Date occurs) after
the date that a tender offer or exchange offer by any Person (other than any
Exempt Person) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, as in
effect on the date of this Agreement, if upon consummation thereof, such Person
would be an Acquiring Person. The Board of Directors of the Company may defer
the date set forth in clause (ii) of the preceding sentence to a specified later
date or to an unspecified later date to be determined by a subsequent action or
event.
"Equivalent Preferred Shares" shall have the meaning set forth in
Section 11(b) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Exchange Ratio" shall have the meaning set forth in Section 24 hereof.
"Exempt Person" shall mean the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company,
and any Person organized, appointed or established by the Company for or
pursuant to the terms of any such plan.
"Expiration Date" shall mean the earlier of (i) the Final Expiration
Date and (ii) the time at which the Rights are redeemed as provided in Section
23 hereof.
"Final Expiration Date" shall mean the close of business on June 18,
2008.
"Original Rights" shall have the meaning set forth in the definition of
"Beneficial Owner."
"Person" shall mean any individual, firm, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other entity.
"Preferred Shares" shall mean Series H Junior Participating Preferred
Shares, stated value $1.00 per share, of the Company having the rights, powers
and preferences set forth in the form of the Statement of Resolutions of the
Board of Directors of SI Diamond Technology, Inc. Establishing and Designating
Series of Preferred Stock as "Series H Junior Participating Preferred Stock" and
Fixing and Determining the Relative Rights and Preferrences thereof of the
Company attached hereto as Exhibit A and, to the extent that there is not a
sufficient number of Series H Junior Participating Preferred Shares authorized
to permit the full exercise of the Rights, any other series of preferred shares,
stated value $1.00 per share, of the Company designated for such purpose
containing terms substantially similar to the terms of the Series H Junior
Participating Preferred Shares.
"Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
"Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
"Record Date" shall have the meaning set forth in the recitals clause
at the beginning of this Agreement.
"Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
"Rights" shall have the meaning set forth in the recitals clause at the
beginning of this Agreement.
"Rights Agent" shall mean the Person named as the "Rights Agent" in the
preamble of this Agreement until a successor Rights Agent shall have become such
pursuant to the applicable provisions hereof, and thereafter "Rights Agent"
shall mean such successor Rights Agent. If at any
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time there is more than one Person appointed by the Company as Rights Agent
pursuant to the applicable provisions of this Agreement, "Rights Agent" shall
mean and include each such Person.
"Rights Certificates" shall mean the certificates evidencing the Rights
after the Distribution Date.
"Rights Dividend Declaration Date" shall have the meaning set forth in
the recitals clause at the beginning of this Agreement.
"Section 11(a)(ii) Event" shall mean an event described in Section
11(a)(ii) hereof.
"Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
"Section 13 Event" shall mean any event described in clause (x), (y) or
(z) of Section 13(a) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Spread" shall have the meaning set forth in Section 11(a)(iii) hereof.
"Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such, which
date may occur prior to the Record Date.
"Subsidiary" shall mean, with reference to any Person, any corporation
or other Person of which an amount of voting securities sufficient to elect at
least a majority of the directors or other persons performing similar functions
is beneficially owned, directly or in directly, by such Person, or otherwise
controlled by such Person.
"Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
"Summary of Rights" shall mean the Summary of Rights to Purchase
Preferred Shares sent pursuant to Section 3(b) hereof.
"Trading Day" with respect to a security shall mean a day on which the
principal national securities exchange on which such security is listed or
admitted to trading is open for the transaction of business or, if such
security is not listed or admitted to trading on any national securities
exchange, a Business Day.
"Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
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Section 2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the Distribution Date, (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Shares registered in the names of the holders of the
Common Shares and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying the Common
Shares (including a transfer to the Company). As soon as practicable after the
Distribution Date, the Rights Agent will send by first class, insured, postage
prepaid mail, to each record holder of the Common Shares as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more Rights Certificates, evidencing one Right
for each Common Share so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per Common Share has been made
pursuant to the provisions of this Agreement, at the time of distribution of the
Right Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) With respect to certificates for the Common Shares outstanding
as of the Record Date, until the Distribution Date or the earlier surrender for
transfer thereof or the Expiration Date, the Rights associated with the Common
Shares represented by such certificates shall be evidenced by such certificates
for the Common Shares together with a copy of the Summary of Rights, and the
registered holders of the Common Shares shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date, the transfer of any of the certificates for the Common Shares
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, shall also constitute the transfer of the Rights associated
with the Common Shares represented by such certificates.
(c) Rights shall be issued in respect of all the Common Shares that are
issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the expiration
or redemption of the Rights or, in certain circumstances provided in Section 22
hereof, after the Distribution Date. Certificates issued for the Common Shares
that shall so become outstanding or shall be transferred or exchanged after the
Record Date but prior to the earlier of the Distribution Date or the expiration
or redemption of the Rights shall also be deemed to be certificates for Rights,
and shall bear the following legend:
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<PAGE> 11
This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in the Rights Agreement between SI
Diamond Technology, Inc. (the "Company") and American Securities
Transfer, Incorporated (the "Rights Agent") dated as of June 18, 1998,
as it may from time to time be supplemented or amended (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of
the Company. Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be redeemed, may be exchanged, may expire or
may be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of
this certificate a copy of the Rights Agreement, as in effect on the
date of mailing, without charge promptly after receipt of a written
request therefor. Under certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether currently held
by or on behalf of such Person or by any subsequent holder, will become
null and void.
With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the expiration or
redemption of the Rights, the Rights associated with the Common Shares
represented by such certificates shall be evidenced by such certificates alone,
and registered holders of the Common Shares shall also be the registered holders
of the associated Rights, and the transfer of any of such certificates shall
also constitute the transfer of the Rights associated with the Common Shares
represented by such certificates.
Section 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof), when, as and if issued,
shall be substantially in the form set forth in Exhibit B hereto and may have
such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this 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 shares exchange or quotation
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 11 and Section 22 hereof,
the Rights Certificates, whenever issued, shall be dated as of the Record Date
and on their face shall entitle the holders thereof to purchase such number of
one-hundredths of a Preferred Share as shall be set forth therein at the price
set forth therein (such exercise price per one-hundredth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
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(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by (i) an Acquiring
Person or an Associate or Affiliate of an Acquiring Person, (ii) a direct or
indirect transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such or
(iii) a direct or indirect transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person's becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that a majority of the
Continuing Directors has determined is part of a plan, arrangement or
understanding that has as a primary purpose or effect avoidance of Section 7(e)
hereof, and any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent feasible)
the following legend, modified as applicable to apply to such Person:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby will become null and void in the
circumstances and with the effect specified in Section 7(e) of such
Agreement.
The provisions of Section 7(e) of this Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights Certificate.
The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence of any Acquiring Person or any Associate or Affiliate
thereof.
Section 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its President or any Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Company's seal or a facsimile
thereof, which shall be attested by the Secretary or an Assistant Secretary of
the Company, either manually or by facsimile signature. The Rights Certificates
shall be manually countersigned by the Rights Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any of the Rights Certificates shall cease to be such officer
of the Company before countersignature by the Rights Agent and issuance and
delivery by the Company, such Rights Certificates, nevertheless, may be
countersigned by the Rights Agent and issued and delivered by the Company with
the same force and effect as though the person who signed such Rights
Certificates had not ceased to be such officer of the Company; and any Rights
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Rights Certificate, shall be a proper
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<PAGE> 13
officer of the Company to sign such Rights Certificate, although at the date of
the execution of this Rights Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office or offices designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the certificate number and the date of each of the Rights
Certificates.
Section 6. TRANSFER, SPLIT UP, COMBINATION, AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e),
Section 14 and Section 24 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the Expiration
Date, any Rights Certificate or Rights Certificates may be transferred, split
up, combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of one-hundredths of a
Preferred Share (or, following a Triggering Event, the Common Shares, other
securities, cash or other assets, as the use may be) as the Rights Certificate
or Rights Certificates surrendered then entitled such holder (or former holder
in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office or offices of the
Rights Agent designated for such purpose. Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) thereof or of the Affiliates or Associates thereof as
the Company shall reasonably request. Thereupon the Rights Agent shall, subject
to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company may require
payment by the holder of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation
of a Rights Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto, and
upon surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for
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<PAGE> 14
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one-hundredths of a Preferred Share (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earliest of (i) the Expiration Date and (ii) the
time at which all outstanding Rights are exchanged as provided in Section 24
hereof.
(b) The Purchase Price for each one-hundredth of a Preferred Share
pursuant to the exercise of a Right shall initially be $1.00, and shall be
subject to adjustment from time to time as provided in Sections 11 and 13(a)
hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed, accompanied by payment, with respect to each Right
so exercised, of the Purchase Price per one-one-hundredth of a Preferred Share
(or other shares, securities, cash or other assets, as the case may be) to be
purchased as set forth below and an amount equal to any applicable transfer tax,
the Rights Agent shall, subject to Section 20(a) hereof, thereupon promptly
(i)(A) requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one-hundredths of a Preferred Share to be
purchased, and the Company hereby irrevocably authorizes its transfer agent to
comply with such requests, or (B) if the Company, in its sole discretion, shall
have elected to deposit the total number of Preferred Shares issuable upon
exercise of the Rights hereunder with a depositary agent, requisition from the
depositary agent depositary receipts representing such number of one-hundredths
of a Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder and (iv) after receipt thereof, deliver such
cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The
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<PAGE> 15
payment of the Purchase Price (as such amount may be reduced pursuant to Section
11(a)(iii) hereof) may be made in cash or by certified check, cashiers or
official bank check or bank draft payable to the order of the Company or the
Rights Agent. In the event that the Company is obligated to issue other
securities (including the Common Shares) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon exercise of Rights, a number of Rights be
exercised so that only whole Preferred Shares would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary,
from and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person other than any such Person that a majority of the Continuing
Directors in good faith determines was not involved in and did not cause or
facilitate, directly or indirectly (including through any change in the Board of
Directors), such Section 11(a)(ii) Event, (ii) a direct or indirect transferee
of such Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such or (iii) a direct or indirect
transferee of such Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person's
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from such Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer that a majority of the
Continuing Directors has determined is part of a plan, arrangement or
understanding that has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(e) and Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such
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exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Rights Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
Section 9. RESERVATION AND AVAILABILITY OF CAPITAL SHARES.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares and/or other securities or out of its authorized and
issued shares held in its treasury), the number of Preferred Shares (and,
following the occurrence of a Triggering Event, the Common Shares and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii)
hereof, will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the Preferred Shares (and, following the occurrence
of a Triggering Event, the Common Shares and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) prepare and
file, as soon as practicable following the first occurrence of a Section
11(a)(ii) Event or, if applicable, as soon as practicable following the earliest
date after the first occurrence of a Section 11(a)(ii) Event on which the
consideration to be delivered by the Company upon exercise of the Rights has
been determined pursuant to this Agreement (including in accordance with Section
11(a)(iii) hereof), a registration statement on an appropriate form under the
Securities Act with respect to the securities purchasable upon exercise of the
Rights, (ii) cause such registration statement to become effective as soon as
practicable after such filing, and (iii) cause such registration statement to
remain effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the earlier of (A)
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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 not to exceed 90 days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if the Company shall determine that the Securities Act requires an effective
registration statement under the Securities Act following the Distribution
Date, the Company may temporarily suspend the exercisability of the Rights until
such time as such a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification in
such jurisdiction shall not have been obtained, the exercise thereof shall not
be permitted under applicable law or any required registration statement shall
not have been declared effective.
(d) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all one-hundredths of a Preferred
Share (and, following the occurrence of a Triggering Event, the Common Shares
and/or other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all federal and state transfer taxes and charges that
may be payable in respect of the issuance or delivery of the Rights Certificates
and of any certificates for a number of one-hundredths of a Preferred Share (or
the Common Shares and/or other securities, as the case may be) upon the exercise
of Rights. The Company shall not, however, be required to pay any transfer tax
that may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or delivery of a number of
one-hundredths of a Preferred Share (or the Common Shares and/or other
securities, as the case may be) in respect of a name other than that of, the
registered holder of the Rights Certificates evidencing Rights surrendered for
exercise or to issue or deliver any certificates for a number of one-hundredths
of a Preferred Share (or the Common Shares and/or other securities, as the case
may be) in a name other than that of the registered holder upon the exercise of
any Rights until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
Section 10. PREFERRED SHARE RECORD DATE. Each Person in whose
name any certificate for a number of one-hundredths of a Preferred Share (or the
Common Shares and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such Preferred Shares (fractional or otherwise) (or the Com-
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<PAGE> 18
mon Shares and/or other securities, as the case may be) represented thereby on,
and such certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
the Common Shares and/or other securities, as the case may be) transfer books of
the Company are closed, such Person shall be deemed to have become the record
holder of such shares (fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the Preferred Shares (or
the Common Shares and/or other securities, as the case may be) transfer books of
the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate, as such, shall not be entitled to any rights
of a shareholder of the Company with respect to shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
Section 11. ADJUSTMENT OF PURCHASE PRICE. The Purchase Price, the
number and kind of shares or other securities subject to purchase 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 the Company shall at any time after the Rights
Dividend Declaration Date (A) declare a dividend on the Preferred
Shares payable in Prefer red Shares, (B) subdivide the outstanding
Preferred Shares, (C) combine the outstanding Preferred Shares into a
smaller number of shares or (D) issue any shares of its capital shares
in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of Preferred Shares or
capital shares, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised
after such time shall be entitled to receive, upon payment of the
Purchase Price then in effect, the aggregate number and kind of
Preferred Shares or capital shares, as the case may be, which, if such
Right had been exercised immediately prior to such date and at a time
when the Preferred Shares transfer books of the Company were open, he
would have owned upon such exercise and been entitled to receive by
virtue of such dividend, subdivision, combination or reclassification.
If an event occurs which would require an adjustment under both this
Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
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(ii) Subject to Section 24 of this Agreement, in the event
any Person shall become an Acquiring Person, unless the event causing
such Person to become an Acquiring Person is a transaction set forth in
Section 13(a) hereof, then, promptly following the occurrence of such
event, each holder of a Right (except as provided below and in Section
7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms
of this Agreement, in lieu of a number of one-hundredths of a Preferred
Share, such number of the Common Shares of the Company as shall equal
the result obtained by (x) multiplying the then current Purchase Price
by the then number of one-hundredths of a Preferred Share for which a
Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event and (y) dividing that product (which product,
following such first occurrence, shall thereafter be the "Purchase
Price" for each Right and for all purposes of this Agreement) by 50% of
the Current Market Price per Common Share on the date of such first
occurrence (such number of shares, the "Adjustment Shares"); provided
that the Purchase Price and the number of Adjustment Shares shall be
further adjusted as provided in this Agreement to reflect any events
occurring after the date of such first occurrence.
(iii) In the event that the number of the Common Shares
that are authorized by the Company's certificate of incorporation but
not outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii) of
this Section 11(a), the Company shall, to the extent permitted by
applicable law and regulation, (A) determine the excess of (1) the
value of the Adjustment Shares issuable upon the exercise of a Right
(computed using the Current Market Price used to determine the number
of Adjustment Shares) (the "Current Value") and (2) the Purchase Price
(such excess is herein referred to as the "Spread"), and (B) with
respect to each Right, make adequate provision to substitute for the
Adjustment Shares, upon the exercise of the Rights and payment of the
applicable Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) the Common Shares or other equity securities of the Company
(including, without limitation, preferred shares, or units of preferred
shares, that the Board of Directors of the Company has deemed to have
the same value as the Common Shares (such preferred shares are herein
referred to as the "Common Share Equivalents")), (4) debt securities of
the Company, (5) other assets or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the
Company based upon the advice of a nationally recognized investment
banking firm selected by the Board of Directors of the Company;
provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within 30 days
following the later of (x) the first occurrence of a Section 11(a)(ii)
Event and (y) the date on which the Company's
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<PAGE> 20
right of redemption pursuant to Section 23(a) expires (the later of
(x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the
surrender for exercise of a Right and without requiring payment of the
Purchase Price, the Common Shares (to the extent available) and then,
if necessary, cash, which shares and/or cash have an aggregate value
equal to the Spread. If the Board of Directors of the Company shall
determine in good faith that it is likely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of
the Rights, the 30 day period set forth above may be extended to the
extent necessary, but not more than 90 days after the Section 11(a)(ii)
Trigger Date, in order that the Company may seek shareholder approval
for the authorization of such additional shares (such period, as it may
be extended, the "Substitution Period"). To the extent that the Company
determines that some action need be taken pursuant to the first and/or
second sentences of this Section 11(a)(iii), the Company (x) shall
provide, subject to Section 7(e) hereof, that such action shall apply
uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution
Period in order to seek any authorization of additional shares and/or
to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of
any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Shares shall be the Current Market
Price per Common Share on the Section 11(a)(ii) Trigger Date and the
value of any Common Share Equivalent shall be deemed to have the same
value as the Common Shares on such date.
(b) In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Preferred Shares entitling them
to subscribe for or purchase (for a period expiring within 45 calendar days
after such record date) Preferred Shares (or shares having the same rights,
privileges and preferences as the Preferred Shares ("Equivalent Preferred
Shares")) or securities convertible into Preferred Shares or Equivalent
Preferred Shares at a price per Preferred Share or per 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 Market
Price per Preferred Share on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on such
record date, plus the number of Preferred Shares that the aggregate offering
price of the total number of Preferred Shares and/or Equivalent Preferred Shares
so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such Current Market
Price, and the denominator of which shall be the number of Preferred Shares
outstanding on such record date, plus the number of additional Preferred Shares
and/or Equivalent Preferred Shares to be offered for subscription or purchase
(or into which the
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<PAGE> 21
convertible securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration, part or all of
which may be in a form other than cash, the value of such consideration shall be
as determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Shares, but including any dividend
payable in shares other than Preferred Shares) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price per share of
Preferred Shares on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent and shall be
conclusive for all purposes) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a Preferred Share and the denominator of which shall be such
Current Market Price per share of Preferred Shares. Such adjustments shall be
made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the
"Current Market Price" per Common Share of a Person on any date shall
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, and for purposes of computations made pursuant to
Section 11(a)(iii) hereof, the "Current Market Price" per Common Share
on any date shall be deemed to be the average of the daily Closing
Prices per share of such Common Shares for the 10 consecutive Trading
Days immediately following such date; provided, however, that in the
event that the Current Market Price per Common Share is determined
during a period following the announcement of (A) a dividend or
distribution on such Common Shares other than a regular quarterly cash
dividend or the dividend of the Rights, or (B) any subdivision,
combination or reclassification of such Common Shares, and the ex
dividend date for such dividend or distribution, or the record date for
such
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<PAGE> 22
subdivision, combination or reclassification, shall not have occurred
prior to the commencement of the requisite 30 Trading Day or 10 Trading
Day period, as set forth above, then, and in each such case, the
Current Market Price shall be properly adjusted to take into account ex
dividend trading. If the Common Shares are not publicly held or not so
listed or traded, "Current Market Price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors
of the Company, whose determination shall be described in a statement
filed with the Rights Agent.
(ii) For the purpose of any computation hereunder, the
"Current Market Price" per Preferred Share (or one-hundredth of a
share) shall be determined in the same manner as set forth above for
the Common Shares in clause (i) of this Section 11(d) (other than the
last sentence thereof). If the Current Market Price per Preferred Share
(or one-hundredth of a share) cannot be determined in the manner
provided above or if the Preferred Shares are not publicly held or
listed or traded in a manner described in clause (i) of this Section
11(d), the "Current Market Price" per Preferred Share shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits, stock dividends
and recapitalization with respect to the Common Shares occurring after
the date of this Agreement) multiplied by the Current Market Price per
Common Share. If neither the Common Shares nor the Preferred Shares are
publicly held or so listed or traded, Current Market Price per
Preferred Share shall mean the fair value as determined in good faith
by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent. For all purposes
of this Agreement, the Current Market Price of one-hundredth of a
Preferred Share shall be equal to the Current Market Price of one
Preferred Share divided by 100.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments that by reason of this Section 11(e) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten thousandth of a Common Share or other share or one
millionth of a Preferred Share, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three years from the date of the
transaction which mandates such adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any capital shares other than Preferred Shares,
thereafter the number of such other shares so receivable upon exercise of any
Right and the Purchase Price thereof shall be subject to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect
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<PAGE> 23
to the Preferred Shares contained in Sections 11 (a), (b), (c), (e), (f), (g),
(h), (i), (j), (k), and (m) hereof, and the provisions of Sections 7, 9, 10, 13
and 14 hereof with respect to the Preferred Shares shall apply on like terms to
any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one-hundredths of a Preferred Share (calculated to the nearest one millionth)
obtained by (i) multiplying (x) the number of one-hundredths of a Preferred
Share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in lieu of any adjustment
in the number of one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest ten
thousandth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of adjustment,
and upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein (and may bear, at the option
of the
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<PAGE> 24
Company, the adjusted Purchase Price) and shall be registered in the names of
the holders of record of Rights Certificates on the record date specified in the
public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of one-hundredths of a Preferred Share issuable upon the exercise
of the Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per one-hundredth of a share and the
number of one-hundredths of a share that were expressed in the initial Rights
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated value, if any, of the number
of one-hundredths of a Preferred Share or of the number of the Common Shares or
other securities issuable upon exercise of the Rights, the Company shall take
any corporate action that may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable such number of one-one-hundredths of a Preferred Share or such
number of the Common Shares or other securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one-one-hundredths of a Preferred Share and other capital shares
or securities of the Company, if any, issuable upon such exercise over and above
the number of one-one-hundredths of a Preferred Share and other capital shares
or securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect prior to such adjustment; provided, however,
that the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares
(fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Shares, (ii) issuance wholly for cash of any
Preferred Shares at less than the current market price, (iii) issuance wholly
for cash of Preferred Shares or securities that by their terms are convertible
into or exchangeable for Preferred Shares, (iv) shares dividends or (v) issuance
of rights, options or warrants referred to in this Section 11 hereafter made by
the Company to holders of its Preferred Shares shall not be taxable to such
shareholders.
(n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person (other
than a Subsidiary of the Company in a transaction that complies with Section
11(o) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Company in a transaction that complies with Section 11(o) hereof) or
(iii) sell, lease or transfer (or permit any Subsidiary to sell or transfer), in
one transaction or
20
<PAGE> 25
a series of related transactions, assets or earning power aggregating more than
50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any other Person or Persons (other than the Company and/or any of
its Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), if (x) at the time of or immediately after such consolidation,
merger, sale, transfer or transaction there are any rights, warrants or other
instruments or securities of the Company or any other Person outstanding or
agreements in effect that would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (y) prior to, simultaneously
with or immediately after such consolidation, merger, sale, transfer or
transaction, the shareholders or other equity owners of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates or Associates, or (z) the form or nature of
organization of the Principal Party would preclude or limit the exercise of
Rights or otherwise diminish substantially or eliminate the benefits intended to
be afforded by the Rights.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if the purpose of such action is
to, or if at the time such action is taken it is reasonably foreseeable that
such action will, diminish substantially or eliminate the benefits intended to
be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior to the Distribution Date (i) declare a dividend on
the outstanding the Common Shares payable in the Common Shares, (ii) subdivide
the outstanding the Common Shares, (iii) combine the outstanding Common Shares
into a smaller number of shares or (iv) otherwise reclassify the outstanding
Common Shares, the number of Rights associated with each Common Share then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each Common Share following any such event shall equal the
result obtained by multiplying the number of Rights associated with each Common
Share immediately prior to such event by a fraction (the "Adjustment Fractions")
the numerator of which shall be the total number of the Common Shares
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of the Common Shares outstanding immediately
following the occurrence of such event. In lieu of such adjustment in the number
of Rights associated with one Common Share, the Company may elect to adjust the
number of one-one-hundredths of a Preferred Share purchasable upon the exercise
of one Right and the Purchase Price. If the Company makes such election, the
number of Rights associated with one Common Share shall remain unchanged, and
the number of one-one-hundredths of a Preferred Share purchasable upon exercise
of one Right and the Purchase Price shall be proportionately adjusted so that
(i) the number of one-one-hundredths of a Preferred Share purchasable upon
exercise of a Right following such adjustment shall equal the product of the
number of one-one-hundredths of a Preferred Share purchasable upon exercise of a
Right immediately prior to such adjustment multiplied by the Adjustment Fraction
and (ii) the Purchase
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<PAGE> 26
Price following such adjustment shall equal the product of the Purchase Price
immediately prior to such adjustment multiplied by the Adjustment Fraction.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF
SHARES. Whenever an adjustment is made as provided in Section 11 or Section 13
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Shares and the Common Shares, a copy of such certificate and (c) mail
a brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing the Common
Shares) in accordance with Section 26 hereof. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. CONSOLIDATION, MERGER OR SALE OF TRANSFER OF ASSETS OR
EARNING POWER.
(a) In the event that, on or after the Shares Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction that
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding Common Shares shall be
changed into or exchanged for shares or other securities of the Company or any
other Person or cash or any other property, or (z) the Company shall sell, lease
or otherwise transfer (or one or more of its Subsidiaries shall sell, lease or
otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company or any combination
thereof in one or more transactions each of which complies with Section 11(o)
hereof), then, and in each such case, proper provision shall be made so that:
(i) on and after the Distribution Date, each holder of a Right, except as
provided in Section 7(e) hereof, shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradeable the Common Shares of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one-one-hundredths of a Preferred Share for which a Right was
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one-one-hundredths of a
Preferred Share for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii)
22
<PAGE> 27
Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be the Purchase Price for each Right and for all
purposes of this Agreement) by (2) 50% of the Current Market Price per Common
Share of such Principal Party on the date of consummation of such Section 13
Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Shares) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to its Common Shares thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof shall
be of no effect following the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), (A) the Person that
is the issuer of any securities into which the Common Shares of the
Company are converted in such merger or consolidation, or, if there is
more than one such issuer, the issuer the Common Shares of which have
the greatest aggregate market value, or (B) if no securities are so
issued, (y) the Person that survives such consolidation or is the other
party to the merger and survives such merger, or, if there is more than
one such Person, the Person the Common Shares of which have the
greatest aggregate market value or (y) if the Person that is the other
party to the merger does not survive the merger, the Person that does
survive the merger (including the Company if it survives); and
(ii) in the case of any transaction described in clause
(z) of the first sentence of Section 13(a), the Person that is the
party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives the
same portion of the assets or earning power so transferred, or if the
Person receiving the greatest portion of the assets or earning power
cannot be determined, the Person the Common Shares of which have the
greatest aggregate market value;
provided, however, that in any such case, if the Common Shares of such Person
are not at such time and have not been continuously over the preceding twelve
month period registered under Section 12 of the Exchange Act, and if (1) such
Person is a direct or indirect Subsidiary of another Person the Common Shares of
which are and have been so registered, "Principal Party" shall refer to such
other Person; (2) such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Shares of all of which are and have been so
registered, "Principal Party" shall refer
23
<PAGE> 28
to whichever of such Persons is the issuer of the Common Shares having the
greatest aggregate market value; and (3) such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth in (1) and (2)
above shall apply to each of the chains of ownership having an interest in such
joint venture as if such party were a "Subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any Section 13 Event unless
each Principal Party (or Person that may become a Principal Party as a result of
such Section 13 Event) shall have a sufficient number of its the Common Shares
authorized that have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and each such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of such Section 13 Event, the
Principal Party at its own expense will
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, and
will use its best efforts to cause such registration statement to (A)
become effective as soon as practicable after such filing and (B)
remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date;
(ii) use its best efforts to qualify or register the
Rights and the securities purchasable upon exercise of the Rights under
the "blue sky" laws of such jurisdictions as may be necessary or
appropriate;
(iii) use its best efforts, if the Common Shares of the
Principal Party are or shall become listed on a national securities
exchange, to list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on such securities
exchange and, if the Common Shares of the Principal Party are not
listed on a national securities exchange, to cause the Rights and the
securities purchasable upon exercise of the Rights to be reported by
the Nasdaq Stock Market or such other transaction reporting system then
in use; and
(iv) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates that
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
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<PAGE> 29
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights that have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates or scrip evidencing fractional
Rights. In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would 23 otherwise be issuable, an amount in cash equal to the same fraction of
the Closing Price of one Right for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable.
(b) The Company shall not be required to issue fractions of
Preferred Shares (other than, except as provided in Section 7(c) hereof,
fractions that are integral multiples of one-one-hundredth of a Preferred Share)
upon exercise of the Rights or to distribute certificates or scrip evidencing
fractional Preferred Shares (other than, except as provided in Section 7(c)
hereof, fractions that 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 the Company in
its sole discretion, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the 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 the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of
one-one-hundredth of the Closing Price of a Preferred Share for the Trading Day
immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company
shall not be required to issue fractions of the Common Shares upon exercise of
the Rights or to distribute certificates or scrip evidencing fractional Common
Shares. In lieu of fractional Common Shares, the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the Closing
Price of one Common Share for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
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<PAGE> 30
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Shares), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this
Agreement. After a Triggering Event, holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees, incurred
by them in any action to enforce the provisions of this Agreement.
Section 16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will not
be evidenced by Rights Certificates and will be transferable only in
connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Rights Certificates
will be transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent
designated for such purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the form of assignment set forth on the
reverse side thereof and the certificate contained therein duly
completed and fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the Person in whose
name a Rights Certificate (or, prior to the Distribution Date, the
associated the Common Shares certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Rights Certificates or the
associated the Common Shares certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary;
and
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(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any
liability to any holder of a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by
any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use
its best efforts to have any such order, decree or ruling lifted or
otherwise overturned as soon as possible.
Section 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of
one-one-hundredths of a Preferred Share or any other securities of the Company
that may at any time be issuable upon the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in Section 25 hereof), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Rights Certificate
shall have been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability or expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
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 in the premises.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or Common Shares certificate or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement or other paper or
document believed by it to be
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genuine and to be signed, executed and, where necessary, guaranteed, verified or
acknowledged, by the proper Person or Persons.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS
AGENTS.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shares transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further ut on the
part of any of the parties hereto; provided, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver such Rights Certificates so countersigned; and
in case at that time any of the Rights Certificates shall not have been counter
signed, the Rights Agent may countersign such Rights Certificates either in its
prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence
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in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or
any Assistant Secretary of the Company and delivered to the Rights Agent; and
such certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates (except its countersignature thereof) or be required to
verify the same (except as to its countersignature on such Rights Certificates),
but all such statements and recitals are and shall be deemed to have been made
by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any Preferred Shares or the
Common Shares or other securities to be issued pursuant to this Agreement or any
Rights Certificate or as to whether any Preferred Shares or the Common Shares or
other securities will, when so issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer.
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(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Company or for any other entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys
or agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company, and to each transfer
agent of the Common Shares and the Preferred Shares, by registered or certified
mail, and to the holders, if any, of the Rights Certificates by first class
mail. The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) upon 30 days' notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Common Shares and the Preferred Shares, by registered or certified mail,
and to the holders of the Rights Certificates by first class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. Notwithstanding the
foregoing provisions of this Section 21, in no event shall the resignation or
removal of a Rights Agent be effective until a successor Rights Agent shall have
been appointed and have accepted such appointment. If the Company shall fail to
make such appointment within a period of 30 days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then the Rights Agent or the registered holder
of any Rights Certificate may apply to any court of competent juris diction for
the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a legal business
entity organized and doing business under the laws of the United States or of
any state of the United States, in good standing, which is authorized to conduct
a stock transfer or corporate trust business and is subject to supervision or
examination by federal or state authority and which has at the time of its
appoint-
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ment as Rights Agent a combined capital and surplus of at least $25,000,000 or
(b) an Affiliate of a corporation described in clause (a) of this sentence.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Shares
and the Preferred Shares, and mail a notice thereof in writing to the registered
holders of the Rights Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.
Section 22. ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any
of the provisions of this Agreement or of the Rights to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing Rights in
such form as may be approved by its Board of Directors to reflect any adjustment
or change in the Purchase Price and the number or kind or class of shares or
other securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of the Common Shares following the Distribution Date
and prior to the expiration or redemption of the Rights, the Company (a) shall,
with respect to the Common Shares so issued or sold pursuant to the exercise of
shares options or under any employee plan or arrangement granted or awarded on
or prior to the Distribution Date, or upon the exercise, conversion or exchange
of securities issued by the Company on or prior to the Distribution Date, and
(b) may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
Person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (i) the close of business on the tenth day
following the Shares Acquisition Date (or, if the Shares Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth day
following the Record Date) as such period may be extended (subject to the
provisions of Section 27 hereof) or shortened in the discretion of the Board of
Directors (the "Redemption Period") and (ii) the Final Expiration Date, cause
the Company to redeem all but not less than
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all the then outstanding Rights at a redemption price of $.001 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price"); provided,
however, that, if the Board of Directors authorizes redemption of the Rights or
a change in the Redemption Period in either of the circumstances set forth in
clauses (i) and (ii) below, then there must be Continuing Directors then in
office and such authorization shall require the concurrence of a majority of
such Continuing Directors: (i) such authorization occurs on or after the time a
Person becomes an Acquiring Person, or (ii) such authorization occurs on or
after the date of a change (resulting from a proxy or consent solicitation or
form a vote or written consent (s)) in a majority of the directors in office at
the commencement of such solicitation, or prior to such vote or consent(s) if
any Person who is a participant in such solicitation, vote or consent(s) has
stated (or, if a majority of the directors in office at the commencement of such
solicitation or prior to such vote or consent(s) has determine in good faith)
the such Person (or any of its Affiliates or Associates) intends to take, or may
consider taking, any action which would result in such Person becoming an
Acquiring Person or which would cause the occurrence of a Triggering Event
unless, concurrently with such a proxy or consent solicitation or such vote or
consent(s), effected in compliance with applicable law and regulations, such
Person (or one or more of its Affiliates or Associates) is making a cash tender
offer pursuant to a Schedule 14D-1 (or any successor form) filed with the
Securities and Exchange Commission for all outstanding Common Shares not
beneficially owned by such Person (or by its Affiliates or Associates) in
compliance with Section 11(a)(ii). If, following the occurrence of Shares
Acquisition Date and following the expiration of the Company's right of
redemption hereunder (i) a Person who is an Acquiring Person shall have
transferred or otherwise disposed of a number of Common Shares in one
transaction or series of transactions, not directly or indirectly involving the
Company or any of its Subsidiaries, which did not result in the occurrence of a
Triggering Event such that such Person is thereafter a Beneficial Owner of 20%
or less of the outstanding Common Shares, (ii) there are no other Persons,
immediately following the occurrence of the event described in clause (i), who
are Acquiring Persons, and (iii) the Board of Directors (with the concurrence of
a majority of the Continuing Directors) shall so approve, then the Company's
right of redemption shall be reinstated and thereafter be subject to the
provisions of this Section 23. Notwithstanding anything contained in this
Agreement to the contrary, the Rights shall not be exercisable after the first
occurrence of a Section 11(a)(ii) Event or Section 13 Event until such time as
the Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, Common Shares (based on the Current
Market Price of the Common Shares at the time of redemption) or any other form
of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the effectiveness of the action of the Board
of Directors of the Company ordering the redemption of the Rights (which action
may be conditioned on the occurrence of one or more events or on the existence
of one or more facts or may be effective at some future time), evidence of which
shall have been filed with the Rights Agent and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held. Promptly after the effectiveness of the action of
the Board of Directors ordering the
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redemption of the Rights, the Company shall give notice of such redemption to
the Rights Agent and the holders of the then outstanding Rights by mailing such
notice to all such holders at each holder's last address as it appears upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Company for the Common Shares. Any notice that is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.
Section 24. EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at
any time and from time to time after the first occurrence of a Section 11(a)(ii)
Event, exchange all or part of the then outstanding and exercisable Rights
(which shall not include Rights that have become void pursuant to the provisions
of Section 7(e) hereof) for Common Shares or Common Share Equivalents or any
combination thereof, at an exchange ratio of one Common Share, or such number of
Common Share Equivalents or units representing fractions thereof as would be
deemed to have the same value as one Common Share, per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the Rights Dividend Declaration Date (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to and in accordance with
subsection (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of Common
Shares and/or Common Share Equivalents equal to the number of such Rights held
by such holder multiplied by the Exchange Ratio. The Company shall promptly give
public notice of any such exchange; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of
Common Shares and/or Common Share Equivalents for Rights will be effected and,
in the event of any partial exchange, the number of Rights that will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.
(c) In the event that the number of Common Shares that are
authorized by the Company's certificate of incorporation but not outstanding or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient to permit an exchange of Rights as contemplated in accordance with
this Section 24, the Company may, at its option, take all such action as may be
necessary to authorize additional Common Shares for issuance upon exchange of
the Rights.
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(d) The Company shall not be required to issue fractions of Common
Shares or to distribute certificates or scrip evidencing fractional Common
Shares. In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of Rights with regard to which such factional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
value of a whole Common Share. For purposes of this Section 24, the value of a
whole Common Share shall be the Closing Price per Common Share for the Trading
Day immediately prior to the date of exchange pursuant to this Section 24, and
the value of any Common Share Equivalent shall be deemed to have the same value
as a Common Share on such date.
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in shares of any class to the
holders of Preferred Shares or to make any other distribution to the holders of
Preferred Shares (other than a regular quarterly cash dividend out of earnings
or retained earnings of the Company), or (ii) to offer to the holders of
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of shares of any class or any other
securities, rights or options, or (iii) to effect any reclassification of its
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), or (iv) to effect any consolidation or merger
into or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), or to effect any sale or
other transfer (or to permit one or more of its Subsidiaries to effect any sale
or other transfer), in one transaction or a series of related transactions, of
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company and/or
any of its Subsidiaries in one or more transactions each of which complies with
Section 11(o) hereof, or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each
holder of record of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution or winding up is to take place
and the date of participation therein by the holders of the Preferred Shares, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the Preferred Shares for purposes of such
action, and in the case of any such other action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of the Preferred Shares, whichever shall be the earlier. The
failure to give notice required by this Section 25 or any defect therein shall
not affect the legality or validity of the action taken by the Company or the
vote upon any such action.
(b) In case any Section 11(a)(ii) Event shall occur, then (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in
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accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Shares shall be deemed thereafter to refer to the Common
Shares and/or, if appropriate, other securities.
Section 26. NOTICES. Notices or demands authorized by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights
Certificate to or on the Company shall be sufficiently given or made if sent by
first class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
SI Diamond Technology, Inc.
3006 Longhorn Boulevard
Suite 107
Austin, Texas 78758
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Rights Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
American Securities Transfer, Incorporated
938 Quail Street, Suite 101
Lakewood, CO 80215-5513
Attention: Stock Transfer Administration
Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares) shall be sufficiently given or made if sent by first class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Shares
Acquisition Date and subject to the penultimate sentence of this Section 27, the
Company may, by resolution of its Board of Directors (which resolution shall be
effective only with the concurrence of a majority of the Continuing Directors),
in its sole and absolute discretion and the Rights Agent shall, if the Company
so directs, supplement or amend any provision of this Agreement in any respect
without the approval of any holders of certificates representing the Common
Shares. From and after the Shares Acquisition Date and subject to the
penultimate sentence of this Section 27, the Company
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<PAGE> 40
may, by resolution of its Board of Directors (which resolution shall be
effective only with the concurrence of a majority of the Continuing Directors),
and the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein that may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder or (iv) to change or
supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and that shall not materially adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person or a transferee of any of
such Persons); provided, that this Agreement may not be supplemented or amended
to lengthen, pursuant to clause (iii) of this sentence, (A) a time period
relating to when the Rights may be redeemed at such time as the Rights are not
then redeemable or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than any Acquiring Person and its
Affiliates and Associates or a transferee of any of such Persons). Upon the
delivery of a certificate from an appropriate of officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment;
provided, however, that the Rights Agent may, but shall not be obligated to,
enter into any such supplement or amendment that affects the Rights Agent's own
rights, duties or immunities under this Agreement. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall be
made that decreases the Redemption Price, shortens the Final Expiration Date,
increases the initial Purchase Price or decreases the number of
one-one-hundredths of a Preferred Share for which a Right is initially
exercisable. Prior to the Distribution Date, the interests of the holders of
Rights shall be deemed coincident with the interests of the holders of the
Common Shares.
Section 28. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS,
ETC. For all purposes of this Agreement, any calculation of the number of Common
Shares outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding Common Shares of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act
as in effect on the date hereof. The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors of
the Company (with, where specifically provided for herein, the concurrence of
the Continuing Directors) 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
36
<PAGE> 41
deemed necessary or advisable for the administration of this Agreement
(including, without limitations a determination to redeem or not redeem the
Rights or to amend this Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company (with, where specifically provided for herein, the
concurrence of the Continuing Directors) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights, as such, and all other parties, and (y) not subject the Board of
Directors to any liability to the holders of the Rights.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Shares) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Shares).
Section 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 shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors of
the Company.
Section 32. GOVERNING LAW. This Agreement, each right and each rights
certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Texas and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such state.
Section 33. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
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<PAGE> 42
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
SI DIAMOND TECHNOLOGY, INC.
By
-------------------------------------
Its
------------------------------------
AMERICAN SECURITIES TRANSFER,
INCORPORATED
By
-------------------------------------
Its
------------------------------------
38
<PAGE> 43
EXHIBIT A
SI DIAMOND TECHNOLOGY, INC.
DESIGNATION OF SERIES H JUNIOR PARTICIPATING PREFERRED SHARES.
Series H Junior Participating Preferred Shares.
1. Designation and Amount. There shall be a series of shares of
preferred stock that shall be designated as "Series H Junior Participating
Preferred Shares," and the number of shares constituting such series shall be
Six Hundred Thousand (600,000).
2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of any
shares of any series of shares of preferred stock ranking prior and superior to
the Series H Junior Participating Preferred Shares with respect to dividends,
the holders of shares of Series H Junior Participating Preferred Shares, in
preference to the holders of shares of any class or series of shares of the
Corporation ranking prior to the Series H Junior Participating Preferred Shares,
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the 15th day of January, April, July and October in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series H Junior Participating Preferred
Shares, in an amount per share (rounded to the nearest cent) equal to the
greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter
set forth, the Adjustment Number (as defined below) times the aggregate per
share amount of all cash dividends, and the Adjustment Number times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of common stock or a
subdivision of the outstanding shares of common stock (by reclassification or
otherwise), declared on the shares of common stock of the Corporation (the
"Common Shares") since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series H Junior
Participating Preferred Shares. The "Adjustment Number" shall initially be 100.
In the event the Corporation shall at any time after June 18, 1998 (the "Rights
Declaration Date") (i) declare any dividend on Common Shares payable in Common
Shares, (ii) subdivide the outstanding Common Shares or (iii) combine the
outstanding Common Shares into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of Common Shares outstanding immediately after such event
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and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series H Junior Participating Preferred Shares as provided in paragraph (A)
above immediately after it declares a dividend or distribution on the Common
Shares (other than a dividend payable in Common Shares); provided that, in the
event no dividend or distribution shall have been declared on the Common Shares
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the
Series H Junior Participating Preferred Shares shall nevertheless be payable on
such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding Series H Junior Participating Preferred Shares from the Quarterly
Dividend Payment Date next preceding the date of issue of such Series H Junior
Participating Preferred Shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of Series H Junior
Participating Preferred Shares entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the Series H Junior Participating Preferred Shares in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share by share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of Series H Junior Participating Preferred Shares
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
3. Voting Rights. The holders of Series H Junior Participating
Preferred Shares shall have the following voting rights:
(A) Each Series H Junior Participating Preferred Share shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the shareholders of the Corporation.
(B) Except as otherwise provided herein or by law, the holders of
Series H Junior Participating Preferred Shares and the holders of the Common
Shares shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) (i) If at any time dividends on any Series H Junior
Participating Preferred Stock shall be in arrears in an amount equal to six (6)
quarterly dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (herein called a "default period") which
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shall extend until such time when all accrued and unpaid dividends for all
previous quarterly dividend periods and for the current quarterly dividend
period on all shares of Series H Junior Participating Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Preferred Stock (including holders of the
Series H Junior Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a class,
irrespective of series, shall have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of
Series H Junior Participating Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at
any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that such voting right shall not be exercised unless the
holders of ten percent (10%) in number of shares of Preferred Stock outstanding
shall be present in person or by proxy. The absence of a quorum of the holders
of Common Stock shall not affect the exercise by the holders of Preferred Stock
of such voting right. At any meeting at which the holders of Preferred Stock
shall exercise such voting right initially during an existing default period,
they shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors in any default period and during the continuance of such period, the
number of Directors shall not be increased or decreased except by vote of the
holders of the Preferred Stock as herein provided or pursuant to the rights of
any equity securities ranking senior to or pari passu with the Series H Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right to elect
Directors, the Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than ten percent (10%) of the total number of
shares of Preferred Stock outstanding, irrespective of series, may request, the
calling of special meeting of the holders of Preferred Stock, which meeting
shall thereupon be called by the President, a Vice President or the Secretary of
the Corporation. Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this Paragraph
(C)(iii) shall be given to each holder of record of Preferred Stock by mailing a
copy of such notice to him or her at his or her last address as the same appears
on the books of the Corporation. Such meeting shall be called for a time not
earlier than 10 days and not later than 50 days after such order or request or
in default of the calling of such meeting within 50 days after such order or
request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten percent (10%) of the
total number of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Paragraph (C)(iii), no such special meeting
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<PAGE> 46
shall be called during the period within 50 days immediately preceding the date
fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other
classes of stock of the Corporation if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders of Preferred Stock
shall have exercised their right to elect two (2) Directors voting as a class,
after the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in Paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this Paragraph
(C) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect Directors shall
cease, (y) the term of any Directors elected by the holders of Preferred Stock
as a class shall terminate, and (z) the number of Directors shall be such number
as may be provided for in the certificate of incorporation or bylaws
irrespective of any increase made pursuant to the provisions of Paragraph
(C)(ii) of this Section 3 (such number being subject, however, to change
thereafter in any manner provided by law or in the certificate of incorporation
or bylaws). Any vacancies in the Board of Directors effected by the provisions
of clauses (y) and (z) in the preceding sentence may be filled by a majority of
the remaining Directors.
(D) Except as set forth herein or as provided by law, holders of
Series H Junior Participating Preferred Shares shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of the Common Shares as set forth herein) for
taking any corporate action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series H Junior Participating Preferred Shares as
provided in Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on Series H Junior
Participating Preferred Shares outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for
consideration any shares ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series H Junior
Participating Preferred Shares;
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<PAGE> 47
(ii) declare or pay dividends on or make any other
distributions on any shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series H
Junior Participating Preferred Shares, except dividends paid ratably on
the Series H Junior Participating Preferred Shares and all such parity
shares on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration any shares ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series H
Junior Participating Preferred Shares, provided that the Corporation
may at any time redeem, purchase or otherwise acquire any such parity
shares in exchange for any shares of the Corporation ranking junior
(both as to dividends and upon dissolution, liquidation or winding up)
to the Series H Junior Participating Preferred Shares; or
(iv) purchase or otherwise acquire for consideration any
shares of Series H Junior Participating Preferred Shares, or any shares
ranking on a parity with the Series H Junior Participating Preferred
Shares, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any Series H Junior Participating
Preferred Shares purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of preferred stock and may be reissued as part of a new series
of shares of preferred stock.
6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares ranking junior (either as to dividends or upon liquidation or winding up)
to the Series H Junior Participating Preferred Shares, unless, prior thereto,
the holders of Series H Junior Participating Preferred Shares shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment
(the "Series H Liquidation Preference"). Following the payment of the full
amount of the Series H Liquidation Preference, no
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<PAGE> 48
additional distributions shall be made to the holders of Series H Junior
Participating Shares unless, prior thereto, the holders of Common Shares shall
have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series H Liquidation Preference by (ii)
the Adjustment Number. Following the payment of the full amount of the Series H
Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series H Junior Participating Preferred Shares and the Common Shares,
respectively, holders of Series H Junior Participating Preferred Shares and
holders of the Common Shares shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Shares and the Common Shares, on a
per share basis, respectively.
(B) In the event, however, that there are not sufficient assets to
permit payment in full of the Series H Liquidation Preference and the
liquidation preferences of all other series of shares of preferred stock, if
any, that rank on a parity with the Series H Junior Participating Preferred
Shares, then such remaining assets shall be distributed ratably to the holders
of such parity shares in proportion to their respective liquidation preferences.
In the event, however, that there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of the Common Shares.
7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, or other transaction in which the Common
Shares are exchanged for or changed into other shares or securities, cash and/or
other property, then in any such case, the Series H Junior Participating
Preferred Shares shall at the same time be similarly exchanged or changed in an
amount per share equal to the Adjustment Number times the aggregate amount of
shares, securities, cash and/or any other property (payable in kind), as the
case may be, into which or for which each Common Share is changed or exchanged.
8. No Redemption. The Series H Junior Participating Shares shall
not be redeemable. Notwithstanding the foregoing sentence of this Section, the
Corporation may acquire Series H Junior Participating Preferred Shares in any
other manner permitted by law.
9. Ranking. The Series H Junior Participating Preferred Shares
shall rank junior to all other series of the Corporation's preferred stock as to
the payment of dividends and the distribution of assets, unless the terms of
any such series shall provide otherwise.
10. Amendment. At any time that any Series H Junior Participating
Preferred Shares are outstanding, these Articles of Incorporation shall not be
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series H Junior Participating Preferred
Shares so as to affect them adversely without the affirmative vote of the
holders of a majority or more of the outstanding Series H Junior Participating
Preferred Shares, voting separately as a class.
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<PAGE> 49
11. Fractional Shares. Series H Junior Participating Preferred
Shares may be issued in fractions of a share that shall entitle the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series H Junior Participating Preferred Shares.
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<PAGE> 50
EXHIBIT B
FORM OF RIGHTS CERTIFICATE
Rights
Certificate No. P
NOT EXERCISABLE AFTER JUNE 18, 2008, OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME NULL AND VOID.
[THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
AND THE RIGHTS REPRESENTED HEREBY WILL BECOME NULL AND VOID IN THE
CIRCUMSTANCES AND WITH THE EFFECT SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]
RIGHTS CERTIFICATE
SI DIAMOND TECHNOLOGY, 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 June ___, 1998, as it may from time to time be
supplemented or amended (the "Rights Agreement"), between SI Diamond Technology,
Inc., a Texas corporation (the "Company"), and American Securities Transfer,
Incorporated, a Delaware company (the "Rights Agent"), to purchase from the
Company at any time prior to 5:00 p.m. (New York City time) on June ___, 2008,
at the office or offices of the Rights Agent designated for such purpose, or its
successor as Rights Agent, one-hundredth of a fully paid, nonassessable Series H
Junior Participating Preferred Share (the "Preferred Shares") of the Company, at
a purchase price of $_____ per one one-hundredth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase and related Certificate set forth on the reverse
hereof duly executed. The Purchase Price may be paid in cash or by certified
check, cashiers or official bank check or bank draft payable to the order of the
Company or the Rights Agent. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
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<PAGE> 51
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of _______________, 199___, based on the
Preferred Shares as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that a number of Rights be exercised so that only whole
Preferred Shares will be issued.
From and after the occurrence of a Section 11(a)(ii) Event (as such
term is defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights
Agreement), (ii) a direct or indirect transferee of any such Acquiring Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a direct or indirect transferee of a person who, concurrently
with or after such transfer, became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void in the
circumstances set forth in the Rights Agreement, and no holder hereof shall have
any rights whatsoever with respect to such Rights from and after the occurrence
of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of Preferred Shares or other securities that may be purchased upon the
exercise of the Rights evidenced by this Rights Certificate are subject to
modification and adjustment upon the happening of certain events, including
Triggering Events.
This Rights Certificate is subject to all of the terms, provision 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, dudes and immunities hereunder of the Rights
Agent, the Company and the holders of the Rights Certificates, which limitations
of rights include the temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights Agreement. Copies of
the Rights Agreement are on file at the above mentioned office of the Rights
Agent and are also available upon written request to the Company.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one-one-hundredths of a Preferred Share as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate (i) may be redeemed by the Company at its option at a
redemption price of $.01 per Right, pay-
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<PAGE> 52
able, at the election of the Company, in cash or the Common Shares or such other
consideration as the Board of Directors may determine, at any time prior to the
earlier of the close of business on (a) the tenth day following the Shares
Acquisition Date (as defined in the Rights Agreement) (as such time period may
be extended or shortened pursuant to the Rights Agreement) and (b) the
Expiration Date (as such term is defined in the Rights Agreement) or (ii) may be
exchanged in whole or in part for common shares, no par value, of the Company
(the "Common Shares") and/or other equity securities of the Company deemed to
have the same value as the Common Shares. Under certain circumstances set forth
in the Rights Agreement, the decision to redeem (or to change such time period)
shall require the concurrence of a majority of the Continuing Directors (as
defined in the Rights Agreement). After the expiration of the redemption period,
the Company's right of redemption may be reinstated if an Acquiring Person
reduces his beneficial ownership to 20% or less of the outstanding Common Shares
in a transaction or series of transactions not involving the Company, and such
reinstatement is approved by the Company's Board of Directors (with the
concurrence of a majority of the Continuing Directors).
No fractional Preferred Shares will be issued upon the exercise of any
Right or Rights evidenced hereby (other than, except as set forth above,
fractions that are integral multiples of one-one-hundredth of a Preferred Share,
which may, at the election of the Company, be evidenced by depositary receipts),
but in lieu thereof, cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Shares or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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<PAGE> 53
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of the ______ day of _______________, ______.
SI Diamond Technology, Inc.
By
President
Secretary
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ______________________________ hereby sells, assigns
and transfers unto ______________________________ (please print name and address
of transferee) this Rights Certificate, together with all right, title and
interest thereon, and does hereby irrevocably constitute and appoint
______________________________ Attorney, to transfer the within Rights
Certificate on the books of the within named Company, with full power of
substitution.
Dated:
------------------------------------
Signature:
------------------------------------
Signature Guaranteed:
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<PAGE> 54
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
[ ] (1) Rights Certificate is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
[ ] (2) After due inquiry and to the best knowledge of the
undersigned, it did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ______________________________
Signature: ______________________________
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
To: SI Diamond Technology, Inc.
The undersigned hereby irrevocably elects to exercise Rights
represented by this Rights Certificate to purchase the Preferred Shares issuable
upon the exercise of the Rights (or such other securities of the Company or of
any other person that may be issuable upon the exercise of the Rights) and
requests that certificates for such shares (or other securities) be issued in
the name of and delivered to:
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
(Please insert social security or other identifying number)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
- -------------------------------------------------------------------------------
(Please print name and address)
- -------------------------------------------------------------------------------
(Please insert social security or other identifying number)
Dated: ______________________________
Signature: ______________________________
Signature Guaranteed:
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<PAGE> 56
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
[ ] (1) the Rights evidenced by this Rights Certificate are
not being exercised by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
[ ] (2) after due inquiry and to the best knowledge of the
undersigned, it did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ______________________________
Signature: ______________________________
Signature Guaranteed:
NOTICE
The signatures to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
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EXHIBIT C
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
On June 18, 1998, the Board of Directors of SI Diamond Technology, Inc.
(the "Company") declared a dividend of one Right for each outstanding common
share, $.001 par value, of the Company (the "Common Shares"), payable on June
18, 1998, to shareholders of record at the close of business on that date. Each
Right entitles the registered holder to purchase from the Company a unit (the
"Unit") consisting of one-one-hundredth of a Series H Junior Participating
Preferred Share, stated value $1.00 per share (the "Preferred Shares"), at a
Purchase Price of $1.00 per Unit, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement dated as of June 18,
1998 (the "Rights Agreement") between the Company and American Securities
Transfer, Incorporated, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
outstanding Common Shares, and no separate Rights Certificates will be
distributed. The Rights will separate from the Common Shares and a "Distribution
Date" will occur upon the earlier of (i) ten days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding Common Shares (the date of the
announcement being the "Shares Acquisition Date"), or (ii) ten business days (or
such later date as may be determined by the Company's Board of Directors (with
the concurrence of a majority of the Continuing Directors (as defined below))
before the Distribution Date occurs) following the commencement of a tender
offer or exchange offer that would result in a person's becoming an Acquiring
Person. Until the Distribution Date, (a) the Rights will be evidenced by the
Common Shares certificates (together with a copy of this Summary of Rights or
bearing the notation referred to below) and will be transferred with and only
with such Common Share certificates, (b) new Common Share certificates issued
after June 18, 1998 will contain a notation incorporating the Rights Agreement
by reference and (c) the surrender for transfer of any certificate for Common
Shares outstanding (with or without a copy of this Summary of Rights) will also
constitute the transfer of the Rights associated with the Common Shares
represented by such certificate. The Company, its subsidiaries and their
employee benefit plans will not at any time be deemed Acquiring Persons.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on June 18, 2008, unless earlier redeemed or
exchanged by the Company as described below. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole Preferred Shares will be issued.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Shares as of the close of
business on the Distribution Date and, from and after the Distribution Date, the
separate Rights Certificates alone will represent the
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Rights. All Common Shares issued prior to the Distribution Date will be issued
with Rights. Common Shares issued after the Distribution Date in connection with
certain employee benefit plans or upon exercise or conversion of certain
securities will be issued with Rights. Except as otherwise determined by the
Board of Directors, no other Common Shares issued after the Distribution Date
will be issued with Rights.
In the event that a Person becomes an Acquiring Person, each holder of
a Right will there after have the right to receive, upon exercise of such Right,
a number of Common Shares (or, in certain circumstances, cash, property or other
securities of the Company) having a Current Market Price (as defined in the
Rights Agreement) equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of any such
event, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person (or by
certain related parties) will be null and void in the circumstances set forth in
the Rights Agreement. However, Rights are not exercisable following the
occurrence of any such event until such time as the Rights are no longer
redeemable by the Company as set forth below.
For example, at the exercise price of $1.00 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $2.00
worth of the Common Shares (or other consideration, as noted above), based upon
their Current Market Price, for $1.00. Assuming that the Common Shares had a
Current Market Price of $0.40 per share at such time, the holder of each valid
Right would be entitled to purchase 5 Common Shares for $1.00.
In the event that, at any time on or after the Shares Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction or (ii) 50% or more of the Company's assets or earning power is sold
or transferred, each holder of a Right (except Rights that previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, a number of common shares of the acquiring company having a Current
Market Price equal to two times the exercise price of the Right. The events
described in this and the two preceding paragraphs are collectively referred to
as "Triggering Events."
The Purchase Price payable, and the number of Units of Preferred Shares
or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Shares, (ii) if holders of the Preferred Shares are granted certain
rights or warrants to subscribe for Preferred Shares or convertible securities
at less than the current market price of the Preferred Shares, or (iii) upon
the distribution to holders of the Preferred Shares of evidences of indebtedness
or assets (excluding regular quarterly cash dividends) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of Units issuable upon
exercise of each Right are also subject to adjustment in the event of a stock
split of the Common Shares or a stock
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<PAGE> 59
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Distribution Date.
The Preferred Shares purchasable upon exercise of the Rights will not
be redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $1.00 per share.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Preferred Shares on the last
trading date prior to the date of exercise.
At any time until ten days following the Shares Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right, payable, at the option of the Company, in cash, Common Shares or such
other consideration as the Board of Directors may determine. Under certain
circumstances set forth in the Rights Agreement, the decision to redeem the
Rights will require the concurrence of a majority of the Continuing Directors
(as defined below). After the redemption period has expired, the Company's right
of redemption may be reinstated (with the concurrence of the Continuing
Directors) if an Acquiring Person reduces his beneficial ownership to 20% or
less of the outstanding Common Shares in a transaction or series of transactions
not involving the Company and there are no other Acquiring Persons. Immediately
upon the effectiveness of the action of the Board of Directors ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.
The term "Continuing Director" means (i) any member of the Board of
Directors of the Company who was a member of the Board as of June 18, 1998, and
(ii) any person who is subsequently elected to the Board, if such person is
recommended or approved by a majority of the Continuing Directors then on the
Board of Directors, and such person is not an Acquiring Per son or an affiliate,
associate, representative or nominee of an Acquiring Person.
At any time after a Person becomes an Acquiring Person, the Company may
exchange the Rights (other than Rights owned by an Acquiring Person or an
affiliate or an associate of an Acquiring Person, which will have become void),
in whole or in part, at an exchange ratio of one Common Share, and/or other
equity securities deemed to have the same value as one Common Share, per Right,
subject to adjustment.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights
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become exercisable for Common Shares (or other consideration) of the Company or
for common shares of the acquiring company as set forth above or are exchanged
as provided in the preceding paragraph.
Other than those provisions relating to the principal economic terms of
the Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors (but only with the concurrence of a majority of the
Continuing Directors) of the Company prior to the Shares Acquisition Date.
Thereafter, the provisions of the Rights Agreement may be amended by the Board
of Directors (but only with the concurrence of a majority of the Continuing
Directors) in order to cure any ambiguity, defect or inconsistency, to make
changes that do not materially adversely effect the interests of holders of
Rights (excluding the interests of any Acquiring Person and certain related
parties), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to lengthen the time period governing
redemption shall be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an exhibit to the Company's Current Report on Form 8-K
dated June 25, 1998. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is incorporated herein by reference.
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