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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Chromatics Color Sciences International, Inc.
(Exact Name of Registrant as Specified in Its Charter)
New York 13-3253392
(State of Incorporation or Organization) (I.R.S. Employer
Identification No.)
5 East 80th Street, New York, New York 10021
(Address of principal executive offices) (zip code)
If this form relates to the If the form relates to the
registration of a class of debt registration of a class of debt
securities and is effective upon filing securities and is to become effec-
pursuant to General tive simultaneously with the
Instruction A(c)(1) please check effectiveness of a concurrent
the following box. |_| registration statement under the
Securities Act of 1993 pursuant to
General Instruction A(c)(2)
please check the following box.|_|
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which to be
so Registered Each Class is to be Registered
None
Securities to be registered pursuant to Section 12(g) of the Act:
Purchase Rights for Class B Series 1 Preferred Stock, par value $0.001
(Title of class)
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Item 1. Description of Securities to be Registered
On December 30, 1998, the Board of Directors of Chromatics Color Sciences
International, Inc. (the "Corporation") declared a dividend distribution of one
preferred stock purchase right (a "Right") for each outstanding share of Common
Stock, par value $0.001 per share (the "Common Stock"), of the Corporation. The
dividend is payable to the shareholders of record on January 11, 1999 (the
"Record Date"), and with respect to shares of Common Stock issued thereafter
until the Distribution Date (as defined below) and, in certain circumstances,
with respect to shares of Common Stock issued after the Distribution Date.
Except as set forth below, each Right, when it becomes exercisable, entitles the
registered holder to purchase from the Corporation one-hundredth of a share of
Class B Series 1 Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), of the Corporation at a price of $28 per one-hundredth of a share of
Preferred Stock (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement between the
Corporation and Continental Stock Transfer & Trust Company, as Rights Agent,
dated as of January 11, 1999 (the "Rights Agreement").
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate Right Certificates will
be distributed. The Rights will separate from the shares of Common Stock upon
the earliest to occur of (i) expiration of the Board's right to redeem the
Rights during the 10 day period (or any extension of such 10 day period) (the
"Window Period") following the date a person or group of affiliated or
associated persons (other than exempted shareholders) becomes the beneficial
owner of 20% or more of the outstanding shares of Common Stock (except pursuant
to a Permitted Offer, as hereinafter defined, or if the acquisition is approved
in advance by the Board of Directors); or (ii) the close of business on the
tenth day (or such later date as the Board may determine) after the commencement
of, or announcement of an intention to make, a tender offer or exchange offer,
the consummation of which would result in a person or group becoming an
Acquiring Person (as hereinafter defined) (the earliest of such dates being
called the "Distribution Date"). A person or group whose acquisition of shares
of Common Stock causes a Distribution Date pursuant to clause (i) above is an
"Acquiring Person." The date that a person or group becomes an Acquiring Person
is the "Shares Acquisition Date." Notwithstanding the foregoing, an Acquiring
Person shall not include (i) any person who or which, together with all
affiliates and associates of such person, as of the close of business on the day
the Corporation publicly announces that the Board of Directors has adopted the
Rights Agreement (the "Announcement Date"), was the beneficial owner of more
than 20% of the shares of Common Stock, and (ii) Darby Simpson Macfarlane, the
Chief Executive Officer of the Corporation, provided, however, that any such
person, together with all affiliates and associates of such person, shall cease
to be exempt from being an Acquiring Person if the number of shares of Common
Stock beneficially owned by that person (by acquisition), together with all
affiliates and associates of such person, (other than as a result of a stock
dividend, stock split or stock distribution by the Corporation) exceeds by more
than one percent of the number of shares of Common Stock beneficially owned by
that person, together with all affiliates and associates of such person, as of
the Announcement Date. In the case of Mrs. Macfarlane, any and all (i) shares
acquired upon exercise of options, including without limitation, options issued
under the Company's 1992 Stock Option Plan as beneficially owned by her, as
amended,
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held by Mrs. Macfarlane or her affiliates, heirs, relatives or entities
controlled by her or her affiliates, and (ii) shares issued upon conversion of
the Class A Preferred Stock owned by Mrs. Macfarlane or her affiliates are not
to be included in determining whether her beneficial ownership has increased
since the Announcement Date.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the shares of Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights) new Common
Stock certificates issued after the Record Date upon transfer or new issuance of
shares of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even without such
notation or a copy of the Summary of Rights being attached thereto, also will
constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the shares of Common Stock
as of the close of business on the Distribution Date (and to each initial record
holder of certain shares of Common Stock issued after the Distribution Date),
and such separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 11, 2009, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person (except (i)
pursuant to a tender or exchange offer which is for all outstanding shares of
Common Stock at a price and on terms which a majority of certain members of the
Board of Directors determines to be adequate and in the best interests of the
Corporation, its shareholders and other relevant constituencies, other than such
Acquiring Person, its affiliates and associates (a "Permitted Offer") or (ii)
pursuant to an acquisition of shares of Common Stock which is approved in
advance by the Board of Directors of the Corporation), each holder of a Right
will thereafter have the right (the "Flip-In Right") to receive upon exercise
thereof the number of shares of Common Stock or of one-hundredths of a share of
Preferred Stock (or, in certain circumstances, other securities of the
Corporation) having a value (immediately prior to such triggering event) equal
to two times the exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event described above, all Rights that are, or
(under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person or any affiliate or associate thereof
will be null and void.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding shares of Common
Stock immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to an Acquiring Person or any affiliate or associate or any
other person in
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which such Acquiring Person, affiliate or associate has an interest or any
person acting on behalf of or in concert with such Acquiring Person, affiliate
or associate, or, if in such transaction all holders of shares of Common Stock
are not treated alike, any other person, then each holder of a Right (except
Rights which previously have been voided as set forth above) shall thereafter
have the right (the "Flip-Over Right") to receive, upon exercise, common shares
of the acquiring company having a value equal to two times the exercise price of
the Right. The holder of a Right will continue to have the Flip-Over Right
whether or not such holder exercises or surrenders the Flip-In Right. However,
in the event that any person becomes an Acquiring Person, the Board of Directors
may, within a ten-day period (or any extension thereof) following the date that
such person becomes known to be an Acquiring Person (the "Window Period"),
redeem the rights or extend the Window Period in order to prevent or delay the
implementation of the Flip-In Right.
The Purchase Price payable, and the number of shares of Preferred Stock,
Common Stock or other securities issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase shares of Preferred
Stock at a price, or securities convertible into shares of Preferred Stock with
a conversion price, less than the then current market price of the shares of
Preferred Stock, or (iii) upon the distribution to holders of the shares of
Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
The number of outstanding Rights and the number of one-hundredths of a
share of Preferred Stock issuable upon exercise of each Right are also subject
to adjustment in the event of a stock split of the shares of Common Stock or a
stock dividend on the shares of Common Stock payable in shares of Common Stock
or subdivisions, consolidations or combinations of the shares of Common Stock
occurring, in any such case, prior to the Distribution Date.
Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Preferred Stock will be entitled to an aggregate
dividend per share of 100 times the dividend declared per share of Common Stock.
In the event of liquidation, first the holders of the Corporation's Class A
Preferred Stock will be entitled to a preferential liquidation payment of $0.01
per share; thereafter, the holders of the shares of Preferred Stock and the
shares of Common Stock will share the remaining assets in the ratio of 100 to 1
(as adjusted) for each share of Preferred Stock and Common Stock so held,
respectively. In the event of any merger, consolidation or other transaction in
which shares of Common Stock are exchanged, each share of Preferred Stock will
be entitled to receive 100 times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions. In the event
that the amount of accrued and unpaid dividends on the Preferred Stock is
equivalent to six full quarterly dividends or more, the holders of the shares of
Preferred Stock shall have the right, voting as a class, to elect two directors
in addition to the directors elected by the holders of the shares of Common
Stock until all cumulative dividends on the shares of Preferred Stock have been
paid through the last quarterly dividend payment date or until non-cumulative
dividends
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have been paid regularly for at least one year. The Preferred Stock ranks junior
to the Corporation's existing Class A Preferred Stock.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least one
percent in such Purchase Price. No fractional shares of Preferred Stock will be
issued (other than fractions which are one-hundredth or integral multiples of
one-hundredth of a share of Preferred Stock, which may, at the election of the
Corporation, be evidenced by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market price of the shares of
Preferred Stock on the last trading day prior to the date of exercise.
At any time prior to the earlier to occur of (i) expiration of the Window
Period following a person becoming an Acquiring Person or (ii) the expiration of
the Rights, and under certain other circumstances, the Corporation may redeem
the Rights in whole, but not in part, at a price of $.001 per Right (the
"Redemption Price") which redemption shall be effective upon the action of the
Board of Directors. Additionally, following a Shares Acquisition Date and the
expiration of the period during which the holder of Rights may exercise the
Rights, the Corporation may redeem the then outstanding Rights in whole, but not
in part, at the Redemption Price, provided that such redemption (a) is in
connection with a merger or other business combination transaction or series of
transactions involving the Corporation in which all holders of shares of Common
Stock are treated alike but not involving an Acquiring Person or its affiliates
or associates, or (b) if and for so long as the Acquiring Person does not own
20% or more of the voting power of the Corporation and there are no other
Acquiring Persons.
All of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders of the Corporation, shareholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit hereto and made a part hereof. A copy of the
Rights Agreement will be provided upon written request (directed to Leslie
Foglesong, Secretary, at the Corporation's executive offices) for a fee limited
to the Corporation's reasonable expenses in furnishing such exhibit. 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 hereby
incorporated herein by reference.
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As of November 13, 1998, there were 15,423,442 shares of Common Stock
outstanding. In addition, 1,380,000 shares of Common Stock were reserved for
issuance upon conversion of the Corporation's Class A Preferred Stock, 915,000
shares of Common Stock were reserved for issuance upon conversion of outstanding
Options and 424,934 shares of Common Stock were reserved for issuance upon
conversion of outstanding Warrants. Each outstanding share of Common Stock on
the Record Date will receive one Right. As long as the Rights are attached to
the Common Stock, the Corporation will issue one Right with each new share of
Common Stock so that all such shares will have attached Rights. 500,000 shares
of Class B Series 1 Preferred Stock have been reserved for issuance upon
exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the
Corporation without conditioning the offer on the Rights being redeemed or a
substantial number of Rights being acquired. However, the Rights should not
interfere with any merger or other business combination approved by the
Corporation because the Rights are redeemable under certain circumstances.
Attached hereto as Exhibit 1 and incorporated herein by reference are a
copy of the Rights Agreement between the Corporation and Continental Stock
Transfer & Trust Company, as Rights Agent, specifying the terms of the Rights,
and the exhibits thereto, as follows: Exhibit A - Form of Certificate of
Amendment of the Certificate of Incorporation of Chromatics Color Sciences
International, Inc.; Exhibit B - Form of Rights Certificate; and Exhibit C -
Summary of Rights to Purchase Preferred Stock. The foregoing description of the
Rights is qualified by reference to the Rights Agreement.
Item 2. Exhibits.
1. Form of the Rights Agreement, dated as of January 11, 1999 between
Chromatics Color Sciences International, Inc. and Continental Stock
Transfer and Trust Company, as Rights Agent, which includes, as Exhibit A
thereto, Form of Certificate of Amendment of the Certificate of
Incorporation of Chromatics Color Sciences International, Inc., as Exhibit
B thereto, Form of Rights Certificate, and as Exhibit C thereto, Summary of
Rights to Purchase Preferred Stock. Pursuant to the Rights Agreement, Right
Certificates will not be mailed until after the Window Period following a
Shares Acquisition Date (as defined in the Rights Agreement) or the close
of business on the tenth day after a person commences or announces its
intention to commence an offer if, upon consummation thereof, such person
would become an Acquiring Person (as defined in the Rights Agreement).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Chromatics Color Sciences International, Inc.
By /s/ Darby S. Macfarlane
-------------------------------
Name: Darby S. Macfarlane
Title: Chief Executive Officer
Dated: January 4, 1999
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EXHIBIT INDEX
Description Page
----------- ----
Exhibit
- -------
1 Form of the Rights Agreement, dated as of 9
January 11, 1999 between Chromatics 9 Color
Sciences International, Inc. and Continental
Stock Transfer & Trust Company, as Rights
Agent, which includes, as Exhibit A thereto,
the Form of Certificate of Amendment of the
Certificate of Incorporation of Chromatics
Color Sciences International, Inc., as
Exhibit B thereto, Form of Rights
Certificate, and as Exhibit C thereto, the
Form of Summary of Rights to Purchase
Preferred Stock.
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PRIVILEGED AND CONFIDENTIAL
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
Rights Agent
Rights Agreement
Dated as of January 11, 1999
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions...............................................................................6
Section 2. Appointment of Rights Agent......................................................................10
Section 3. Issuance of Right Certificates...................................................................10
Section 4. Form of Right Certificate........................................................................12
Section 5. Countersignature and Registration................................................................13
Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates; Mutilated,
Destroyed, Lost or Stolen Right Certificate..................................................14
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights....................................15
Section 8. Cancellation and Destruction of Right Certificates...............................................17
Section 9. Reservation and Availability of Preferred Stock..................................................17
Section 10. Preferred Stock Record Date......................................................................19
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights......................19
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.......................................27
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.............................28
Section 14. Fractional Rights and Fractional Shares..........................................................31
Section 15. Rights of Action.................................................................................32
Section 16. Agreement of Right Holders.......................................................................32
Section 17. Right Certificate Holder Not Deemed a Shareholder................................................34
Section 18. Concerning the Rights Agent......................................................................34
Section 19. Merger or Consolidation or Change of Name of Rights Agent........................................35
Section 20. Duties of Rights Agent...........................................................................35
Section 21. Change of Rights Agent...........................................................................38
</TABLE>
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<TABLE>
<S> <C>
Section 22. Issuance of New Right Certificates...............................................................38
Section 23. Redemption and Termination.......................................................................39
Section 24. Notice of Certain Events.........................................................................41
Section 25. Notices..........................................................................................41
Section 26. Supplements and Amendments.......................................................................43
Section 27. Determination and Actions by the Board of Directors, etc.........................................44
Section 28. Successors.......................................................................................44
Section 29. Benefits of this Agreement.......................................................................44
Section 30. Severability.....................................................................................44
Section 31. Governing Law....................................................................................44
Section 32. Counterparts.....................................................................................45
Section 33. Descriptive Headings.............................................................................45
Exhibit A - Form of Certificate of Amendment designating the
relative rights, preferences and limitations of the Class B
Series 1 Preferred Stock of Chromatics Color Sciences
International, Inc.
Exhibit B - Form of Right Certificate
Exhibit C - Summary of Rights to Purchase Preferred Stock
</TABLE>
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Defined Term Cross Reference Sheet
Acquiring Person Section 1(a)
Act Section 1(b)
Adjustment Shares Section 11(a)(ii)
Adjusted Number of Shares Section 11(a)(iii)
Adjusted Purchase Price Section 11(a)(iii)
Affiliate Section 1(c)
Agreement Preface
Appointment of Rights Agent Section 2
Associate Section 1(c)
Beneficial Owner Section 1(d)
Beneficially Own Section 1(d)
Business Day Section 1(e)
Capital Stock Equivalent Section 11(a)(iii)
Close of Business Section 1(f)
Common Stock Section 1(g)
Corporation Preface
Current Per Market Price Section 11(d)
Current Per Share Market Price Section 11(d)(i)
Distribution Date Section 3(a)
Equivalent Preferred Shares Section 11(b)
Exchange Act Section 1(c)
Exempt Shareholder Section 1(i)
Final Expiration Date Section 7(a)
Interested Shareholder Section 1(k)
Permitted Offer Section 1(l)
Person Section 1(m)
Preferred Stock Section 1(n)
Principal Party Section 13(b)
Proration Factor Section 11(a)(iii)
Purchase Price Section 4(a)
Record Date Preface
Redemption Date Section 7(a)
Redemption Price Section 23
Right Preface
Right Certificate Section 3(a)
Right Agent Preface
Rights Agreement Section 3
Section 11(a)(ii) Event Section 11(a)(ii)
Section 13 Event Section 13(a)
Security Section 11(d)(i)
Shares Acquisition Date Section 1(r)
Subsidiary Section 1(s)
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Summary of Rights Section 3(b)
Then outstanding Section 1(d)(iii)
Trading Day Section 11(d)(i)
Triggering Event Section 1(t)
Voting Securities Section 13(a)
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of January 11, 1999 (the "Agreement"), between
Chromatics Color Sciences International, Inc., a New York corporation (the
"Corporation"), and Continental Stock Transfer & Trust Company (the "Rights
Agent").
The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Corporation outstanding at the
close of business on January 11, 1999 (the "Record Date"), each Right
representing the right to purchase one-hundredth of a Preferred Share (as
hereinafter defined), upon the terms and subject to the conditions herein set
forth, and has further authorized and directed the issuance of one Right with
respect to each share of Common Stock that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Final Expiration Date (as such terms are hereinafter defined); provided,
however, that Rights may be issued with respect to shares of Common Stock that
shall become outstanding after the Distribution Date and prior to the earlier of
the Redemption Date and the Final Expiration Date in accordance with the
provisions of Section 22 of this Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 20% or more of the then outstanding Common Stock (other than as a
result of a Permitted Offer (as hereinafter defined)) or was such a
Beneficial Owner at any time after the date hereof, whether or not such
person continues to be the Beneficial Owner of 20% or more of the then
outstanding Common Stock. Notwithstanding the foregoing, (A) the term
"Acquiring Person" shall not include (i) the Corporation, (ii) any
Subsidiary of the Corporation, (iii) any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation, (iv) any Person or
entity organized, appointed or established by the Corporation for or
pursuant to the terms of any such plan (each entity referred to in (i)-(iv)
hereof being a "Company Related Entity"), or (v) any Exempt Shareholder and
(B) no Person shall be deemed to be an Acquiring Person either (X) as a
result of the acquisition of Common Stock by the Corporation which, by
reducing the number of shares of Common Stock outstanding, increases the
proportional number of shares beneficially owned by such Person together
with all Affiliates and Associates of such Person; except that if (i) a
Person would become an Acquiring Person (but for the operation of this
subclause (X)) as a result of the acquisition of Common Stock by the
Corporation, and (ii) after such share acquisition by the Corporation, such
Person, or an Affiliate or Associate of such Person, becomes the Beneficial
Owner of any additional shares of Common Stock, then such Person shall be
deemed an Acquiring Person, (Y) if (i) within eight days after such Person
would
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otherwise have become an Acquiring Person (but for the operation of this
subclause (Y)), such Person notifies the Board of Directors that such
Person did so inadvertently and (ii) within two days after such
notification, such Person is the Beneficial Owner of less than 20% of the
outstanding Common Stock, or (Z) if the acquisition of shares of Common
Stock by such Person, or an Affiliate or Associate of such Person, is
approved prior to such acquisition by the Board of Directors of the
Corporation.
(b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act in effect on the date of this Agreement.
(d) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time) pursuant to
any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own,
securities tendered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (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 (other than customary
agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities) relating to
the acquisition, holding, voting (except to the extent contemplated by
the proviso to Section 1(d)(ii)(B)) or disposing of any securities of
the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial
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Ownership of securities of the Corporation, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, Sunday,
New York State holiday or U.S. federal holiday.
(f) "Close of business" on any given date shall mean 5:00 p.m., New
York time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 p.m., New York time, on the next succeeding
Business Day.
(g) "Common Stock" when used with reference to the Corporation shall
mean the Common Stock, par value $0.001 per share, of the Corporation or,
in the event of a subdivision, combination or consolidation with respect to
such shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Stock" when used with
reference to any Person other than the Corporation shall mean the capital
stock (or equity interest) with the greatest voting power of such other
Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(i) "Exempt Shareholder" shall mean at any time (i) any Person who or
which, together with all Affiliates and Associates of such Person (which
for the purpose of this definition shall exclude any Company Related
Entity), as of the close of business on the day the Corporation publicly
announces that the Board of Directors has adopted this Agreement (the
"Announcement Date"), was the Beneficial Owner of more than 20 percent of
the shares of Common Stock, and (ii) Darby Simpson Macfarlane, the Chief
Executive Officer of the Corporation; provided, however, that any such
Person, together with all Affiliates and Associates of such Person, shall
not be an Exempt Shareholder if the number of shares of Common Stock
Beneficially Owned by that Person, together with all Affiliates and
Associates of such Person (other than as a result of a stock dividend,
stock split or stock distribution by the Corporation), exceeds by more than
one percent of the number of shares of Common Stock Beneficially Owned by
that Person, together with all Affiliates and Associates of such Person, as
of the Announcement Date. In the case of Mrs. Macfarlane, any and all (i)
shares acquired upon exercise of options, including without limitation,
options issued under the Company's 1992 Stock Option Plan as beneficially
owned by her, as amended, held by Mrs. Macfarlane or her affiliates, and
(ii) shares issued upon conversion of the Class A Preferred Stock owned by
Mrs. Macfarlane or her affiliates, are not to be included in determining
whether her beneficial ownership has increased since the Announcement Date.
(j) "Final Expiration Date" shall have the meaning set forth in
Section 7 hereof.
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(k) "Interested Shareholder" shall mean any Acquiring Person or any
Affiliate or Associate of an Acquiring Person or any other Person in which
any such Acquiring Person, Affiliate or Associate has an interest, or any
other Person acting directly or indirectly on behalf of or in concert with
any such Acquiring Person, Affiliate or Associate.
(l) "Permitted Offer" shall mean a tender or exchange offer which is
for all outstanding shares of Common Stock at a price and on terms
determined, prior to the purchase of shares under such tender or exchange
offer, by at least a majority of the members of the Board of Directors who
are not Acquiring Persons or Affiliates, Associates, nominees or
representatives of an Acquiring Person, to be adequate (taking into account
all factors that such Directors deem relevant including, without
limitation, prices that could reasonably be achieved if the Corporation or
its assets were sold on an orderly basis designed to realize maximum value)
and otherwise in the best interests of the Corporation, its shareholders
(other than the Person or any Affiliate or Associate thereof on whose basis
the offer is being made) and its other relevant constituencies, taking into
account all factors that such Directors may deem relevant.
(m) "Person" shall mean any individual, firm, partnership,
corporation, trust, association, joint venture or other entity, and shall
include any Successor (by merger or otherwise) of such entity.
(n) "Preferred Stock" shall mean Class B Series 1 Preferred Stock, par
value $0.001 per share, of the Corporation having the relative rights,
preferences and limitations set forth in the Form of Certificate of
Amendment attached to this Agreement as Exhibit A.
(o) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(p) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii) hereof.
(q) "Section 13 Event" shall mean any event described in clause (x),
(y) or (z) of Section 13(a) hereof.
(r) "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 the Exchange Act) by the
Corporation or an Acquiring Person that an Acquiring Person has become
such; provided, that, if such Person is determined not to have become an
Acquiring Person pursuant to Section 1(a)(Y) hereof, then no Shares
Acquisition Date shall be deemed to have occurred.
(s) "Subsidiary" of any Person shall mean any corporation or other
Person of which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such
Person.
(t) "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 Corporation hereby appoints the
Rights Agent to act as agent for the Corporation and the holders of the Rights
(who, in accordance with Section 3 hereof, shall prior to the Distribution Date
also be the holders of shares of Common Stock) in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable upon 10 days' prior written notice to the Rights Agent.
The Rights Agent shall have no duty to supervise, and shall in no event be
liable for, the acts or omissions of, any such co-Rights Agent.
Section 3. Issuance of Right Certificates. (a) Until the earlier of (i) the
expiration of the 10 day period (or any extension thereof as determined by the
Board of Directors of the Corporation) (the "Window Period") following the
Shares Acquisition Date or (ii) the close of business on the tenth day (or such
later date as may be determined by action of the Corporation's Board of
Directors) after the date of the commencement by any Person (other than the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation or any Person or entity
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan) of, or of the first public announcement of the intention
of any Person (other than the Corporation, any Subsidiary of the Corporation,
any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation or any Person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of any such plan) to commence (which
intention to commence remains in effect for five Business Days after such
announcement), a tender or exchange offer, the consummation of which would
result in any Person becoming an Acquiring Person (including, in the case of
both (i) and (ii), any such date which is after the date of this Agreement and
prior to the issuance of the Rights) (the earlier of such dates being herein
referred to as the "Distribution Date") (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the certificates for
shares of Common Stock registered in the names of the holders thereof (which
certificates shall also be deemed to be Right Certificates) and not by separate
Right Certificates, and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Corporation); provided, however, that
if a tender offer is terminated prior to the occurrence of a Distribution Date,
then no Distribution Date shall occur as a result of such tender offer. As soon
an practicable after the Distribution Date, the Corporation will prepare and
execute, the Rights Agent will countersign, and the Corporation will send or
cause to be sent, at the Corporation's expense, by first-class, postage-prepaid
mail, to each record holder of shares of Common Stock as of the close of
business on the Distribution Date, at the address of such holder shown on the
records of the Corporation, a Right Certificate, substantially in the form of
Exhibit B hereto (a "Right Certificate"), evidencing one Right for each share of
Common Stock so held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) As promptly as practicable following the Record Date, the Corporation
will send a copy of a Summary of Rights to Purchase Preferred Stock, in
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substantially the form of Exhibit C hereto (the "Summary of Rights"), by
first-class, postage-prepaid mail, to each record holder of shares of Common
Stock as of the close of business on the Record Date, at the address of such
holder shown on the records of the Corporation, with respect to certificates for
shares of Common Stock outstanding as of the Record Date. Until the Distribution
Date, the Rights will be evidenced by such certificates registered in the names
of the holders thereof together with a copy of the Summary of Rights attached
thereto. Until the Distribution Date (or the earlier of the Redemption Date or
the Final Expiration Date), the surrender for transfer of any certificate for
shares of Common Stock outstanding on the Record Date, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with such shares of Common Stock.
(c) Certificates for shares of Common Stock which become outstanding
(including, without limitation, reacquired shares of Common Stock referred to in
the last sentence of this paragraph (c)) after the Record Date but prior to the
earliest of the Distribution Date, the Redemption Date or the Final Expiration
Date, shall be deemed also to be certificates for Rights, and shall bear the
following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Chromatics
Color Sciences International, Inc. ("Chromatics") and Continental Stock
Transfer & Trust Company, dated as of January 11, 1999 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive
offices of Chromatics. Under certain circumstances, as set forth in the
Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.
Chromatics will mail to the holder of this certificate a copy of the
Rights Agreement without charge 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 an Affiliate or Associate thereof (as
defined in the Rights Agreement) and certain related Persons, whether
currently held by or on behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented
thereby. In the event that the Corporation purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date, any
Rights associated with such shares shall be deemed cancelled and retired so that
the Corporation shall not be entitled to exercise any Rights associated with the
shares of Common Stock which are no longer outstanding.
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Section 4. Form of Right Certificate. (a) The Right Certificates (and the
forms of election to purchase and of assignment to be printed on the reverse
thereof) 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 Corporation may deem appropriate and as
are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage. Subject to
the provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one-hundredths (1/100) of
a share of Preferred Stock as shall be set forth therein at the price per
one-hundredth of a share of Preferred Stock set forth therein (the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section 7(e)
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Right Certificate
and the Rights represented hereby are null and void.
The Corporation shall instruct the Rights Agent in writing of the Rights which
should be legended and shall supply the Rights Agent with such legended Right
Certificates. Provisions of Section 7(e) of this Rights Agreement shall be
operative whether or not the foregoing legend is contained on any such Right
Certificate.
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Section 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Corporation by its Chief Executive Officer, either
manually or by facsimile signature, shall have affixed thereto the Corporation's
seal or a facsimile thereof, and shall be attested by the Secretary or an
Assistant Secretary of the Corporation, either manually or by facsimile
signature. The Right Certificates shall be countersigned by an authorized
signatory of the Rights Agent which need not be the same authorized signatory
for all of the Right Certificates and shall not be valid for any purpose unless
so countersigned. In case any officer of the Corporation who shall have signed
any of the Right Certificates shall cease to be such officer of the Corporation
before countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates may nevertheless be countersigned by an
authorized signatory of the Rights Agent and issued and delivered by the
Corporation with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the Corporation; and any
Right Certificate may be signed on behalf of the Corporation by any person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Corporation to sign such Right Certificate, although at the date
of the execution of this Rights Agreement any such person was not such an
officer.
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 such Right Certificates or transfer, books for registration and transfer of
the Right Certificates issued hereunder. Such books shall show the names and
addresses of the respective holders of the Right Certificates, the number of
Rights evidenced on its face by each of the Right Certificates and the
certificate number and the date of each of the Right Certificates.
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Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate. Subject to
the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any time
after the close of business on the Distribution Date, and at or prior to the
close of business on the earlier of the Redemption Date or the Final Expiration
Date, any Right Certificate(s) may be transferred, split up, combined or
exchanged for another Right Certificate(s), entitling the registered holder to
purchase a like number of one-hundredth of a share of Preferred Stock (or,
following a Triggering Event, other securities, as the case may be) as the Right
Certificate(s) 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 Right Certificate(s) shall make such request
in writing delivered to the Rights Agent, and shall surrender the Right
Certificate(s) 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 Corporation shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Right Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the
Corporation and/or Rights Agent shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Right certificate or
Right Certificates, as the case may be, as so requested. The Corporation may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.
Upon receipt by the Corporation and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate, if mutilated, along with a signature guarantee and such
other and further documents as the Rights Agent may reasonably request, the
Corporation will make and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered holder in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
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Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right 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,
along with a signature guarantee and such other and further documents as the
Rights Agent may reasonably request, together with payment of the aggregate
Purchase Price for the total number of one-hundredths of a share of Preferred
Stock (or other securities, as the case may be) as to which such surrendered
Rights are exercised, at or prior to the earliest of (i) the close of business
on January 11, 2009 (the "Final Expiration Date"), or (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date").
(b) The Purchase Price for each one-hundredth of a share of Preferred Stock
pursuant to the exercise of a Right shall initially be $28, shall be subject to
adjustment from time to time as provided in the next sentence and in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
Anything in this Agreement to the contrary notwithstanding, in the event that at
any time after the date of this Agreement and prior to the Distribution Date,
the Corporation shall (i) declare or pay any dividend on the Common Stock
payable in shares of Common Stock or (ii) effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in any such case, each share of Common Stock
outstanding following such subdivision, combination or consolidation shall
continue to have a Right associated therewith, and the Purchase Price following
any such event shall be proportionately adjusted to equal the result obtained by
multiplying the Purchase Price immediately prior to such event by a fraction,
the numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event. The adjustment provided for
in the preceding sentence shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Stock (or other
securities, as the case may be) to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Stock certificates for the number of shares of Preferred Stock to be
purchased, and the Corporation hereby irrevocably authorizes its transfer agent
to comply with all such requests, or (B) if the Corporation, in its sole
discretion, shall have elected to deposit the Preferred Stock issuable upon
exercise of the Rights hereunder into a depositary, requisition from the
depositary agent depositary receipts representing such
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number of one-hundredths of a share of Preferred Stock as are to be purchased
(in which case certificates for the Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent), and the
Corporation will direct the depositary agent to comply with such requests, (ii)
when appropriate, requisition from the Corporation the amount of cash to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder, and (iv) when appropriate, after receipt thereof, deliver such cash to
or upon the order of the registered holder of such Right Certificate. In the
event that the Corporation is obligated to issue other securities (including
Common Stock) of the Corporation pursuant to Section 11(a) hereof, the
Corporation will make all arrangements necessary so that such other securities
are available for distribution by the Rights Agent, if and when appropriate.
In addition, in the case of an exercise of the Rights by a holder pursuant
to Section 11(a)(ii), the Rights Agent shall return such Right Certificate to
the registered holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Right Certificate no longer include
the rights provided by Section 11(a)(ii) of the Rights Agreement and if less
than all the Rights represented by such Right Certificate were so exercised, the
Rights Agent shall indicate on the Right Certificate the number of Rights
represented thereby which continue to include the rights provided by Section
11(a)(ii).
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
(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 Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Corporation has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Corporation shall use all reasonable efforts to insure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder
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of Right 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 Corporation 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 Right Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Corporation shall reasonably request.
Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Agreement. The Corporation shall deliver
to the Rights Agent for cancellation and retirement, and the Rights Agent shall
so cancel and retire, any other Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Corporation.
Section 9. Reservation and Availability of Preferred Stock. The Corporation
covenants and agrees that at all times prior to the occurrence of a Section
11(a)(ii) Event it will cause to be reserved and kept available out of its
authorized and unissued Preferred Stock, or any authorized and issued Preferred
Stock held in its treasury, the number of shares of Preferred Stock that will be
sufficient to permit the exercise in full of all outstanding Rights, and, after
the occurrence of a Section 11(a)(ii) Event, shall, to the extent reasonably
practicable, so reserve and keep available a sufficient number of shares of
Common Stock (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Stock (and, after the occurrence of a Section
11(a)(ii) Event, Common Stock or any other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Nasdaq SmallCap Market or the Nasdaq National Market, the Corporation 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, or to be listed on the
Nasdaq SmallCap Market or the Nasdaq National Market, as the case may be.
The Corporation covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Stock (or Common Stock and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for
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such stock or other securities (subject to payment of the Purchase Price), be
duly and validly authorized and issued and fully paid and non-assessable shares
or securities.
The Corporation further covenants and agrees that it will pay when due and
payable any and all U.S. federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Stock (or Common Stock and/or other securities, as the case may
be) upon the exercise of Rights. The Corporation shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Preferred Stock (or
Common Stock and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or to deliver any certificates or
depositary receipts for Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of any Rights, until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Corporation's reasonable satisfaction that no such tax is due.
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation will also take such action as may be appropriate under the blue
sky laws of the various states.
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Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for Preferred Stock (or Common Stock 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 the Preferred Stock (or Common
Stock and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that, if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Corporation are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Stock (or Common Stock and/or
other securities, as the case may be) transfer books of the Corporation are
open.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C)
combine the outstanding shares of Preferred Stock into a smaller number of
shares of Preferred Stock or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation 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 shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the corporation were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Corporation issuable upon exercise of one Right. If an event occurs which would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person, then proper provision shall be
made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall, for a period
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of 60 days after the later of the expiration of the Window Period following the
occurrence of any such event or the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of shares of
Common Stock (or, in the discretion of the Board of Directors, one-hundredths of
a share of Preferred Stock) as shall equal the result obtained by (y)
multiplying the then current Purchase Price by the then number of one-hundredths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event, and dividing that
product by (z) 50% of the then current per share market price of the
Corporation's Common Stock (determined pursuant to Section 11(d) hereof) on the
date of such first occurrence (such number of shares being referred to as the
"Adjustment Shares"); provided, however, that if the transaction that would
otherwise give rise to the foregoing adjustment is also subject to the
provisions of Section 13 hereof, then only the provisions of Section 13 hereof
shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii);
(iii) In the event that there shall not be sufficient treasury shares or
authorized but unissued (and unreserved) shares of Common Stock to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) and the Rights become so exercisable (and the Board has determined to make
the Rights exercisable into fractions of a share of Preferred Stock),
notwithstanding any other provision of this Agreement, to the extent necessary
and permitted by applicable law, each Right shall thereafter represent the right
to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, (x) a number of (or fractions of)
shares of Common Stock (up to the maximum number of shares of Common Stock which
may permissibly be issued) and (y) one-hundredth of a share of Preferred Stock
or a number of, or fractions of other equity securities of the Corporation (or,
in the discretion of the Board of Directors, debt) which the Board of Directors
of the Corporation has determined to have the same aggregate current market
value (determined pursuant to Section 11(d)(i) and (ii) hereof, to the extent
applicable) as one share of Common Stock (such number of, or fractions of,
shares of Preferred Stock, debt, or other equity securities or debt of the
Corporation being referred to as a "capital stock equivalent"), equal in the
aggregate to the number of Adjustment Shares; provided, however, if sufficient
Common Stock and/or capital stock equivalents are unavailable, then the
Corporation shall, to the extent permitted by applicable law, take all such
action as may be necessary to authorize additional shares of Common Stock or
capital stock equivalents for issuance upon exercise of the Rights, including
the calling of a meeting of shareholders; and provided, further, that if the
Corporation is unable to cause sufficient shares of Common Stock and/or capital
stock equivalents to be available for issuance upon exercise in full of the
Rights, then each Right shall thereafter represent the right to receive the
Adjusted Number of Shares upon exercise at the Adjusted Purchase Price (as such
terms are hereinafter defined). As used herein, the term "Adjusted Number of
Shares" shall be equal to that number of (or fractions of) shares of Common
Stock (and/or capital stock equivalents) equal to the product of (x) the number
of Adjustment Shares and (y) a fraction, the numerator of which is the number of
shares of Common Stock (and/or capital stock equivalents) available for issuance
upon exercise of the Rights and the denominator of which is the aggregate number
of Adjustment Shares otherwise issuable upon exercise in full of all Rights
(assuming there were a sufficient number of shares of Common Stock available)
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(such fraction being referred to as the "Proration Factor"). The "Adjusted
Purchase Price" shall mean the product of the Purchase Price and the Proration
Factor. The Board of Directors may, but shall not be required to, establish
procedures to allocate the right to receive Common Stock and capital stock
equivalents upon exercise of the Rights among holders of Rights.
(b) In case the Corporation shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Stock (or shares having the
same rights, privileges and preferences as the Preferred Stock ("equivalent
preferred shares")) or securities convertible into Preferred Stock or equivalent
preferred shares at a price per share of Preferred Stock or equivalent preferred
share (or having a conversion price per share, if a security convertible into
Preferred Stock or equivalent preferred shares) less than the then current per
share market price of the Preferred Stock (as determined pursuant to Section
11(d) hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock outstanding on such record date
plus the number of shares of Preferred Stock which the aggregate offering price
of the total number of shares of Preferred Stock and/or equivalent preferred
shares so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current per
share market price, and the denominator of which shall be the number of shares
of Preferred Stock outstanding on such record date plus the number of additional
shares of Preferred Stock and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent.
Preferred Stock owned by or held for the account of the Corporation 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 Corporation shall fix a record date, and shall give
simultaneous written notice to the Rights Agent for the making of a distribution
to all holders of the Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Corporation is the
continuing or surviving corporation) of evidences of indebtedness or assets
(other than a regular quarterly cash dividend or a dividend payable in shares of
Preferred Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price (as determined
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pursuant to Section 11(d) hereof) of the Preferred Stock on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent)
of the portion of the assets or evidences of indebtedness so to be distributed
or of such subscription rights or warrants applicable to one share of Preferred
Stock and the denominator of which shall be such current per share market price
of the Preferred Stock; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares, or (B) any subdivision, combination or reclassification of such Security
and prior to the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market, or if
the Security is not listed or admitted to trading on the New York Stock
Exchange, the Nasdaq SmallCap Market or the Nasdaq National Market, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange, on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the Board
of Directors of the Corporation. If on any such date no such market maker is
making a market in the Security, the fair value of the Security on such date as
determined in good faith by the Board of Directors of the Corporation shall be
used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.
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(ii) For the purpose of any computation hereunder, the "current per share
market prices" of the Preferred Stock shall be determined in accordance with the
method set forth in Section 11(d)(i). If the Preferred Stock is not publicly
traded, the "current per share market price" of the Preferred Stock shall be
conclusively deemed to be the current per share market price of the Common Stock
as determined pursuant to Section 11(d)(i) (appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof), multiplied by 100. If neither the Common Stock nor the Preferred Stock
is publicly held or so listed or traded, "current per share market price" shall
mean the fair value per share as determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent.
(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 which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one-hundredth of a share of Preferred Stock or
ten-thousandth of any other share or security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Corporation other than
Preferred Stock, thereafter the number of other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Corporation 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
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Corporation 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
share of Preferred Stock (calculated to the nearest one-millionth of a share of
Preferred Stock) obtained by (i) multiplying (x) the number of one-hundredths of
a share covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect
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<PAGE>
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 Corporation 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 such adjustment of the number of
Rights shall be exercisable for the number of one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
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 Corporation shall make a
public announcement, and shall give simultaneous written notice to the Rights
Agent, 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 Right Certificates have been issued,
shall be at least ten (10) days later than the date of the public announcement.
If Right Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(h), the Corporation shall, as promptly as
practicable, cause to be distributed to holders of record of Right Certificates
on such record date Right 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 Corporation, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Corporation, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right 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 share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one-hundredths of a
share of Preferred Stock which were expressed in the initial Right Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the number of one-hundredths
of a share of Preferred Stock, shares of Common Stock or other securities
issuable upon exercise of the Rights, the Corporation shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue such number of fully paid and
non-assessable one-hundredths of a share of Preferred Stock, shares of Common
Stock or other securities at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Corporation
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may elect to defer until the occurrence of such event the issuance to the holder
of any Right exercised after such record date the Preferred Stock, Common Stock
or other securities of the Corporation, if any, issuable upon such exercise over
and above the Preferred Stock, Common Stock or other securities of the
Corporation, if any, issuable upon exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided, however, that the Corporation
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of Preferred Stock at less than the current market
price, (iii) issuance wholly for cash of Preferred Stock or securities which by
their terms are convertible into or exchangeable for Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Corporation to holders of its Preferred Stock
shall not be taxable to such shareholders.
(n) The Corporation 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 Corporation in a transaction which does not violate Section
11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Corporation in a transaction which does not violate Section 11(n)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(n) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(m).
(o) The Corporation covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action the purpose of which is to, or if at
the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.
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(p) The exercise of Rights under Section 11(a)(ii) shall only result in the
loss of rights under Section 11(a)(ii) to the extent so exercised and shall not
otherwise affect the rights represented by the Rights under this Rights
Agreement, including the rights represented by Section 13.
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Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock
and the Preferred Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of such adjustment unless and until it shall have received such
certificate.
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Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that, on or following the Shares Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Interested Shareholder or, if in such merger or consolidation
all holders of Common Stock are not treated alike, any other Person, (y) the
Corporation shall consolidate with, or merge with, any Interested Shareholder
or, if in such merger or consolidation all holders of Common Stock are not
treated alike, any other Person, and the Corporation shall be the continuing or
surviving corporation of such consolidation or merger (other than, in a case of
any transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities") of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting securities
of the Corporation or such surviving entity outstanding immediately after such
merger or consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Corporation shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any Interested
Shareholder or Shareholders or, if in such transaction all holders of Common
Stock are not treated alike, any other Person (other than the Corporation or any
Subsidiary of the Corporation in one or more transactions each of which does not
violate Section 11(n) hereof), then, and in each such case (except as provided
in Section 13(d) hereof), proper provision shall be made so that (i) 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 a price equal to the then current
Purchase Price, in accordance with the terms of this Agreement and in lieu of
Preferred Stock, such number of freely tradeable shares of Common Stock of the
Principal Party (as hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal
the result obtained by (A) multiplying the then current Purchase Price by the
number of one-hundredths of a share of Preferred Stock for which a Right is then
exercisable (without taking into account any adjustment previously made pursuant
to Section 11(a)(ii)) and dividing that product by (B) 50% of the then current
per share market price of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) 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 Corporation pursuant to this Agreement; (iii) the term "Corporation" 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; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its shares of Common Stock) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as reasonably
may be, in relation to the Common Stock thereafter deliverable upon the exercise
of the Rights.
(b) "Principal Party" shall mean
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(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities into which Common Stock of the Corporation is converted in such
merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation (including, if
applicable, the Corporation if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions;
provided, however, that in any of the foregoing cases, (1) if the shares of
Common Stock of such Person are not at such time and have not been continuously
over the preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect Subsidiary of another
Person the shares of Common Stock of which are and have been so registered,
"Principal Party" shall refer to such other Person; (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one Person, the Common Stock of
two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Common Stock having the
greatest aggregate market value; and (3) in case such Person is owned, directly
or indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in (1)
and (2) above shall apply to each of the chains of ownership having an interest
in such joint venture as if such party were a Subsidiary of both or all of such
joint venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Corporation shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
its authorized shares of Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Corporation and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate; and
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(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly
owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of Common Stock whose shares were purchased
pursuant to such Permitted Offer; and (iii) the form of consideration offered in
such transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
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Section 14. Fractional Rights and Fractional Shares. (a) The Corporation
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange, the Nasdaq
SmallCap Market or the Nasdaq National Market or, if the Rights are not listed
or admitted to trading on the New York Stock Exchange, the Nasdaq SmallCap
Market or the Nasdaq National Market, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Rights, the fair value of the Rights
on such date as determined in good faith by the Board of Directors of the
Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are one-hundredth or integral
multiples of one-hundredth of a share of Preferred Stock) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are one-hundredth or integral
multiples of one-hundredth of a share of Preferred Stock). Fractions of shares
of Preferred Stock in integral multiples of one-hundredth of a share of
Preferred Stock may, at the election of the Corporation, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the
Corporation and a depositary selected by it; provided that such agreement shall
provide that the holders of such depositary receipts shall have the rights,
privileges and preferences to which they are entitled as beneficial owners of
the Preferred Stock represented by such depositary receipts. In lieu of
fractional shares of Preferred Stock that are not one-hundredth or integral
multiples of one-hundredth of a share of Preferred Stock, the Corporation shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one share of Preferred Stock. For the purposes of this
Section 14(b), the current market value of a share of Preferred Stock shall be
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
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(c) Following the occurrence of one of the transactions or events specified
in Section 11 giving rise to the right to receive Common Stock, capital stock
equivalents (other than shares of Preferred Stock) or other securities upon the
exercise of a Right, the Corporation shall not be required to issue fractions of
shares or units of such Common Stock, capital stock equivalents or other
securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such shares of Common Stock, capital stock equivalents or
other securities. In lieu of fractional shares or units of such shares of Common
Stock, capital stock equivalents or other securities, the Corporation may pay to
the registered holders of Right Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of a share or unit of such Common Stock, capital stock
equivalents or other securities. For purposes of this Section 14(c), the current
market value shall be determined in that manner set forth in Section 11(d)
hereof for the Trading Day immediately prior to the date of such exercise and,
if such capital stock equivalent is not traded, each such capital stock
equivalent shall have the value of one-hundredth of a share of Preferred Stock.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional share upon exercise
of a Right (except as provided above).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office or offices of the Rights
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Agent designated for such purpose, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate form fully executed, along
with a signature guarantee and such other further documentation as the
Rights Agent may reasonably request;
(c) subject to Section 6 and Section 7(f) hereof, the Corporation and
the Rights Agent may deem and treat the person in whose name the Right
Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or
writing on the Right Certificate or the associated Common Stock certificate
made by anyone other than the Corporation or the Rights Agent) for all
purposes whatsoever, and neither the Corporation nor the Rights Agent,
subject to the last sentence of Section 7(e) hereof, shall be required to
be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Corporation nor the Rights Agent shall have any liability to
any holder of a Right or a beneficial interest in 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 Corporation must use its best
efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
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Section 17. Right Certificate Holder Not Deemed a Shareholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Stock or any other
securities of the Corporation which may at any time be issuable on the exercise
of the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24 hereof), or to receive dividends
or other distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Corporation agrees to pay to
the Rights Agent such compensation as shall be agreed to in writing in advance
of execution of this Agreement between the Corporation and the Rights Agent 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 expenses and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Corporation also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any
loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including, without limitation, the costs and expenses of defending
against any claim of liability in the premises. The indemnity provided for
herein shall survive the expiration of the Rights and the termination of this
Agreement.
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 Right Certificate or
certificate for Common Stock or for other securities of the Corporation,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed and executed by the
proper Person or Persons.
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Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
all or substantially all of the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided 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 Right 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 Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes only those
duties and obligations expressly imposed by this Agreement, and no implied
duties or obligations shall be read into this Agreement against the Rights
Agent, upon the following terms and conditions, by all of which the Corporation
and the holders of Right Certificates, by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any
action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein
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specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer or the Secretary of the Corporation 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 gross
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
Right Certificates (except to countersignature on such Right Certificates)
or be required to verify the same, but all such statements and recitals are
and shall be deemed to have been made by the Corporation 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 Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Corporation of
any covenant or condition contained in this Agreement or in any Right
Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void pursuant
to Section 7(e) hereof) or any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or
amount of any change in the exercisability of the Rights or any such
adjustment or the ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after receipt of the certificate described
in Section 12 hereof); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of
any Preferred Stock or Common Stock to be issued pursuant to this Agreement
or any Right Certificate or as to whether any Preferred Stock or Common
Stock will, when issued, be validly authorized and issued, fully paid and
non-assessable; nor shall the Rights Agent be responsible for the legality
of the terms hereof in its capacity as an administrative agent.
(f) The Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered
all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or
performing by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chief Executive Officer of the Corporation, and to apply to such
officer for advice or instructions in connection with its duties, and
shall not be liable for any action taken or suffered by it in good faith or
lack of action in accordance with instructions of any such officer or for
any delay in acting while waiting for those instructions. Any application
by the Rights Agent for written instructions from the Corporation may, at
the option of the Rights Agent, set
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forth in writing any action proposed to be taken or omitted by the Rights
Agent under this Rights Agreement and the date on or after which such
action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights
Agent in accordance with a proposal included in any such application on or
after the date specified in such application (which date shall not be less
than five Business Days after the date any officer of the Corporation
actually receives such application, unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instruction in response to such application
specifying the action to be taken or omitted.
(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 Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or
lend money to the Corporation or otherwise act as fully and freely as
though it were not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the
Corporation or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Corporation resulting
from any such act, default, neglect or misconduct, provided reasonable care
was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or liability is
not reasonably assured to it.
(k) If, with respect to any Right 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 not
been completed, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting
with the Corporation.
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Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Corporation. The
Corporation may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
or Preferred Stock by registered or certified mail, and to holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Corporation shall appoint a
successor to the Rights Agent. If the Corporation shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), then the Corporation shall become the Rights
Agent until a successor Rights Agent has been appointed, and the registered
holder of any Right Certificate may apply to any court of competent jurisdiction
for the appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Corporation or by such a court, shall be a corporation
organized and doing business under the laws of the United States or of the State
of Delaware or of the State of New York (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of Delaware or in the State of New York), in good
standing, having an office in the State of Delaware or in the State of New York,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000. 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
Corporation shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Stock or Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Right 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 Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Corporation
may, at its option, subject to Section 4 hereof, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.
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In addition, in connection with the issuance or sale of Common Stock
following the Distribution Date and prior to the earlier of the Redemption Date
and the Final Expiration Date, the Corporation (a) shall with respect to Common
Stock so issued or sold pursuant to the exercise of stock options or under any
employee plan or arrangement, or upon the exercise, conversion or exchange of
securities, notes or debentures issued by the Corporation, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Corporation, issue Right Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) the
Corporation shall not be obligated to issue any such Right Certificates if, and
to the extent that, the Corporation shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Corporation or the Person to whom such Right Certificate would be issued,
and (ii) no Right Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) (i) The Board of Directors of the Corporation may, at its option,
redeem all but not less than all of 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"), (A) at any time prior to the earlier of (x) the occurrence
of a Section 11(a)(ii) Event (and after giving effect to the Window Period), or
(y) the Final Expiration Date, or (B) within 10 days after any Person becomes an
Acquiring Person if (x) the Acquiring Person notifies the Board of Directors
that such person became an Acquiring Person inadvertently and (y) during such 10
day period, and at the time of redemption, the Acquiring Person is no longer the
Beneficial Owner of 20% or more of the then outstanding Common Stock, or (C) the
Board chooses to redeem the rights within the Window Period. The Corporation
may, at its option, pay the Redemption Price either in Common Stock (based on
the "current per share market price," as defined in Section 11(d) hereof, of the
Common Stock at the time of redemption) or cash; provided that if the
Corporation elects to pay the Redemption Price in Common Stock, the Corporation
shall not be required to issue any fractional shares of Common Stock and the
number of shares of Common Stock issuable to each holder of Rights shall be
rounded down to the next whole share.
(ii) In addition, the Board of Directors of the Corporation may at its
option, at any time following the occurrence of a Section 11(a)(ii) Event (and
after giving effect to the Window Period) and the expiration of any period
during which the holder of Rights may exercise the rights, under Section
11(a)(ii) but prior to any Section 13 Event, redeem all but not less than all of
the then outstanding Rights at the Redemption Price (x) in connection with any
merger, consolidation or sale or other transfer (in one transaction or in a
series of related transactions) of assets or earning power aggregating 50% or
more of the earning power of the Corporation and its Subsidiaries (taken as a
whole) in which all holders of Common Stock are treated alike and not involving
(other than as a holder of Common Stock being treated like all
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other such holders) an Interested Shareholder or (y)(A) if and for so long as
the Acquiring Person is not thereafter the Beneficial Owner of 20% of the Common
Stock, and (B) at the time of redemption no other Persons are Acquiring Persons.
(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified) in a resolution of the Board of Directors ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights will terminate, and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. In the case of
a redemption permitted only under Section 23(a)(ii), evidence of which shall
have been filed with the Rights Agent, the right to exercise the Rights will
terminate and represent only the right to receive the Redemption Price upon the
later of the tenth Business Day following the giving of such notice or the
expiration of any period during which the rights under Section 11(a)(ii) may be
exercised. The Corporation shall promptly give public notice of any such
redemption; provided, however, that the failure to give, or any defect in, any
such notice shall not affect the validity of such redemption. Within ten (10)
days after such date for redemption set forth in a resolution of the Board of
Directors ordering the redemption of the Rights, the Corporation shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Stock, and to 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 redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Corporation not any of
its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this
Section 23 and other than in connection with the purchase of Common Stock prior
to the Distribution Date.
(c) The Corporation may, at its option, discharge all of its obligations
with respect to the Rights by (i) issuing a press release, and giving
simultaneous written notice to the Rights Agent, announcing the manner of
redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent of
the Common Stock, and upon such action, all outstanding Rights and Right
Certificates shall be null and void without any further action by the
Corporation.
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Section 24. Notice of Certain Events. (a) In case the Corporation shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regularly quarterly cash dividend), (ii) to offer
to the holders of its Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding Preferred Stock), (iv) to effect any
consolidation or merger into or with any other Person (other than a Subsidiary
of the Corporation in a transaction which does not violate Section 11(n)
hereof), or to affect any sale or other transfer (or to permit one or more of
its Subsidiaries to affect any sale or other transfer) in one or more
transactions, of 50% or more of the assets or earning power of the Corporation
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Corporation and/or any of its Subsidiaries in one or more transactions
each of which does not violate Section 11(n) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Corporation, then, in each such
case, the Corporation shall give to each holder of a Right Certificate, in
accordance with Section 25 hereof, a notice of such proposed action to the
extent feasible and file a certificate with the Rights Agent to that effect,
which shall specify the record date for the purposes of such stock dividend, or
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Preferred Stock, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least 20
days prior to the record date for determining holders of the Preferred Stock for
purposes of such action, and in the case of any such other action, at least 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 Stock, whichever shall be
the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation shall as
soon as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 25 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph (a) to Preferred Stock shall be deemed thereafter to refer
also to Common Stock and/or, if appropriate, other securities of the
Corporation.
Section 25. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Corporation 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:
Chromatics Color Sciences International, Inc.
5 East 80th Street
New York, New York 10021
Attention: Darby Simpson Macfarlane
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Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Corporation or by the holder of any
Right 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 Corporation) as follows:
Continental Stock Trust & Transfer Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Stock 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 Corporation.
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Section 26. Supplements and Amendments. Prior to the Distribution Date, the
Corporation and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Stock. From and after the
Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, 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. Upon the delivery of a certificate from an
appropriate officer of the Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 26, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
or amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock. Notwithstanding
any other provision hereof, the Rights Agent's consent must be obtained
regarding any amendment or supplement pursuant to this Section 26 which alters
the Rights Agent's rights or duties.
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Section 27. Determination and Actions by the Board of Directors, etc. The
Board of Directors 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, or the Corporation, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend the Agreement and whether any proposed amendment
adversely affects the interests of the holders of Right Certificates). For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock or other securities outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock or any other securities 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 of this Agreement. All such actions, calculations, interpretations and
determinations (including, for purposes clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board of Directors in
good faith, shall (x) be final, conclusive and binding on the Corporation, the
Rights Agent, the holders of the Right Certificates and all other parties, and
(y) not subject the Board to any liability to the holders of the Right
Certificates.
Section 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Corporation or the Rights Agent shall bind and
inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Corporation, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Stock).
Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 31. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
44
<PAGE>
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.
CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
Attest:
By: _________________________ By: ___________________________
Name: Name: Darby S. Macfarlane
Title: Title: Chief Executive Officer
CONTINENTIAL STOCK TRANSFER &
TRUST COMPANY
Attest:
By: _________________________ By: ___________________________
Name: Name:
Title: Title:
46
<PAGE>
Exhibit A
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
CHROMATICS COLOR SCIENCES INTERNATIONAL, INC.
------------------------
Under Section 805 of the
Business Corporation Law
------------------------
We, the undersigned, Darby S. Macfarlane, Chief Executive Officer, and
Leslie Foglesong, Secretary, of Chromatics Color Sciences International, Inc.
(the "Corporation"), a corporation organized and existing under the Business
Corporation Law of the State of New York, do hereby certify as follows:
1. The name of the Corporation is CHROMATICS COLOR SCIENCES INTERNATIONAL,
INC.
2. The Certificate of Incorporation of the Corporation was filed by the
Department of State on March 30, 1984. The Corporation was formed under the name
Chromatics International, Inc.
3. The Certificate of Incorporation of the Corporation, as heretofore
amended, is hereby further amended to fix the relative rights, preferences and
limitations with respect to the Class B Preferred Stock of the Corporation.
1
<PAGE>
4. To accomplish the foregoing,
(i) Paragraph D of Article FOURTH of the Certificate of Incorporation
of the Corporation is amended to read in its entirety as follows:
"D. Class B Preferred Stock.
1. The Board of Directors of the Corporation is authorized, subject to the
limitations prescribed by law, to provide for the issuance of the Class B
Preferred Stock in series, to establish the number of shares to be included
in each series and to fix the designation and the relative rights,
preferences and limitations of the Class B Preferred Stock of each series.
The authority of the Board of Directors with respect to each series shall
include, but shall not be limited to, determination of the following:
(1) The number of shares of Class B Preferred Stock constituting that
series and the distinctive designation of that series.
(2) The dividend rate on the Class B Preferred Stock of that series
and whether dividends shall be cumulative and, if so, from which date or
dates.
(3) Whether the Class B Preferred Stock of that series shall have
voting rights, in addition to the voting rights provided by law, and, if
so, the terms of such voting rights.
(4) Whether the Class B Preferred Stock of that series shall have
conversion privileges and, if so, the terms and conditions of such
conversion, including, without limiting the generality thereof, provisions
for adjustment of the conversion rate in such events as the Board of
Directors shall determine.
(5) Whether the Class B Preferred Stock of that series shall be
redeemable and, if so, the terms and conditions of such redemption,
including, without limiting the generality thereof, the date or dates upon
or after which such Class B Preferred Stock shall be redeemable and the
amount per share payable in the event of redemption, which amount may vary
under different conditions and at different redemption dates.
(6) The rights of the Class B Preferred Stock of that series in the
event of the voluntary or involuntary liquidation, dissolution or winding
up of the Corporation.
2. Class B Series 1 Preferred Stock:
(1) The Corporation has authorized the creation of a series of Class B
Preferred Stock, consisting of 500,000 shares of Class B Preferred Stock,
to be designated "Class B Series 1 Preferred Stock." Such number of shares
may be increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Class B
Series 1 Preferred Stock to a number less than
2
<PAGE>
that of the shares then outstanding plus the number of shares issuable upon
exercise of outstanding rights, options or warrants or upon conversion of
outstanding securities issued by the Corporation. The Class B Series 1
Preferred Stock shall have a par value of $0.001 per share.
(2) (a) Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the
Class B Series 1 Preferred Stock with respect to dividends, the holders of
shares of Class B Series 1 Preferred Stock in preference to the holders of
shares of Common Stock, of the Corporation and any other junior stock,
shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first 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 Class B Series 1 Preferred Stock in an amount per share (rounded
to the nearest cent) equal to, subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or, with respect to the first Quarterly Dividend Payment Date, since
the first issuance of any share or fraction of a share of Class B Series 1
Preferred Stock. In the event the Corporation shall at any time after
January 11, 1999 (the "Rights Declaration Date") (i) declare any dividend
on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount to which
holders of shares of Class B Series 1 Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Class B Series 1 Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Class B Series 1 Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Class B
Series 1 Preferred Stock 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
shares of Class B Series 1 Preferred Stock entitled to receive a quarterly
dividend and before such
3
<PAGE>
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 shares of Class B Series 1 Preferred Stock 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 shares of Class B
Series 1 Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 60
days prior to the date fixed for the payment thereof.
(3) The holders of shares of Class B Series 1 Preferred Stock shall
have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Class B Series 1 Preferred Stock shall entitle
the holder thereof to 100 votes on all matters submitted to a vote of
the shareholders of the Corporation. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of shares of
Class B Series 1 Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of
shares of Class B Series 1 Preferred Stock and the holders of shares
of Common Stock 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 Class B Series 1
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 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 Class B Series 1
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 Class B Series 1 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 Class B Series 1 Preferred Stock may be exercised
initially at a special meeting called pursuant to subparagraph
(iii) of this Paragraph D.2.3(c) or at any annual meeting of
shareholders, and thereafter at annual meetings of shareholders,
provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any,
4
<PAGE>
to increase, in certain cases, the authorized number of Directors
shall be exercised unless the holders of one-third (1/3) 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 the 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 shall not
be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of
any equity securities ranking senior to or pari passu with the
Class B Series 1 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
shareholder or shareholders owning in the aggregate not less than
twenty percent (20%) of the total number of shares of Preferred
Stock outstanding, irrespective of series, may request, the
calling of a special meeting of the holders of Preferred Stock,
which meeting shall thereupon be called by the Chairman of the
Board or the President and Chief Executive officer 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 D.2.(3)(c)(iii) shall be given to each holder of
record of Preferred Stock by mailing a copy of such notice to him
at his last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier
than ten days and not later than 60 days after such order or
request or in default of the calling of such meeting within 60
days after such order or request, such meeting may be called on
similar notice by any shareholder or shareholders owning in the
aggregate not less than twenty percent (20%) of the total number
of shares of Preferred Stock outstanding. Notwithstanding the
provisions of this Paragraph D.2.(3)(c)(iii), no such special
meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting
of the shareholders.
(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 (y) 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 (z) any vacancy in the
Board of Directors may (except as provided in Paragraph
D.2.(3)(c)(ii)) be filled by a 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
become vacant. References in this Paragraph D.2.(3)(c) to
Directors elected by the holders of a particular class of stock
shall include Directors
5
<PAGE>
elected by such Directors to fill vacancies as provided in clause
(z) 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 By-laws
irrespective of any increase made pursuant to the provisions of
Paragraph D.2.(3)(c)(ii) (such number being subject, however, to
change thereafter in any manner provided by law or in the
Certificate of Incorporation or By-laws). 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, holders of Class B Series 1
Preferred Stock shall have no special voting rights, and their consent
shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any
corporate action.
(4) Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Class B Series 1 Preferred Stock as
provided in Paragraph D.2.(2) are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not
declared, on shares of Class B Series 1 Preferred Stock 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 of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Class B Series 1 Preferred Stock;
(ii) Declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Class B Series 1 Preferred Stock except dividends paid
ratably on the Class B Series 1 Preferred Stock and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) Redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Class B Series 1 Preferred Stock provided that the
Corporation may at any time redeem, purchase or otherwise acquire
shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends
or upon dissolution, liquidation or winding up) to the Class B
Series 1 Preferred Stock; or
(iv) Purchase or otherwise acquire for consideration any
shares of Class B Series 1 Preferred Stock or any shares of stock
ranking on a parity with the Class
6
<PAGE>
B Series 1 Preferred Stock except in accordance with a purchase
offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
Paragraph D.2.(4)(a), purchase or otherwise acquire such shares at
such time and in such manner.
(5) Any shares of Class B Series 1 Preferred Stock purchased or
otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled 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 class or series of
Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
(6) (a) Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, first the holders of the Corporation's Class
A Preferred Stock will be entitled to a preferential liquidation payment of
$0.01 per share; thereafter, the holders of Class B Series 1 Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio
of 100 to 1 (as appropriately adjusted as set forth in paragraph (c) below
to reflect such events as stock splits, stock dividends and
recapitalization with respect to the Common Stock) with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(b) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding common stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then
in each such case the Adjustment Number in effect immediately prior to such
event shall be adjusted by multiplying such Adjustment Number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(7) If the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such event the shares of Class B Series 1
Preferred Stock shall at the same time be similarly exchanged or changed in
an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 100 times the aggregate amount of stock, securities,
cash and/or any other property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed or exchanged. In
the event the Corporation shall at any time
7
<PAGE>
after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Class B Series
1 Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that are outstanding immediately prior
to such event.
(8) The shares of Class B Series 1 Preferred Stock shall not be
redeemable.
(9) The Class B Series 1 Preferred Stock shall rank junior to all
other classes 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) Fractional Shares. Class B Series 1 Preferred Stock may be issued
in the descretion of the Board of Directors of the Corporation in fractions
of a share which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Class B Series 1 Preferred Stock.
(11) Amendment. The Certificate of Incorporation of the Corporation
shall not be further amended in any manner which would materially alter or
change the powers, preferences or special rights of the Class B Series 1
Preferred Stock so as to affect them adversely without the affirmative vote
of the holders of a majority or more of the outstanding shares of Class B
Series 1 Preferred Stock, voting separately as a class."
5. The foregoing amendments to the Certificate of Incorporation of the
Corporation have been duly authorized by unanimous consent of the Board of
Directors of the Corporation.
8
<PAGE>
IN WITNESS WHEREOF, the undersigned have signed this Certificate and affirm
under the penalties of perjury that the statements made herein are true this
30th day of December, 1998.
__________________________________
Darby S. Macfarlane,
Chief Executive Officer
Chairman of the Board
__________________________________
Leslie Foglesong,
Secretary
9
<PAGE>
Preferred
Exhibit B
Form of Right Certificate
Certificate No. R- _____________ Rights
NOT EXERCISABLE AFTER January 11, 2009 OR EARLIER IF
REDEEMED BY THE CORPORATION. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE
RIGHTS AGREEMENT.
Right Certificate
Chromatics Color Sciences International, 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 January 11, 1999 (the "Rights Agreement"), between
Chromatics Color Sciences International, Inc., a New York corporation (the
"Corporation"), and Continental Stock Transfer & Trust Company (the "Rights
Agent"), to purchase from the Corporation at any time after the Distribution
Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m.,
New York time, on January 11, 2009, unless the Rights evidenced hereby shall
have been previously redeemed by the Corporation, at the principal office or
offices of the Rights Agent designated for such purpose, or at the office of its
successor as Rights Agent, one-hundredth of a fully paid non-assessable share of
Class B Series 1 Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), of the Corporation, at a purchase price of $28 per one-hundredth of a
share of Preferred Stock (the "Purchase Price"), upon presentation and surrender
of this Right Certificate with the Form of Election to Purchase duly executed.
The number of Rights evidenced by this Right Certificate (and the number of
one-hundredths of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of January 11, 1999, based on the Preferred
Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee after the Acquiring Person becomes such, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void, and no holder hereof
<PAGE>
shall have any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number of
one-hundredths of a share of Preferred Stock or other securities which may be
purchased upon the exercise of the Rights evidenced by this Right Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right 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 principal executive offices of
the Corporation and the principal office or offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificate of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate number of Preferred
Stock or other securities as the Rights evidenced by the Right Certificate or
Right Certificates surrendered shall have entitled such holder to purchase. If
this Right Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Corporation at a redemption price of
$0.001 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are
one-hundredth or integral multiples of one-hundredth of a share of Preferred
Stock, which may, at the election of the Corporation, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the shares of Preferred
Stock or of any other securities of the Corporation which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Corporation 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 other
distributions or to exercise any preemptive or subscription rights, or
otherwise, until the
<PAGE>
Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal.
[SEAL]
ATTEST: CHROMATICS COLOR SCIENCES
INTERNATIONAL, INC.
_______________________________ By _____________________________
Name: Name: Darby S. Macfarlane
Title: Title: Chief Executive Officer
Dated: _______________
Countersigned:
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By ___________________________
Authorized Officer
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Right
Certificate.)
FOR VALUE RECEIVED ____________________________________________ hereby
sells, assigns and transfers unto___________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint __________________ Attorney, to
transfer the attached Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: _____________, ____
________________________________
Signature
Signature Guaranteed:
- --------------------------------------------------------------------------------
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being sold, assigned or transferred by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate thereof
(as such terms are defined in the Right Agreement) and (2) after due inquiry and
to the best knowledge of the undersigned, the undersigned did not acquire the
Rights evidenced by this Right Certificate from any Person who is or was an
Acquiring Person or an Affiliate or Associate thereof (as such terms are defined
in the Rights Agreement).
________________________________
Signature
- --------------------------------------------------------------------------------
<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise __________________
Rights represented by this Right Certificate to purchase the shares of Preferred
Stock, Common Stock or other securities issuable upon the exercise of such
Rights and requests that certificates for such shares of Preferred Stock, Common
Stock or other securities be issued in the name of:
Please insert social security or other identifying number ____________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number _____________________
________________________________________________________________________________
(Please print name and address)
Dated: __________________, ___
________________________________
Signature
<PAGE>
Form of Reverse Side of Right Certificate -- continued.
Signature Guaranteed:
The undersigned hereby certifies that (1) the Rights evidenced by this
Right Certificate are not being exercised by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement) and (2) after due inquiry and to the best
knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Right Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
________________________________
Signature
- --------------------------------------------------------------------------------
NOTICE
The signature on the foregoing Form of Assignment and Election to Purchase
and certificates must conform to the name as written above on the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Corporation and the Rights Agent will deem the Beneficial Owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
<PAGE>
Preferred
Exhibit C
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 AN
AFFILIATE OR AN ASSOCIATE THEREOF (AS DEFINED IN THE RIGHTS AGREEMENT) AND
CERTAIN RELATED PERSONS, WHETHER CURRENTLY HELD BY OR ON BEHALF OF SUCH PERSON
OR BY ANY SUBSEQUENT HOLDER, SHALL BECOME NULL AND VOID.
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On December 30, 1998, the Board of Directors of Chromatics Color Sciences
International, Inc. (the "Corporation") declared a dividend distribution of one
preferred share purchase right (a "Right") for each outstanding share of Common
Stock, par value $0.001 per share (the "Common Stock"), of the Corporation. The
dividend is payable to the shareholders of record on January 11, 1999 (the
"Record Date"), and with respect to shares of Common Stock issued thereafter
until the Distribution Date (as defined below) and, in certain circumstances,
with respect to shares of Common Stock issued after the Distribution Date.
Except as set forth below, each Right, when it becomes exercisable, entitles the
registered holder to purchase from the Corporation one-hundredth of a share of
Class B Series 1 Preferred Stock, par value $0.001 per share (the "Preferred
Stock"), of the Corporation at a price of $28 per one-hundredth of a share of
Preferred Stock (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in a Rights Agreement (the "Rights
Agreement") between the Corporation and Continental Stock Transfer & Trust
Company as Rights Agent (the "Rights Agent"), dated as of January 11, 1999.
Initially, the Rights will be attached to all certificates representing
shares of Common Stock then outstanding, and no separate Right Certificates will
be distributed. The Rights will separate from the Common Stock upon the earliest
to occur of (i) expiration of the Board's right to redeem the Rights during the
10 day period ("Window Period"), or any extension of the Window Period, after a
person or group of affiliated or associated persons (other than exempted
shareholders) becoming the beneficial owner of 20% or more of the outstanding
Common Stock (except pursuant to a Permitted Offer, as hereinafter defined, or
if the acquisition is approved in advance by the Corporation's Board of
Directors; or (ii) 10 days (or such later date as the Board may determine)
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer, the consummation of which would result in a person or
group becoming an Acquiring Person (as hereinafter defined) (the earliest of
such dates being called the "Distribution Date"). A person or group whose
acquisition of Common Stock causes a Distribution Date pursuant to clause (i)
above is an "Acquiring Person." The date that a person or group becomes an
Acquiring Person is the "Shares Acquisition Date."
<PAGE>
Notwithstanding the foregoing, an Acquiring Person shall not include (i) any
person who or which, together with all affiliates and associates of such person,
as of the close of business on the day the Corporation publicly announces that
the Board of Directors has adopted the Rights Agreement (the "Announcement
Date"), was the beneficial owner of 20% or more of the shares of Common Stock,
and (ii) Darby Simpson Macfarlane, the Chief Executive Officer of the Company,
provided, however, that any such person, together with all affiliates and
associates of such person, shall cease to be exempt from being an Acquiring
Person if the number of shares of Common Stock beneficially owned by that
person, together with all affiliates and associates of such person (other than
as a result of a stock dividend, stock split or stock distribution by the
Corporation) exceeds by more than one percent of the number of shares of Common
Stock beneficially owned by that person, together with all affiliates and
associates of such person, as of the Announcement Date, other than, in the case
of Mrs. Macfarlane, any and all (i) shares acquired upon exercise of options,
including without limitation, options issued under the Company's 1992 Stock
Option Plan as beneficially owned by her, as amended, held by Mrs. Macfarlane or
her affiliates, and (ii) shares issued upon conversion of the Class A Preferred
Stock owned by Mrs. Macfarlane or her affiliates.
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Stock. Until the Distribution
Date (or earlier redemption or expiration of the Rights), new Common Stock
certificates issued after the Record Date upon transfer or new issuance of
shares of Common Stock will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
shares of Common Stock outstanding as of the Record Date, even without such
notation or a copy of this Summary of Rights being attached thereto, also will
constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of Common Stock as of the
close of business on the Distribution Date (and to each initial record holder of
certain shares of Common Stock issued after the Distribution Date), and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on January 11, 2009, unless earlier redeemed by the
Corporation as described below.
In the event that any person becomes an Acquiring Person (except (i)
pursuant to a tender or exchange offer which is for all outstanding Common Stock
at a price and on terms which a majority of the Board of Directors determines to
be adequate and in the best interests of the Corporation, its shareholders and
other relevant constituencies, other than such Acquiring Person, its affiliates
and associates (a "Permitted Offer") or (ii) if such acquisition of shares of
Common Stock is approved in advance by the Board of Directors of the
Corporation, each holder of a Right will thereafter have the right (the "Flip-In
Right") to receive upon exercise the number of shares of Common Stock or, in the
discretion of the Board of Directors, the number of one-hundredths of a share of
Preferred Stock (or, in certain circumstances, other securities of the
Corporation) having a value (immediately prior to such triggering event) equal
to two times the exercise price of the Right. Notwithstanding the foregoing,
following the occurrence of the event described above, all Rights that are, or
(under certain circumstances specified in the Rights
<PAGE>
Agreement) were, beneficially owned by any Acquiring Person or any affiliate or
associate thereof will be null and void. However, in the event that any person
becomes an Acquiring Person, the Board of Directors may, within a 10-day period
following the date of public announcement that such person has become an
Acquiring Person (the "Window Period") redeem the rights or extend the Window
Period in order to prevent or delay the Flip-In Right from triggering.
In the event that, at any time following the Shares Acquisition Date, (i)
the Corporation is acquired in a merger or other business combination
transaction in which the holders of all of the outstanding shares of Common
Stock immediately prior to the consummation of the transaction are not the
holders of all of the surviving corporation's voting power, or (ii) more than
50% of the Corporation's assets or earning power is sold or transferred, in
either case with or to an Acquiring Person or any affiliate or associate or any
other person in which such Acquiring Person, affiliate or associate has an
interest or any person acting on behalf of or in concert with such Acquiring
Person, affiliate or associate, or, if in such transaction all holders of Common
Stock are not treated alike, any other person, then each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right (the "Flip-Over Right") to receive, upon exercise,
common stock of the acquiring company having a value equal to two times the
exercise price of the Right. The holder of a Right will continue to have the
Flip-Over Right whether or not such holder exercises or surrenders the Flip-In
Right.
The Purchase Price payable, and the number of shares of Preferred Stock,
Common Stock or other securities issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of
certain rights or warrants to subscribe for or purchase shares of Preferred
Stock at a price, or securities convertible into shares of Preferred Stock with
a conversion price, less than the then current market price of the Preferred
Stock or (iii) upon the distribution to holders of the Preferred Stock of
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 one-hundredths of a
share of Preferred Stock issuable upon exercise of each Right are also subject
to adjustment in the event of a stock split of the Common Stock or a stock
dividend on the Common Stock payable in shares of Common Stock or subdivisions,
consolidations or combinations of the Common Stock occurring, in any such case,
prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will not
be redeemable. Each share of Preferred Stock will be entitled to an aggregate
dividend per share of 100 times the dividend declared per share of Common
Stock. In the event of liquidation first the holders of the Corporation's Class
A Preferred Stock will be entitled to a preferential liquidation payment of $.01
per share; thereafter, the holders of the shares of Preferred Stock and the
shares of Common Stock will share the remaining assets in the ratio of 100 to
1 (as adjusted) for each share of Preferred Stock and Common Stock so held,
respectively.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No
<PAGE>
fractional shares of Preferred Stock will be issued (other than fractions which
are one-hundredth or integral multiples of one-hundredth of a share of Preferred
Stock, which may, at the election of the Corporation, be evidenced by depositary
receipts) and in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Stock on the last trading day prior to the date of
exercise.
At any time prior to the earlier to occur of (i) the expiration of the
Window Period or any extension thereof following a person becoming an Acquiring
Person or (ii) the expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights in whole, but not in part,
at a price of $0.001 per Right (the "Redemption Price") which redemption shall
be effective upon the action of the Board of Directors. Additionally, following
a Shares Acquisition Date and the expiration of the period during which the
holder of Rights may exercise the Rights, the Corporation may redeem the then
outstanding Rights in whole, but not in part, at the Redemption Price, provided
that such redemption (a) is in connection with a merger or other business
combination transaction or series of transactions involving the Corporation in
which all holders of Common Stock are treated alike but not involving an
Acquiring Person or its affiliates or associates, or (b) if and for so long as
the Acquiring Person does not own 20% or more of the voting power of the
Corporation and there are no other Acquiring Persons.
All of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Corporation prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person), or, subject to certain limitations, to
shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Corporation, including, without limitation, the
right to vote or to receive dividends. While the distribution of the Rights will
not be taxable to shareholders of the Corporation, shareholders may, depending
upon the circumstances, recognize taxable income should the Rights become
exercisable or upon the occurrence of certain events thereafter.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
January 4, 1999. A copy of the Rights Agreement will be provided upon written
request (directed to Leslie Foglesong, Secretary, at the Corporation's executive
offices) for a fee limited to the Corporation's reasonable expenses in
furnishing such exhibit. 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 hereby incorporated herein by reference.
