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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
December 29, 1997
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Date of Report (Date of earliest event reported)
CIENA Corporation
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 0-21969 23-2725311
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File No.) Identification No.)
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920 Elkridge Landing Road, Linthicum, Maryland 21090
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(410) 865-8500
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Not applicable
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(Former name or former address, if changed since last report)
Exhibit Index on Page 11
Total Number of Pages: 76
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Item 5. Other Events
a. Adoption of Rights Plan.
On December 23, 1997, the Board of Directors of CIENA
Corporation (the "Company") declared a dividend distribution of one Right for
each outstanding share of common stock, par value $.01 per share (the "Common
Stock"), of the Company. The distribution is payable to stockholders of record
on January 8, 1998. Each Right, when exercisable, entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series A
Junior Participating Preferred Stock ("Preferred Stock") at a price of $300
per one one-thousandth share (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 Company and Boston Equiserve as Rights
Agent (the "Rights Agent").
Initially, the Rights will be attached to all certificates
representing shares of Common Stock then outstanding, and no separate
certificates evidencing the Rights will be distributed. The Rights will
separate from the Common Stock and a distribution of Rights Certificates will
occur upon the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired, or obtained the right to acquire, beneficial ownership
of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date") or (ii) 10 business days (or such later date as the
Continuing Directors may determine) following the commencement of a tender
offer or exchange offer the consummation of which would result in the
beneficial ownership by a person of 15% or more of the outstanding shares of
Common Stock (the earlier of such dates being called the "Distribution Date").
Until the Distribution Date, (i) the Rights will be evidenced
by the Common Stock certificates, and will be transferred with and only with
the Common Stock certificates, (ii) new Common Stock certificates issued after
January 6, 1998 upon transfer or new issuance of the Common Stock will contain
a notation incorporating the Rights Agreement by reference, and (iii) the
surrender for transfer of any certificates for Common Stock outstanding will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
The Rights are not exercisable until the Distribution Date and
will expire at the close of business on December 29, 2007 unless earlier
redeemed or
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exchanged by the Company as described below. The Rights will not be
exercisable by a holder in any jurisdiction where the requisite qualification
to the issuance to such holder, or the exercise by such holder, of the Rights
has not been obtained or is not obtainable.
As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights ("Rights Certificates") will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will evidence the Rights. Except as otherwise determined by the Board of
Directors, only shares of Common Stock issued prior to the Distribution Date
will be issued with Rights.
In the event that a Person becomes the beneficial owner of 15%
or more of the then outstanding shares of Common Stock (except pursuant to an
offer for all outstanding shares of Common Stock which the Outside Directors
determine to be fair to and otherwise in the best interests of the Company and
its stockholders), each holder of a Right will, after the end of a redemption
period referred to below, have the right to exercise the Right by purchasing,
for an amount equal to the Purchase Price, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a
value equal to two times such amount. Notwithstanding any of the foregoing,
following the occurrence of the events set forth in this paragraph, all Rights
that are, or (under certain circumstances specified in the Rights Agreement)
were, beneficially owned by any Acquiring Person will be null and void.
However, Rights are not exercisable following the occurrence of the events set
forth above until such time as the Rights are no longer redeemable by the
Company as set forth below.
For example, at a Purchase Price of $300 per Right, each Right
not owned by an Acquiring Person (or by certain related parties) following an
event set forth in the preceding paragraph would entitle its holder to purchase
$600 worth of Common Stock (or other consideration, as noted above) for $300.
Assuming that the Common Stock had a per share value of $50 at such time, the
holder of each valid Right would be entitled to purchase 12 shares of Common
Stock for $300.
In the event that, at any time following the Stock Acquisition
Date, (i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger which follows an offer described in the second preceding paragraph), or
(ii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall after the expiration of the redemption period
referred to below thereafter have the right to receive, upon exercise, common
stock of the
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acquiring company having a value equal to two times the Purchase Price of the
Right (e.g., common stock of the acquiring company having a value of $600 for
the $300 Purchase Price).
At any time after a person or group of affiliated or
associated persons becomes an Acquiring Person, the Board of Directors of the
Company may exchange the Rights (other than Rights owned by such person or
group which have become void), in whole or in part, at an exchange ratio of one
share of Common Stock per Right (subject to adjustment).
The Purchase Price payable, and the number of one
one-thousandths of a share of Preferred Stock or other securities or property
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Preferred Stock (ii) upon
the grant to holders of the Preferred Stock of certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the
current market price of the Preferred Stock or (iii) upon the distribution to
holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
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 fractional shares will be issued and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise.
In general, the Board of Directors of the Company, may cause
the Company to redeem the Rights in whole, but not in part, at any time during
the period commencing on January 8, 1998, and ending on the tenth day following
the Stock Acquisition Date, as such period may be extended or shortened by the
Board of Directors (the "Redemption Period") at a price of $.001 per Right
(payable in cash, Common Stock or other consideration deemed appropriate by the
Board of Directors). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem the Rights will require the concurrence of a
majority of the Continuing Directors. After the Redemption Period has expired,
the Company's right of redemption may be reinstated (with the concurrence of
the Continuing Directors) if an Acquiring Person reduces his beneficial
ownership to 10% or less of the outstanding shares of Common Stock in a
transaction or series of transactions not involving the Company and there are
no other Acquiring Persons. Immediately upon the action of the Board of
Directors of the Company ordering redemption of the Rights, with, where
required, the concurrence of the Continuing Directors, the Rights will
terminate
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and the only right of the holders of Rights will be to receive the $.001
redemption price.
The term "Continuing Director" means any member of the Board
of Directors of the Company who was a member of the Board of Directors prior to
the date of the Rights Agreement, and any person who is subsequently elected to
the Board if such person is recommended or approved by a majority of the
Continuing Directors, but shall not include an Acquiring Person or an affiliate
or associate of an Acquiring Person, or any representative of the foregoing
entities. The term "Outside Directors" means "Continuing Directors" who are
not officers of the Company.
Until a Right is exercised, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without limitation,
the right to vote or to receive dividends. While the distribution of the
Rights will not be subject to federal taxation to stockholders or to the
Company, stockholders may, depending upon the circumstances, recognize taxable
income in the event that the Rights become exercisable for Common Stock (or
other consideration) of the Company or for common stock of the acquiring
company as set forth above.
Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be
amended by the Board of Directors of the Company prior to the Distribution
Date. After the Distribution Date, the provisions of the Rights Agreement may
be amended by the Board in order to cure any ambiguity, defect or inconsistency
or to make changes which do not adversely affect the interests of holders of
Rights (excluding the interests of any Acquiring Person), or to shorten or
lengthen any time period under the Rights Agreement; provided however, no
amendment to adjust the time period governing redemption may be made at such
time as the Rights are not redeemable.
Each share of Common Stock outstanding on January 8, 1998 will
receive one Right. A total of 300,000 shares of Preferred Stock are 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
Company without conditioning the offer on a substantial number of Rights being
acquired, or in a manner or on terms not approved by the Board of Directors.
The Rights, however, should not deter any prospective offeror willing to
negotiate in good faith with the Board of Directors. Nor should the Rights
interfere with any merger or other business combination approved by the Board
of Directors.
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The form of Rights Agreement between the Company and the Rights
Agent specifying the terms of the Rights, which includes as Exhibit B the form
of Rights Certificate, is attached hereto as Exhibit 4.2 and is incorporated
herein by reference. The press release announcing the declaration of the
Rights dividend, and the Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock are attached hereto as Exhibits
99 and Exhibit A to the Rights Agreement, respectively, and are incorporated
herein in their entireties by reference. The foregoing description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to such Exhibits.
b. Legal Proceedings.
Pirelli Litigation. On December 20, 1996, a U.S. affiliate of Pirelli SpA
("Pirelli") filed suit in U.S. District Court in Delaware, alleging willful
infringement by the Company of five U.S. patents held by Pirelli. The lawsuit
seeks treble damages, attorneys' fees and costs, as well as preliminary and
permanent injunctive relief against the alleged infringement. On February 10,
1997, the Company filed its answer denying infringement, alleging inequitable
conduct on the part of Pirelli in the prosecution of certain of its patents,
and stating a counterclaim against the relevant Pirelli parties for a
declaratory judgment finding the Pirelli patents invalid and/or not infringed.
Following the filing of the Company's answer, Pirelli dedicated to the public
and withdrew from the lawsuit all infringement claims relating to one of the
five patents. In September 1997, Pirelli withdrew another patent from the
suit, leaving three patents at issue. Expert discovery proceedings are ongoing,
and are currently expected to be completed by January 31, 1998, with trial
expected no earlier than mid-1998.
In February, 1997, the Company filed a complaint against
Pirelli with the International Trade Commission ("ITC"), based on the Company's
belief that a 32 channel DWDM system announced by Pirelli infringed at least
two of the Company's patents. The Company's complaint sought a ban on the
importation by Pirelli into the U.S. of any infringing 32 channel system. A
formal investigative proceeding was instituted by the ITC on April 3, 1997. On
November 24, 1997, the parties settled the matter by entry of a Consent Order.
Under the Consent Order, Pirelli has agreed not to import into the United
States WDM components and or systems which infringe the Company's patented in
fiber Bragg gratings-based WDM systems.
On March 14, 1997, the Company filed suit against Pirelli in U.S. District
Court in the Eastern District of Virginia, alleging willful infringement by
Pirelli of three U.S. patents held or co-owned by the Company. In September
1997, the Company withdrew one of the three patents from the suit. The two
patents which remained at issue related to certain of Pirelli's cable
television equipment, and to
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certain Pirelli fiberoptic communications equipment announced by Pirelli in
January 1997 as being deployed in a field trial in the MCI network. Motions
for summary judgment by both parties had been pending on the issue of
infringement as it relates to the cable television patent, and Pirelli also
filed a motion for summary judgment of invalidity of this patent. As to the
second of the two patents, on December 5, 1997, the court issued an order
granting partial summary judgment for Pirelli on the issue of non-infringement,
and denying Pirelli's motion for summary judgment of invalidity of this patent.
The court later amended its ruling to specifically affirm the validity of this
patent. The Company has elected to appeal the partial summary judgment of
non-infringement, and has agreed to dismiss its other claims, with the right to
reassert certain of them, pending the outcome of the appeal. The appellate
decision is not expected until late 1998 at the earliest.
The Company continues to believe its MultiWave 1600 system does not
infringe any valid claim of the three remaining Pirelli patents and believes
certain of the Pirelli patents and/or claims are invalid. The Company is
defending itself vigorously, and is planning on all remaining litigation
proceeding through trial. In light of the complexity and likely time-consuming
nature of the litigation, including the Company's counterclaim, the ITC
proceeding, and the Company's patent infringement lawsuit against Pirelli in
the Eastern District of Virginia, the Company recorded a charge of
approximately $7.5 million in estimated legal and related costs associated with
these proceedings during fiscal 1997. While the Company believes its estimate
of legal and related costs is adequate based on its current understanding of
the overall facts and circumstances, the estimate may be increased in future
periods depending on the course of the legal proceedings.
In the Delaware litigation, the so-called "Markman" hearing
was conducted in September 1997. Markman hearings are pre-trial proceedings
required in all patent infringement litigation, and result in rulings by the
trial judge on certain issues of patent claim construction. These rulings then
become the basis for later jury determination of the infringement claims, and
can be very influential in determining the outcome of the litigation. The
Delaware court's Markman ruling was issued in November. The Company believes
the Markman ruling is generally favorable to the Company's position, and
nothing in the ruling has changed the Company's view that its MultiWave systems
do not infringe any valid claim of the three remaining Pirelli patents and
believes certain of the Pirelli patents and/or claims are invalid. Pirelli has
filed a motion for reargument of certain portions of the court's ruling.
As the Delaware proceeding approaches trial, the Company
expects pre-trial motions, including motions for summary judgment like those
filed in the Virginia litigation, will be filed by both parties with a view to
narrowing or disposing of one or more of the claims in one or more of the
proceedings. The Company believes that rulings on such motions, whether the
motions are made by
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CIENA or Pirelli, may but most likely will not result in complete disposition
of all litigation, and continues to plan on going to trial in all litigation.
The Company also anticipates that as the proceedings converge toward trials,
either or both parties may take actions to amend or add to the patent
infringement claims already pending. On December 26, 1997, the Company
received word that Pirelli had filed on December 23, 1997, a new complaint in
U.S. District Court in Delaware, alleging willful infringement by the Company
of two additional U.S. patents held by Pirelli. The lawsuit seeks treble
damages, attorneys' fees and costs, as well as preliminary and permanent
injunctive relief against the alleged infringement. It is currently unclear as
to what effect the filing of this lawsuit will have on the timing of the trial
as to the three patents which have been at issue since December 1996.
The patent claims cited in the new Delaware complaint had been
evaluated by the Company prior to the lawsuit. The Company continues to believe
that its MultiWave systems do not infringe any valid claims of any patents held
by Pirelli, and will continue to defend itself vigorously as to the new claims
brought on December 23, 1997.
The Pirelli proceedings have been and will continue to be
costly and involve a substantial diversion of the time and attention of some
members of management. Further, the Company believes Pirelli and other
competitors have used the existence of the Delaware litigation to raise
questions in customers' and potential customers' minds as to the Company's
ability to manufacture and deliver MultiWave systems. There can be no
assurance that such efforts by Pirelli and others will not disrupt the
Company's existing and prospective customer relationships.
There can be no assurance that the Company will be successful in the Pirelli
litigation, and an adverse determination in the Delaware court, either on a
motion for summary judgment or in trial, could result from a finding of
infringement of only one claim of a single patent. The Company may settle the
litigation due to the costs and uncertainties associated with litigation in
general and patent infringement litigation in particular and due to the fact
that an adverse determination in the litigation could preclude the Company from
producing MultiWave 1600 systems until it were able to implement a
non-infringing alternative design to any portion of the system to which such a
determination applied. However, there can be no assurance that any settlement
will be reached by the parties. The Company is planning on all litigation
proceeding through trial. An adverse determination in, or settlement of, the
Pirelli litigation could involve the payment of significant amounts, or could
include terms in addition to such payments, which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
3. 4. Certificate of Designation, Preferences and
Rights of Series A Junior Participating
Preferred Stock. (included as Exhibit A to
Exhibit 4.2 filed herewith).
4.2. Form of Rights Agreement dated as of December
29, 1997 between the Company and Boston
Equiserve as Rights Agent.
99. Press Release dated December 29, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
CIENA Corporation
Date: December 29, 1997 By: /s/ G. Eric Georgatos
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G. Eric Georgatos
Vice-president, General Counsel
and Secretary
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EXHIBIT INDEX
Exhibit No. Description
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3.4. Certificate of Designation, Preferences and
Rights of Series A Junior Participating
Preferred Stock. (included as Exhibit A to
Exhibit 4.2 filed herewith).
4.2. Form of Rights Agreement dated as of December
29, 1997 between the Company and Boston
Equiserve as Rights Agent including exhibits
thereto.
99. Press Release dated December 29, 1997.
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RIGHTS AGREEMENT
Rights Agreement, dated as of December 29, 1997 (the
"Agreement"), between CIENA Corporation, a Delaware corporation (the
"Company"), and Boston Equiserve (the "Rights Agent").
WHEREAS, on December 23, 1997 (the "Rights Dividend
Declaration Date"), the Board of Directors of the Company authorized and
declared a dividend of one Right for each share of Common Stock (as hereinafter
defined) of the Company outstanding at the Close of Business (as defined
herein) on the Record Date (as defined herein), and has authorized the issuance
of one Right with respect to each share of Common Stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date (as hereinafter defined), each
Right initially representing the right to purchase one one-thousandth of a
share of Series A Junior Participating Preferred Stock of the Company having
the rights, powers and preferences set forth in the form of Certificate of
Designation, Preferences and Rights attached hereto as Exhibit A, upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms have the
meanings indicated:
(a) "Acquiring Person" shall mean any Person (as such term
is hereinafter defined) who or which, together with all
Affiliates and Associates (as such terms are hereinafter
defined) of such Person, shall be the Beneficial Owner (as such
term is hereinafter defined) of 15% or more of the shares of
Common Stock then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, or (iii) any
employee benefit plan of the Company or any Subsidiary of the
Company, or any Person or entity holding shares of Common Stock
for or pursuant to the terms of any such plan to the extent, and
only to the extent, of such shares so held. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Common Stock by the
Company which, by reducing the number of shares of Common Stock
outstanding, increases the proportionate number of shares of
Common Stock beneficially owned by such Person to 15% or more of
the shares of Common Stock of the Company then outstanding;
provided, however, that if a Person shall
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become the Beneficial Owner of 15% or more of the Common Stock
of the Company then outstanding by reason of share purchases by
the Company and shall, after such share purchases by the
Company, become the Beneficial Owner of any additional shares of
Common Stock of the Company, then such Person shall be deemed to
be an "Acquiring Person" if such Person is then the Beneficial
Owner of 15% or more of the Common Stock then outstanding. In
addition, if the Board of Directors of the Company determines in
good faith that a Person who would otherwise be an "Acquiring
Person", as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares
of Common Stock so that such Person would no longer be an
"Acquiring Person", then such Person shall not be deemed an
"Acquiring Person" for any purposes of this Agreement unless and
until such Person shall again become an "Acquiring Person".
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(c) A Person shall be deemed the "Beneficial Owner" of and
shall be deemed to "beneficially own" any securities:
(i) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding (whether
or not in writing), or upon the exercise of conversion
rights, exchange rights, other rights (other than these
Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own", (A)
securities tendered pursuant to a tender or exchange
offer made by 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) securities issuable upon exercise of
Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon
exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such
Person or any of such Person's Affiliates or Associates
prior to the Distribution Date or pursuant to Section
3(a) or Section 22 hereof (the "Original Rights") or
pursuant to Section 11(i) hereof in connection with an
adjustment made with respect to any Original Rights;
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(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has
the right to vote or dispose of or has "beneficial
ownership" of (as determined pursuant to Rule 13d-3 of
the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement
or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the
"Beneficial Owner" of, or to beneficially own, any
security under this subparagraph (ii) as a result of an
agreement, arrangement or understanding to vote such
security if such agreement, arrangement or
understanding: (A) arises solely from a revocable
proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with,
the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also
then reportable by such Person on Schedule 13D under
the Exchange Act (or any comparable or successor
report); or
(iii) which are beneficially owned, directly
or indirectly, by any other Person (or any Affiliate or
Associate thereof) with which such Person or any of
such Person's Affiliates or Associates has any
agreement, arrangement or understanding (whether or not
in writing), for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this
paragraph (c)) or disposing of any voting securities of
the Company; provided, however, that nothing in this
paragraph (c) shall cause a person engaged in business
as an underwriter of securities to be the "Beneficial
Owner" of, or to "beneficially own," any securities
acquired through such person's participation in good
faith in a firm commitment underwriting until the
expiration of forty days after the date of such
acquisition.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Business Day" shall mean any day other than a
Saturday, Sunday, or a day on which banking institutions in the
State of New York are authorized or obligated by law or
executive order to close.
(f) "Close of Business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that
if such date is not a Business Day it shall mean 5:00 P.M., New
York City time, on the next succeeding Business Day.
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(g) "Common Stock" when used with reference to the Company
shall mean the shares of common stock, par value $.01 per share,
of the Company. "Common Stock" when used with reference to any
Person other than the Company shall mean the class of capital
stock with the greatest aggregate voting power, or the class of
equity securities or other equity interests having power to
control or direct the management, of such Person.
(h) "Company" shall mean CIENA Corporation, a Delaware
Corporation.
(i) "Continuing Director" shall mean (i) any member of the
Board, while such Person is a member of the Board, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative of any Acquiring Person or of any
such Affiliate or Associate, and was a member of the Board as of
the date of this Agreement, or (ii) any Person who subsequently
becomes a member of the Board, while such Person is a member of
the Board, who is not an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, or a representative of an
Acquiring Person or of any such Affiliate or Associate, if such
Person's nomination for election or election to the Board is
recommended or approved by a majority of the Continuing
Directors.
(j) "Distribution Date" shall mean the earlier of (i) the
Close of Business on the tenth day after the Stock Acquisition
Date (or, if the tenth day after the Stock Acquisition Date
occurs before the Record Date, the close of business on the
Record Date), or (ii) the Close of Business on the tenth
Business Day (or, if such tenth Business Day occurs before the
Record Date, the Close of Business on the Record Date), or such
specified or unspecified later date on or after the Record Date
as may be determined by action of a majority of the Continuing
Directors, after the date that a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company or
any employee benefit plan of the Company or of any Subsidiary of
the Company or any Person or entity holding shares of Common
Stock for or pursuant to the terms of any such plan) is first
published or sent or given within the meaning of Rule 14d-2(a)
of the General Rules and Regulations under the Exchange Act, if
upon consummation thereof, such Person would be the beneficial
owner of 15% or more of the outstanding shares of Common Stock.
(k) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, as in effect on the date of this Agreement.
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(l) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(m) "Final Expiration Date" shall have the meaning set
forth in Section 7(a) hereof.
(n) "Outside Directors" shall mean the Continuing Directors
who are not officers of the Company.
(o) "Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(p) "Preferred Stock" shall mean shares of Series A Junior
Participating Preferred Stock, par value $.01 per share, of the
Company.
(q) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.
(r) "Purchase Price" shall have the meaning set forth in
Section 4(a) and 11(a)(ii) herein.
(s) "Record Date" shall mean the close of business on
January 8, 1998.
(t) "Redemption Period" shall have the meaning set forth in
Section 23(a) hereof.
(u) "Rights Agent" shall mean Boston Equiserve.
(v) "Rights Certificate" shall have the meaning set forth
in Section 3 hereof.
(w) "Rights Dividend Declaration Date" shall mean the close
of business on December 23, 1997.
(x) "Section 11(a)(ii) Event" shall mean any event
described in Section 11(a)(ii) hereof.
(y) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of Section 13(a) hereof.
(z) "Securities Act" shall mean the Securities Act of 1933,
as amended, as in effect on the date of this Agreement.
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(aa) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to
Section 13(d) of the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such.
(bb) "Subsidiary" of any Person shall mean any corporation
or other entity of which a majority of the voting power of the
voting equity securities or equity interests is owned, directly
or indirectly, by such Person, or is otherwise controlled by
such Person.
(cc) "Triggering Event" shall mean any Section 11(a)(ii)
Event or any Section 13 Event.
SECTION 2. APPOINTMENT OF RIGHTS AGENT.
The Company hereby appoints the Rights Agent to act as agent
for the Company and the holders of the Rights (who, in accordance with Section
3 hereof, shall prior to the Distribution Date also be the holders of the
Common Stock) in accordance with the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such Co-Rights Agents as it may deem necessary or desirable, upon
ten (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. ISSUE OF RIGHTS CERTIFICATES.
(a) 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 for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the Distribution Date (or the earlier Expiration Date
or Final Expiration Date), the transfer of any certificate representing shares
of Common Stock in respect of which Rights have been issued shall also
constitute the transfer of the Rights associated with the shares of Common
Stock represented thereby.
(b) Rights shall be issued in respect of all shares of
Common Stock issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date or the Final Expiration Date. Rights shall also be issued to
the extent provided in Section 22 in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Distribution Date and prior to the Expiration Date. Certificates
representing such shares of Common Stock shall also be deemed to be
certificates for Rights, and shall bear the following legend:
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This certificate also evidences and entitles the holder hereof
to certain Rights as set forth in a Rights Agreement between
CIENA Corporation (the "Company") and Boston Equiserve (the
"Rights Agent") dated as of December 29, 1997 (the "Rights
Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal
executive offices of the Company. Under certain circumstances,
as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the
holder of this certificate a copy of the Rights Agreement as in
effect on the date of mailing without charge after receipt of a
written request therefor.
Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or becomes
an Acquiring Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement), whether
currently held by or on behalf of such Person or by any
subsequent holder, may become null and void. The Rights shall
not be exercisable, and shall be void so long as held, by a
holder in any jurisdiction where the requisite qualification of
the issuance to such holder, or the exercise by such holder, of
the Rights in such jurisdiction shall not have been obtained or
be obtainable.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any such certificate shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby.
(c) Until the Distribution Date (i) the Rights will be
evidenced (subject to the provisions of paragraph (a) of this Section 3) by the
certificates for Common Stock registered in the names of the holders thereof
(which certificates for Common Stock shall also be deemed to be Rights
Certificates) and not by separate Rights Certificates, and (ii) the Rights will
be transferable only in connection with the transfer of the underlying shares
of Common Stock (including a transfer to the Company).
(d) As soon as practicable after the Distribution Date, the
Rights Agent will send by first-class, insured, postage prepaid mail, to each
record holder of Common Stock as of the Close of Business on the Distribution
Date, at the address of such holder shown on the records of the Company, a
Rights Certificate, in substantially the form of Exhibit B hereto, evidencing
one Right for each share of Common Stock so held, subject to adjustment as
provided herein. In the event that an adjustment in the number of Rights per
share of Common Stock has been made
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pursuant to Section 11(p) hereof, at the time of distribution of the Rights
Certificates, the Company shall make necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Right Certificates.
SECTION 4. FORM OF RIGHTS CERTIFICATES.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall be
substantially the same as Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section
11 and Section 22 hereof, the Rights Certificates, whenever issued, shall be
dated as of the Record Date, and on their face shall entitle the holders
thereof to purchase such number of one one-thousandths of a share of Preferred
Stock as shall be set forth therein at the price set forth therein (such
exercise price per one one-thousandth of a share, the "Purchase Price"), but
the amount and type of securities purchasable upon exercise of each Right and
the Purchase Price thereof shall be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(d)
or Section 22 hereof that represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an Acquiring Person; (ii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes such; or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which a majority of the
Continuing Directors has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect avoidance of Section
7(e) hereof, and any Rights Certificate issued pursuant to Section 6 or Section
11 hereof upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:
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<PAGE> 9
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section
7(e) of such Rights Agreement.
SECTION 5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of
the Company by its President or a Vice-President either manually or by
facsimile signature, and have affixed thereto the Company's seal or a facsimile
thereof which shall be attested by the Secretary or an Assistant Secretary or
the Treasurer or an Assistant Treasurer of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect
as though the person who signed such Rights Certificates had not ceased to be
such officer of the Company; and any Rights Certificate may be signed on behalf
of the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will
keep or cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
SECTION 6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE
OF RIGHTS CERTIFICATES; MUTILATED, DESTROYED,
LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e)
and Section 14 hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of business on the earlier of
the Expiration Date or Final Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the
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<PAGE> 10
registered holder to purchase a like number of one one-thousandths of a share
of Preferred Stock (or following a Triggering Event, Common Stock, other
securities, cash, or other assets, as the case may be) as the Rights
Certificate or Certificates surrendered then entitled such holder (or former
holder in the case of a transfer) to purchase. Any registered holder desiring
to transfer, split up, combine or exchange any Rights Certificate shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office of the Rights Agent. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Rights Certificate until the
registered holder shall have completed and signed the certificate contained in
the form of assignment on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the person
entitled thereto a Rights Certificate or Certificates, as the case may be, as
so requested. The Company may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will execute
and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed, or mutilated.
SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION
DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder
of any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office of the Rights Agent, together with payment of the
Purchase Price for each one one-thousandth of a share of Preferred Stock (or
other securities, cash or other assets, as the case may be) as to which the
Rights are exercised, at or prior to the earlier of (i) the close of business
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on December 29, 2007 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof, (iii) the time at which
such Rights are exchanged (the "Exchange Date") as provided in Section 24
hereof, or (iv) the time at which the Rights expire pursuant to Section 13(d)
hereof (the earliest of (i), (ii), (iii) and (iv) being herein referred to as
the "Expiration Date").
(b) Each Right shall entitle the registered holder thereof
to purchase one one-thousandth of a share of Preferred Stock, and the Purchase
Price for each one one-thousandth of a share of Preferred Stock pursuant to the
exercise of a Right shall initially be $300, and shall be subject to adjustment
from time to time as provided in Sections 11 and 13 hereof and shall be payable
in lawful money of the United States of America in accordance with paragraph
(c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price per one one-thousandth of a share of Preferred Stock (or
Common Stock, other securities, cash or other assets, as the case may be) to be
purchased and an amount equal to any applicable transfer tax in cash, or by
certified check, cashier's check or bank draft payable to the order of the
Company, the Rights Agent shall, subject to Section 18(j) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of Preferred
Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the total number of one one-thousandths of a share of
Preferred Stock to be purchased and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company
shall have elected to deposit the total number of shares of Preferred Stock
issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of one one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary to comply with
such request, (ii) requisition from the Company the amount of cash, if any, to
be paid in lieu of issuance of fractional shares in accordance with Section 14,
(iii) promptly after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) after receipt thereof, promptly deliver such cash, if any,
to or upon the order of the registered holder of such Rights Certificate. In
the event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.
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(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
Rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, which a majority of the Continuing Directors,
in their sole discretion, determines is or was involved in or caused or
facilitated, directly or indirectly (including through any change in the
Board), such Section 11(a)(ii) Event, (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom such Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which a majority of the Continuing Directors 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 Company shall use all reasonable efforts to ensure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied with, but
shall have no liability to any holder of Rights Certificates or other Person as
a result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company shall reasonably request.
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SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES.
All Rights Certificates surrendered for the purpose of
exercise, transfer, split up, combination or exchange shall, if surrendered to
the Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent, shall
be canceled by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any provisions of this Rights Agreement. The
Company shall deliver to the Rights Agent for cancellation and retirement, and
the Rights Agent shall so cancel and retire, any other Rights Certificate
purchased or acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all canceled Rights Certificates to the Company,
or shall, at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to
be reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out
of its authorized and issued shares held in its treasury), the number of shares
of Preferred Stock (and, following the occurrence of a Triggering Event, shares
of Common Stock and/or other securities) that, as provided in this Agreement,
including Section 11(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) In the event the shares of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other
securities) issuable upon the exercise of Rights become listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with this
Agreement, a registration statement under the Securities Act with respect to
the Common Stock or other 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 Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such
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securities, and (B) the Expiration Date. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a
period of time not to exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c), the exercisability of
the Rights in order to prepare and file such registration statement and permit
it to become effective. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Upon any suspension of
exercisability of Rights referred to in this Section 9(c), the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. Notwithstanding any provision of this
Agreement to the contrary, the Rights shall not be exercisable and shall be
void so long as held, by a holder in any jurisdiction where the requisite
qualification to the issuance to such holder, or the exercise by such holder,
of the Rights in such jurisdiction shall not have been obtained or be
obtainable, or the exercise thereof shall not be permitted under applicable law
or a registration statement shall not have been declared effective.
(d) The Company covenants and agrees that it will take all
such action as may be necessary to ensure that all one one-thousandths of a
share of Preferred Stock (and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully
paid and non-assessable.
(e) The Company further covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges which may be payable in respect of the issuance or delivery of the
Rights Certificates or of any certificates for a number of one one-thousandths
of a share of Preferred Stock (or Common Stock and/or other securities, as the
case may be) upon the exercise of Rights. The Company shall not, however, be
required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of certificates for a number of one one-thousandths of a
share of Preferred Stock (or Common Stock and/or other securities, as the case
may be) in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or deliver
any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) in a name
other than that of the registered holder upon the exercise of any Rights until
any such tax shall have been paid (any such tax being payable by the holder of
such Rights Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
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SECTION 10. PREFERRED STOCK RECORD DATE.
Each person in whose name any certificate for a number of one
one-thousandths of a share of 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 such fractional
shares of 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 Rights 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 Company are closed, such person shall be
deemed to have become the record holder of such shares (fractional or
otherwise) on, and such certificate shall be dated, the next succeeding
Business Day on which the Preferred Stock (or Common Stock and/or other
securities as the case may be) transfer books of the Company are open. Prior
to the exercise of the Rights evidenced thereby, the holder of a Rights
Certificate shall not be entitled to any rights of a stockholder of the Company
with respect to shares for which the Rights shall be exercisable, including,
without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
SECTION 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS.
The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares or (D)
issue any shares of its capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing or surviving corporation),
except as otherwise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of Preferred Stock or the number and kind of
shares of capital stock issuable on such date, as the case may be, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the aggregate
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adjusted Purchase Price then in effect necessary to exercise a Right in full,
the aggregate number and kind of shares of Preferred Stock or the number and
kind of shares of capital stock, as the case may be, which, if such Right had
been exercised immediately prior to such date and at a time when the Preferred
Stock (or other capital stock, as the case may be) transfer books of the
Company were open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination, or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be
made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Sections 23 and 24 of this
Agreement, in the event that any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary
of the Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan), alone or together
with its Affiliates and Associates, shall, at any time after the Rights
Dividend Declaration Date, become an Acquiring Person, unless the event causing
such Person to become an Acquiring Person is a transaction set forth in Section
13(a) hereof, or is an acquisition of shares of Common Stock pursuant to a cash
tender offer made pursuant to Section 14(d) of the Exchange Act for all
outstanding shares of Common Stock (other than shares of Common Stock
beneficially owned by the person making the offer or by its Affiliates or
Associates) at a price and on terms determined by at least a majority of the
Outside Directors, after receiving advice from one or more investment banking
firms, to be (a) at a price which is fair to stockholders (taking into account
all factors which such members of the Board deem relevant including, without
limitation, prices which could reasonably be achieved if the Company or its
assets were sold on an orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Company and its stockholders, proper
provision shall be made so that promptly following the Redemption Period (as
defined in Section 23(a)), each holder of a Right (except as provided below and
in Section 7(e) hereof) shall thereafter have the right to receive, upon
exercise thereof and payment of an amount equal to the then current Purchase
Price in accordance with the terms of this Agreement, in lieu of a number of
one one-thousandths of a share of Preferred Stock, such number of shares of
Common Stock of the Company as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one
one-thousandths of a share of Preferred Stock for which a Right was or would
have been exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, whether or not such Right was then exercisable, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement except to the extent set forth in Section 13 thereof) by 50% of
the current market price per share of Common Stock (determined pursuant
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to Section 11(d) hereof) on the date of such first occurrence (such number of
shares, the "Adjustment Shares").
(iii) The Company may at its option substitute for a
share of Common Stock issuable upon the exercise of Rights in accordance with
the foregoing subparagraph (ii) such number or fractions of shares of Preferred
Stock having an aggregate market value equal to the current per share market
price of a share of Common Stock. In the event that the number of shares of
Common Stock which is authorized by the Company's Certificate of Incorporation
but not outstanding, or reserved for issuance for purposes other than upon
exercise of the Rights, is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the Board shall
(acting by at least a majority of the Continuing Directors), to the extent
permitted by applicable law and by material agreements then in effect to which
the Company is a party, (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value")
over (2) the Purchase Price (such excess, the "Spread"), and (B) with respect
to each Right (subject to Section 7(e) hereof), make adequate provision to
substitute for some or all of the Adjustment Shares, upon exercise of a Right
and payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or other equity securities of the Company
(including, without limitation, shares, or units of shares, of Preferred Stock
which the Board has deemed to have the same value as shares of Common Stock)
such shares or units of shares of equity securities are herein called "common
stock equivalents"), (4) debt securities of the Company, (5) other assets, or
(6) any combination of the foregoing, having an aggregate value equal to the
Current Value, where such aggregate value has been determined by the Board
based upon the advice of an investment banking firm selected by the Board;
provided, however, if the Company shall not have made adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following
the later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the
date on which the Company's right of redemption pursuant to Section 23(a)
expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread. If, upon the occurrence of a Section 11(a)(ii) Event, the Board shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, then if the Board so elects, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
period, as it may be extended, the "Substitution Period"). To the extent that
action is to be taken pursuant to the preceding provisions of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof, that
such action shall apply uniformly to all
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<PAGE> 18
outstanding Rights, and (y) may suspend the exercisability of the Rights until
the expiration of the Substitution Period in order to seek any authorization of
additional shares and/or to decide the appropriate form of distribution to be
made pursuant to the first sentence of this Section 11(a)(iii) and to determine
the value thereof. In the event of any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section
11(a)(iii), the value of the Common Stock shall be the current market price (as
determined pursuant to Section 11(d) hereof) per share of the Common Stock on
the Section 11(a)(ii) Trigger Date and the value of any "common stock
equivalent" shall be deemed to have the same value as the Common Stock on such
date. The Board may, but shall not be required to, establish procedures to
allocate the right to receive shares of Common Stock upon the exercise of the
Rights among holders of Rights pursuant to this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them (for a period expiring within forty-five (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 shares of Preferred
Stock ("equivalent preferred stock") or securities convertible into Preferred
Stock at a price per share of Preferred Stock or per share of "equivalent
preferred stock" (or having a conversion price per share of Preferred Stock, if
a security convertible into Preferred Stock) less than the current per share
market price of the Preferred Stock (as defined in Section 11(d)) on such
record date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the number of
shares of Preferred Stock outstanding on such record date, plus the number of
shares of Preferred Stock which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred stock so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of additional shares of
Preferred Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be
paid in a consideration part or all of which shall be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. Shares of Preferred
Stock owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights
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or warrants are not so issued, the Purchase Price shall be adjusted to be the
Purchase Price which would then be in effect if such record date had not been
fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation) of evidences of indebtedness, cash (other
than a regular quarterly cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock), or
subscription rights or warrants (excluding those referred to in Section 11(b)),
the Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the current per share
market price of the Preferred Stock (as defined in Section 11(d)) on such
record date, less the fair market value (as determined in good faith by the
Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes) of the portion of the
cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Preferred Stock and
the denominator of which shall be such current per share market price of the
Preferred Stock. Such adjustment 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 market price" of the Common Stock on any date shall be deemed to be
the average of the daily closing prices per share of such Common Stock for the
30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date, and for purposes of computations made pursuant to Section
11(a)(iii) hereof, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
Common Stock for the ten (10) consecutive Trading Days immediately following
such date; provided, however, that in the event that the current market price
of the Common Stock is determined during a period following the announcement by
the issuer of such Common Stock of (i) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities convertible
into such Common Stock (other than the Rights), or (ii) any subdivision,
combination or reclassification of such Common Stock, and prior to the
expiration of the requisite thirty (30) Trading Day or ten (10) Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be appropriately adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in
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either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the shares of Common Stock are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the NASDAQ Stock Market
("NASDAQ") or such other system then in use, or, if on any such date the shares
of Common Stock are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the shares of Common Stock selected by the Board. If on any such
date no market maker is making a market in the Common Stock, the fair value of
such shares on such date as determined in good faith by the Board shall be
used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for the transaction of business, or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the term "Trading Day" shall mean a Monday, Tuesday, Wednesday,
Thursday or Friday on which banking institutions in the State of New York are
not authorized or obligated by law or executive order to close. If the Common
Stock is not publicly held or not listed or traded, "current market price"
shall mean the fair value per share as determined in good faith by the Board,
whose determination shall be described in a statement filed with the Rights
Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder,
the "current market price" per share of Preferred Stock shall be determined in
the same manner as set forth above for the Common Stock in clause (i) of this
Section 11(d) (other than the last sentence thereof). If the current market
price per share of Preferred Stock cannot be determined in the manner provided
above or if the Preferred Stock is not publicly held or listed or traded in a
manner described in clause (i) of this Section 11(d), the "current market
price" per share of Preferred Stock shall be conclusively deemed to be an
amount equal to 1,000 (as such number may be appropriately adjusted for such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock occurring after the date of this Agreement) multiplied by the
current market price per share of the Common Stock. If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded, "current
market price" per share of the Preferred Stock shall mean the fair value per
share as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and shall be conclusive
for all purposes. For all purposes of this Agreement, the "current market
price" of one one-thousandth of a share of Preferred Stock shall be equal to
the "current market price" of one share of Preferred Stock divided by 1,000.
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(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in such price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be
made to the nearest cent or to the nearest ten-thousandth of a share of Common
Stock or other share or one-millionth of a share of Preferred Stock, as the
case may be. Notwithstanding the first sentence of this Section 11(e), an
adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to
Section 11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Stock, thereafter the number of such other shares
so receivable upon exercise of any Right and the Purchase Price thereof shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m),
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of one one-thousandths
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 Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-thousandths of a share of Preferred Stock (calculated to the nearest
one-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share covered by a Right immediately prior to this
adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of one one-thousandths of a share of Preferred Stock
issuable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the
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<PAGE> 22
number of Rights shall be exercisable for the number of one one-thousandths 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 Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders
of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such
holders shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a share of Preferred
Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price
per one one-thousandth of a share and the number of one one-thousandths of a
share which were expressed in the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then-par value, if any, of the number of
one one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may validly and legally
issue fully paid and non-assessable such number of one one-thousandths of a
share of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that
an adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event
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the issuance to the holder of any Right exercised after such record date the
number of one one-thousandths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over
and above the number of one one-thousandths of a share of Preferred Stock and
other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that it in its sole discretion shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock
at less than the current market price, (iii) issuance wholly for cash of shares
of Preferred Stock or securities which by their terms are convertible into or
exchangeable for Preferred Stock, (iv) stock dividends or (v) issuance of
rights, options or warrants referred to hereinabove in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to, simultaneously
with or immediately after such consolidation, merger or sale, the stockholders
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.
(o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23 or Section 27
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is
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reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Distribution Date (i) declare
a dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Distribution
Date, shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
SECTION 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and
13 hereof, the Company shall (a) promptly prepare a certificate setting forth
such adjustment, and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent and with each transfer
agent for the Preferred Stock and the Common Stock a copy of such certificate
and (c) mail a brief summary thereof to each holder of a Rights Certificate
(or, if prior to the Distribution Date, to each holder of a certificate
representing shares of Common Stock) 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
any adjustment unless and until it shall have received such certificate.
SECTION 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF
ASSETS OR EARNING POWER.
(a) Subject to Section 23 of this Agreement, in the event
that, following the Stock Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof), and the Company shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof) shall consolidate with, or merge with or
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into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Common Stock
shall be changed into or exchanged for stock or other securities of any other
Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Person or Persons (other
than the Company or any Subsidiary of the Company in one or more transactions
each of which complies with Section 11(o) hereof), then, and in each such case
(except as may be contemplated by 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, upon the expiration of the Redemption Period (as defined in
Section 23(a)), thereafter have the right to receive, upon the exercise thereof
at the then current Purchase Price in accordance with the terms of this
Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be
equal to the result obtained by (1) multiplying the then current Purchase Price
by the number of one one-thousandths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the first
occurrence of a Section 13 Event, multiplying the number of one one-thousandths
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 by the Purchase
Price in effect immediately prior to such first occurrence), and (2) dividing
that product (which product, following the first occurrence of a Section 13
Event, shall be referred to as the "Purchase Price" for each Right and for all
purposes of this Agreement) by 50% of the current market price per share of the
shares of Common Stock of such Principal Party on the date of consummation of
such Section 13 Event (or the fair market value on such date or other
securities or property of the Principal Party, as provided for herein); (ii)
such Principal Party shall thereafter be liable for, and shall assume, by
virtue of such Section 13 Event, all the obligations and duties of the Company
pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed
to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof (other than Sections 11(a)(ii) and 11(a)(iii))
shall apply only to such Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of shares of its
Common 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 its shares of Common
Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) and Section 11(a)(iii) hereof shall be of no
effect following the first occurrence of any Section 13 Event.
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<PAGE> 26
(b) "Principal Party" shall mean
(i) in the case of any transaction described in clause
(x) or (y) of the first sentence of Section 13(a), the Person
that is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or
consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person
that is the party receiving the greatest portion of the assets
or earning power transferred pursuant to such transaction or
transactions; provided, however, that in any such case, (1) if
the Common Stock of such Person is not at such time and has not
been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person
is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, "Principal Party"
shall refer to such other Person; and (2) in case such Person is
a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such
Persons is the issuer of the Common Stock having the greatest
aggregate market value.
(c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized shares
of its 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 Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and
further providing that, as soon as practicable after the date of any such
Section 13 Event, the Principal Party will:
(i) prepare and file a registration statement under
the Securities Act, with respect to the Rights and the
securities purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act)
until the Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its
Affiliates which
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<PAGE> 27
comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers
or consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii)
Event, the Rights which have not theretofore been exercised shall thereafter
become exercisable in the manner described in Section 13(a) hereof.
(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 (or a wholly owned subsidiary of any such
Person or Persons) who acquired shares of Common Stock pursuant to a cash
tender offer for all outstanding shares of Common Stock which complies with the
provisions of Section 11(a)(ii) hereof, (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 cash tender offer and (iii) the form of consideration being
offered to the remaining holders of shares of Common Stock pursuant to such
transaction is the same as the form of consideration paid pursuant to such cash
tender offer. Upon consummation of any such transaction contemplated by this
Section 13(d), all Rights hereunder shall expire.
SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights except prior to the Distribution Date as provided in Section 11(p)
hereof, or to distribute Rights Certificates which evidence fractional Rights.
In lieu of such fractional Rights, there shall be paid to the registered
holders of the Rights Certificates with regard to which such fractional Rights
would otherwise be issuable, an amount in cash equal to the same fraction of
the current market value of the 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, or, in case no such sale takes place on
such day, the average of the high bid and low asked prices, in either case 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. If on any such date no such market maker is
making a market in the Rights the fair value of the Rights on such date as
determined in good faith by the Board shall be used. In the event the Rights
are listed or admitted to trading on a national securities exchange, the
closing price for any day shall be the last sale price, regular way, or, in
case no such
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sale takes place on such day, the average of the high bid and low asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to the national securities exchange
on which the Rights are listed or admitted to trading.
(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock) upon exercise of the Rights
or to distribute certificates which evidence fractional shares of Preferred
Stock (other than fractions which are integral multiples of one one-thousandth
of a share of Preferred Stock). In lieu of fractional shares of Preferred
Stock that are not integral multiples of one one-thousandth of a share of
Preferred Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of one
one-thousandth of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-thousandth of a share of Preferred
Stock shall be one one-thousandth of 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.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one (1) share of Common Stock.
For purposes of this Section 14(c), the current market value of one share of
Common Stock shall be the closing price of one share of Common Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his right to receive any fractional Rights or any fractional
shares upon exercise of a Right, except as permitted by this Section 14.
SECTION 15. RIGHTS OF ACTION.
All rights of action in respect of this Agreement, except the
rights of action vested in the Rights Agent pursuant to Section 18 and Section
20 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock); and any registered holder of any Rights Certificate (or,
prior to the Distribution Date, of the Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of the Common Stock),
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may, in his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, his right to exercise the Rights evidenced by such
Rights Certificate in the manner provided in such Rights Certificate and in
this Agreement. Without limiting the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this
Agreement and will be entitled to specific performance of the obligations
under, and injunctive relief against actual or threatened violations of, the
obligations hereunder of any Person subject to this Agreement.
SECTION 16. AGREEMENT OF RIGHTS HOLDERS.
Every holder of a Right by accepting the same consents and
agrees with the Company and the Rights Agent and with every other holder of a
Right that:
(a) prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Rights Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer and with the appropriate form of assignment and
the certificate contained therein duly completed and executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the
Company and the Rights Agent may deem and treat the person in whose name the
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Rights Certificates or the associated Common Stock certificate made by
anyone other than the Company or the Rights Agent) for all purposes whatsoever,
and neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be affected by any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any government authority, prohibiting or otherwise
restraining performance of such obligation;
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provided, however, the Company must use its best efforts to have any such
order, decree or ruling lifted or otherwise overturned as soon as possible.
SECTION 17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER.
No holder, as such, of any Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the Preferred Stock or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
SECTION 18. DUTIES OF RIGHTS AGENT.
The Rights Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter (including, without limitation, the identity of any Acquiring Person
and the determination of "current market price") be proved or established by
the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the President, a Vice President, the Treasurer
or the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
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(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 Rights Certificates (except as to its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent's responsibilities are of an
administrative nature only and it shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or any
adjustment required under any of the provisions hereof or responsible for the
manner, method, or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after actual notice
of any such adjustment); nor shall it by any act hereunder be deemed to make
any representation or warranty as to the authorization or reservation of any
shares of Common Stock or shares of Preferred Stock to be issued pursuant to
this Agreement or any Rights Certificate or as to whether any shares of Common
Stock or shares of Preferred Stock will, when so issued, be validly authorized
and issued, fully paid and non-assessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder
from any one of the Chairman of the Board, the President, a Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer. Any application by the
Rights Agent for written instructions from the Company may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Rights Agreement and the date on or
after which such action shall be taken or such omission shall be effective.
The Rights Agent shall not be liable for any action taken by, or omission of,
the Rights
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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 Company actually receives
such application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instruction in response to such application specifying the action to be taken
or omitted.
(h) The Rights Agent and any stockholder, director, officer
or employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, default, neglect, or misconduct of
any such attorneys or agents or for any loss to the Company resulting from any
such act, default, neglect, or misconduct; provided, however, reasonable care
was exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of its rights if there shall be reasonable grounds for believing that repayment
of such funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered
to the Rights Agent for exercise or transfer, the certificate attached to the
form of assignment or form of election to purchase, as the case may be, has
either not been completed or indicates an affirmative response to clause 1
and/or 2 thereof, the Rights Agent shall not take any further action with
respect to such requested exercise of transfer without first consulting with
the Company.
SECTION 19. COMPENSATION AND INDEMNIFICATION OF THE RIGHTS
AGENT.
(a) The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from
time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and
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the exercise and performance of its duties hereunder. The Company also
agrees to indemnify the Rights Agent, its officers, employees, agents and
directors for, and to hold each of them 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 or such other indemnified party in connection with the acceptance and
administration of this Agreement and its duties hereunder, including the costs
and expenses of defending against any claim of liability in the premises. The
indemnity provided for hereunder shall survive the expiration of the Rights and
the termination of this Agreement.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement or the exercise of its
duties hereunder in reliance upon any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified
or acknowledged, by the proper person or persons.
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF
RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Rights Certificates
shall have been countersigned but not delivered, any such successor Rights
Agent may adopt the countersignature of the predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor Rights Agent or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall
be changed and at any such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature
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under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
SECTION 21. CHANGE OF RIGHTS AGENT.
The Rights Agent or any successor Rights Agent may resign and
be discharged from its duties under this Agreement upon thirty (30) days'
notice in writing mailed to the Company and to each transfer agent of the
Common Stock and the Preferred Stock by registered or certified mail, and to
the holders of the Rights Certificates by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing, mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock and Preferred Stock
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the registered holder of any Rights Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the
United States or of the State of Maryland or New York (or of any other state of
the United States so long as such corporation is authorized to do business as a
banking institution in the State of Maryland or New York), in good standing,
having a principal office in the State of Maryland or New York which is
authorized under such laws to exercise corporate trust power and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary for the purpose. Not
later than the effective date of any such appointment the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock and the Preferred Stock, and mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or
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any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
SECTION 22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
Notwithstanding any of the provisions of this Agreement or of
the Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board to
reflect any adjustment or change in the Purchase Price per share and the number
or kind of class of shares or other securities or property purchasable under
the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of shares of
Common Stock following the Distribution Date (other than upon exercise of a
Right) and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of 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 hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall
be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.
SECTION 23. REDEMPTION.
(a) The Board may, at its option, at any time prior during
the period commencing on the Rights Dividend Declaration Date and ending on the
earlier of (i) the Close of Business on the tenth day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior
to the Record Date, the Close of Business on the tenth day following the Record
Date), as such period may be extended or shortened in the discretion of the
Board of Directors (the "Redemption Period") or (ii) the Final Expiration Date,
cause the Company to redeem all but not less than all the then outstanding
Rights at a redemption price of $.001 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"); provided, however, that, if
the Board authorizes redemption of the Rights or a change in the Redemption
Period on or after the time a Person becomes an Acquiring Person then there
must be Continuing Directors then in office and such authorization shall
require the concurrence of a majority of such Continuing Directors. If,
following the
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occurrence of a Stock Acquisition Date and following the expiration of the
Company's right of redemption hereunder (i) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of a number of shares of Common
Stock in one transaction or series of transactions, not directly or indirectly
involving the Company or any of its Subsidiaries, which did not result in the
occurrence of a Triggering Event such that such Person is thereafter a
Beneficial Owner of 10% or less of the outstanding shares of Common Stock, (ii)
there are no other Persons, immediately following the occurrence of the event
described in clause (i), who are Acquiring Persons, and (iii) the Board (with
the concurrence of a majority of the Continuing Directors) shall so approve,
then the Company's right of redemption shall be reinstated and thereafter be
subject to the provisions of this Section 23. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be
exercisable after the first occurrence of a Section 11(a)(ii) Event or a
Section 13 Event until such time as the Company's right of redemption hereunder
has expired. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the current market price of the Common Stock
at the time of redemption) or any other form of consideration deemed
appropriate by the Board.
(b) Immediately upon the action of the Board 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. Promptly after the
action of the Board ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the Transfer Agent for the
Common Stock. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.
SECTION 24. EXCHANGE.
(a) The Board may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the then
outstanding and exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii) or Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such exchange
ratio being hereinafter referred to as the "Exchange Ratio").
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(b) Immediately upon the action of the Board ordering the
exchange of any Rights pursuant to subsection (a) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of Common Stock for Rights will be
effected and, in the event of any partial exchange, the number of Rights which
will be exchanged. Any partial exchange shall be effected pro rata based on
the number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) or Section 7(e) hereof) held by each holder of
Rights.
(c) In the event that there shall not be sufficient Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.
(d) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares, the Company shall
pay to the registered holders of the Right Certificates with regard to which
such fractional shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole share of Common Stock.
For the purposes of this paragraph (d), the current market value of a whole
share of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.
SECTION 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after
the Distribution Date (i) to pay any dividend payable in stock of any class to
the holders of Preferred Stock or to make any other distribution to the holders
of Preferred Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings) or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any
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reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding Preferred Stock), or (iv) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person, or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of
a Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock
whichever shall be the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, then,
in any such case, (i) the Company shall as soon as practicable thereafter give
to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of the occurrence of such event
which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Preferred Stock shall be deemed thereafter to refer to Common
Stock and/or, if appropriate other securities.
SECTION 26. NOTICES.
Notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any Rights Certificate to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
CIENA Corporation
920 Elkridge Landing Road
Linthicum, Maryland 21090
Attention: General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Rights
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Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
Boston Equiserve
Blue Hills Office Park
Mail Stop 45-02-62
150 Royall Street
Canton, Massachusetts 02021
Attention: Executive Vice President
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to any such holder at the address of such holder as shown on the
registry books of the Company.
SECTION 27. SUPPLEMENTS AND AMENDMENTS.
Prior to the Distribution Date and subject to the penultimate
sentence of this Section 27, the Company may, and the Rights Agent shall, if
the Company so directs, supplement or amend any provision of this Agreement
without the approval of any holders of certificates representing shares of
Common Stock. From and after the Distribution Date and subject to the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall at any time and from time to time, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates in order (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period hereunder
or (iv) to change or supplement the provisions hereunder in any manner which
the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates (other than an
Acquiring Person or an Affiliate or Associate of any such Person); provided,
however, that this Agreement may not be supplemented or amended (A) whether
before or after the Distribution Date, to lengthen a time period relating to
when the Rights may be redeemed, or (B) after the Distribution Date, to
lengthen, pursuant to clause (iii) of this sentence, 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 Company which
states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement or
amendment. Notwithstanding anything contained in this Agreement to the
contrary, no supplement or amendment shall be made which
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changes the Redemption Price, the Final Expiration Date, the Purchase Price or
the number of one one-thousandths of a share of Preferred Stock for which a
Right is exercisable. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of shares of Common Stock.
SECTION 28. SUCCESSORS.
All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 29. DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC.
For all purposes of this Agreement, any calculation of the
number of shares of Common Stock outstanding at any particular time, including
for purposes of determining the particular percentage of such outstanding
shares of Common Stock 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. The Board (with, where
specifically provided for herein, the concurrence of the Continuing Directors
or Outside Directors) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board (with, where specifically provided for herein, the
concurrence of the Continuing Directors or Outside Directors) or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations 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). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board (with, where
specifically provided for herein, the concurrence of the Continuing Directors
or Outside Directors) in good faith, shall (x) be final, conclusive and binding
on the Company, the Rights Agent, the holders of the Rights and all other
parties, and (y) not subject any director to any liability to the holders of
the Rights.
SECTION 30. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the registered
holders of the Common Stock) any legal or equitable right, remedy or claim
under this Agreement;
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but this Agreement shall be for the sole and exclusive benefit of the Company,
the Rights Agent and the registered holders of the Rights Certificates (and,
prior to the Distribution Date, registered holders of Common Stock).
SECTION 31. SEVERABILITY.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated; provided,
however, that notwithstanding anything in this Agreement to the contrary, if
any such term, provision, covenant or restriction is held by such court or
authority to be invalid, void or unenforceable and the Board of Directors
determines in its good faith judgment that severing the invalid language from
this Agreement would materially and adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 hereof shall be
reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board.
SECTION 32. GOVERNING LAW.
This Agreement, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with laws of such State.
SECTION 33. COUNTERPARTS.
This Agreement may be executed in any number of counterparts.
It shall not be necessary that the signature of or on behalf of each party
appears on each counterpart, but it shall be sufficient that the signature of
or on behalf of each party appears on one or more of the counterparts. All
counterparts shall collectively constitute a single agreement. It shall not be
necessary in any proof of this Agreement to produce or account for more than a
number of counterparts containing the respective signatures of or on behalf of
all of the parties.
SECTION 34. DESCRIPTIVE HEADINGS.
Descriptive headings of the several Sections of this Agreement
are inserted for convenience only and shall not control or affect the meaning
or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
CIENA CORPORATION
Attest:
By /s/ G. Eric Georgatos By /s/Patrick H. Nettles
Vice-president, General Counsel --------------------------------
and Secretary President
BOSTON EQUISERVE
Attest:
By By
-------------------------------- --------------------------------
-------------------------------- --------------------------------
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Exhibit A
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
CIENA Corporation
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Patrick H. Nettles, President and Chief Executive Officer,
of CIENA Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of
Directors by the Certificate of Incorporation of the said Corporation, the said
Board of Directors on December 23, 1997, adopted the following resolution
creating a series of 300,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation (the "Board") in accordance with the
provisions of its Certificate of Incorporation, a series of Preferred Stock of
the Corporation be and it hereby is created, and that the designation and
amount thereof and the voting rights or powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such
series, par value $.01 per share, shall be designated as "Series A Junior
Participating Preferred Stock" and the number of shares constituting such
series shall be 300,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders
of any shares of any series of Preferred Stock ranking prior and superior to
the shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors out of
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funds legally available for the purpose, quarterly dividends payable in cash on
the 15th day of April, July, October and January, 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 first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $.01
or (b) subject to the provision for adjustment hereinafter set forth, 1,000
times the aggregate per share amount of all cash dividends, and 1,000 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, par
value $.01 per share, of the Corporation (the "Common Stock"), or a subdivision
of the outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock, since the immediately preceding Dividend Payment
Date, or, with respect to the first Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A Junior Participating
Preferred Stock. In the event the Corporation shall at any time after December
23, 1997 (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 Series
A Junior Participating 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 Series A Junior Participating Preferred Stock as provided
in paragraph (A) above immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the common stock during the period between any quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $.01 per share on the Series A Junior Participating Preferred Stock
shall nevertheless be payable on such subsequent quarterly Dividend Payment
Date. (C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record set 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 Series A Junior Participating Preferred Stock entitled to
receive a quarterly
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dividend and before such Quarterly Dividend Payment date, in either of which
event such dividends shall begin to accrue and be cumulative for such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series a Junior Participating 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 Series A
Junior Participating Preferred stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 30
days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series
A Junior Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter
set forth, each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to 1,000 votes on all matters submitted to a vote of
the stockholders 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 Series A Junior Participating 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 by law, the holders of
shares of Series A Junior Participating Preferred Stock and the holders of
shares of Common Stock shall vote together as one class on all matters
submitted to a vote of stockholders of the Corporation.
Section 4. Certain Restrictions.
(A) Whenever dividends or distributions payable on the
Series A Junior Participating Preferred Stock as provided in Section 2 are not
paid, thereafter and until such dividends and distributions, whether or not
declared, on shares of Series A Junior Participating Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase or otherwise acquire for
consideration
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<PAGE> 46
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock; or
(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 Series A
Junior Participating Preferred Stock, except dividends paid ratably on the
Series A Junior Participating Preferred Stock and all such parity stock on
which dividends are payable in proportion to the total amounts to which the
holders of all such shares are then entitled; or
(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 Series A
Junior Participating 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 Series A
Junior Participating Preferred Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior Participating Preferred Stock, or
any shares of stock ranking on a parity with the Series A Junior Participating
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
Section 5. Reacquired Shares. Any shares of Series A
Junior Participating Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
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Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Junior Participating
Preferred Stock unless, prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $300,000 per share, plus any
unpaid dividends and distributions payable thereon, whether or not declared, to
the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 1,000 (as appropriately adjusted as set forth in
subparagraph (C) below to reflect such events as stock splits, stock dividends
and recapitalizations with respect to the Common Stock) (such number in clause
(ii) immediately above being referred to as the "Adjustment Number").
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series A
Junior Participating Preferred Stock and Common Stock, respectively, holders of
Series A Junior Participating 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 the Adjustment Number to one (1) with
respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of preferred
stock, if any, which rank on a parity with the Series A Junior Participating
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are sufficient assets available
to permit payment in full of the Common Adjustment, then such remaining assets
shall be distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time 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
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fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 7. Consolidation, Merger, etc. In case the
Corporation shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or changed
into other stock or securities, cash and/or any other property, then in any
such case the shares of Series A Junior Participating Preferred Stock shall at
the same time be similarly exchanged or changed in an amount per share (subject
to the provision for adjustment hereinafter set forth) equal to 1,000 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
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 Series A Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 8. Redemption. The outstanding shares of Series A
Junior Participating Preferred Stock may be redeemed as a whole, but not in
part, at any time, or from time to time, at the option of the Board, at a cash
price per share equal to 105 percent of (i) the product of the Adjustment
Number times the Average Market Value (as such term is hereinafter defined) of
the Common Stock, plus (ii) all dividends which on the redemption date are
payable on the shares to be redeemed and have not been paid or declared, and a
sum sufficient for the payment thereof set apart, without interest. The
"Average Market Value" is the average of the closing sale prices of the Common
Stock during the 30 day period immediately preceding the date before the
redemption date on the NASDAQ National Stock Market, or if such stock is not
listed on NASDAQ Stock Market, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934, as amended, on
which such stock is listed, or, if such stock is not listed on any such
exchange, or if no such quotations are available, the fair market value of the
Common Stock as determined by the Board in good faith.
Section 9. Ranking. Notwithstanding anything contained
herein to the contrary, the Series A Junior Participating Preferred Stock shall
rank
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junior to all other series of the Corporation's Preferred Stock as to voting
rights, the payment of dividends and the distribution of assets in liquidation,
unless the terms of any such series shall provide otherwise.
Section 10. 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
Series A Junior Participating 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 Series A Junior Participating Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Series A Junior
Participating Preferred Stock may be issued in fractions of a share which shall
entitle the holders, in proportion to such holders fractional shares, to
exercise voting rights, receive dividends, participate in distributions and to
have the benefit of all other rights of holders of Series A Junior
Participating Preferred Stock.
IN WITNESS WHEREOF, I have executed and subscribed this
Certificate and do affirm the foregoing as true under the penalties of perjury
this __ day of _________________, 1997.
---------------------------------------
Patrick H. Nettles
President and Chief Executive Officer
Attest:
- - --------------------------------
G. Eric Georgatos
General Counsel and Secretary
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Exhibit B
[Form of Rights Certificate]
Certificate No. R-__________ __________ Rights
NOT EXERCISABLE AFTER DECEMBER 29, 2007 OR EARLIER IF REDEEMED OR
EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH
IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE
OF ANY SUCH PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.
THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO LONG AS
HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE
QUALIFICATION TO THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH
HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN
OBTAINED OR BE OBTAINABLE. [THE RIGHTS REPRESENTED BY THIS RIGHTS
CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR
BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(e) OF SUCH AGREEMENT.] *
- - ----------------------------------
* The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
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Rights Certificate
CIENA Corporation
This certifies that ______________________________ , or its
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 December 29,
1997 (the "Rights Agreement"), between CIENA Corporation, a Delaware
corporation (the "Company"), and Boston Equiserve (the "Rights Agent"), to
purchase from the Company at any time prior to December 29, 2007 at the office
or offices of the Rights Agent designated for such purpose, or its successors
as Rights Agent, one one-thousandth of a fully paid, non-assessable share of
Series A Junior Participating Preferred Stock, par value $.01 per share (the
"Preferred Stock") of the Company, at a purchase price of $300 per one
one-thousandth share (the "Purchase Price"), upon presentation and surrender of
this Rights Certificate with the Form of Election to Purchase and related
Certificate duly executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Purchase Price per share set forth above, are
the number and Purchase Price as of ______,___ based on the Preferred Stock as
constituted at such date, and are subject to adjustment upon the happening of
certain events as provided in the Rights Agreement.
From and after the occurrence of an event described in Section
11(a)(ii) of the Rights Agreement, the Rights evidenced by this Rights
Certificate beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement), which the Continuing Directors (as defined in the Rights
Agreement), in their sole discretion, determines is or was involved in or
caused or facilitated, directly or indirectly (including through any change in
the Board), such Section 11(a)(ii) Event, (ii) a transferee of any such
Acquiring Person, Associate or Affiliate, or (iii) under certain circumstances
specified in the Rights Agreement, a transferee of a person who, concurrently
with or after such transfer, became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person shall become null and void and no holder
hereof shall have any right with respect to such Rights from and after the
occurrence of such Section 11(a)(ii) Event.
The Rights evidenced by this Rights Certificate shall not be
exercisable, and shall be void so long as held, by a holder in any jurisdiction
where the requisite qualification to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not have been
obtained or be obtainable.
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As provided in the Rights Agreement, the Purchase Price and
the number and kind of shares of Preferred Stock or other securities, which may
be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events (as such term is defined in the
Rights Agreement).
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description
of the rights, limitations of rights, obligations, duties and immunities
hereunder of the Rights Agent, the Company and the holders of the Rights
Certificates, which limitations of rights include the temporary suspension of
the exercisability of such Rights under the specific circumstances set forth in
the Rights Agreement. Copies of the Rights Agreement are on file at the
above-mentioned office of the Rights Agent and are also available upon written
request to the Rights Agent.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office or offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Right Certificates of like tenor and date evidencing Rights entitling the
holder to purchase a like aggregate number of one one-thousandths of a share of
Preferred Stock as the Rights evidenced by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the Company at its option at a
redemption price of $.001 per Right at any time prior to the earlier of the
close of business on (i) the tenth day following the Stock Acquisition Date (as
such time period may be changed in the discretion of the Board of Directors
pursuant to the Rights Agreement), and (ii) the Final Expiration Date (as
defined in the Rights Agreement). Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors. After the expiration of the redemption
period, the Company's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership to 10% or less of the outstanding
shares of Common Stock in a transaction or series of transactions not involving
the Company, and such reinstatement is approved by the Company's Board of
Directors (with the concurrence of a majority of the Continuing Directors).
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<PAGE> 53
At any time after a person becomes an Acquiring Person, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such Acquiring Person which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock per Right (subject to
adjustment).
No fractional shares of Preferred Stock will be issued upon
the exercise of any Right or Rights evidenced hereby, (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred
Stock, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder
of shares of Preferred Stock or of any other securities of the Company which
may at any time be issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
-66-
<PAGE> 54
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
<TABLE>
<S> <C>
Dated as of , 19
---------- --- --
ATTEST: CIENA CORPORATION
By:
- - ------------------------------------- ------------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
Countersigned:
- - -------------------------------------
- - -------------------------------------
By:
---------------------------------
Authorized Signature
</TABLE>
-67-
<PAGE> 55
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate.)
FOR VALUE RECEIVED
------------------------------------------------------------
hereby sells, assigns and transfers unto
--------------------------------------
- - -------------------------------------------------------------------------------
(Please print name and address of transferee)
- - -------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated: ,
---------------------------------- -----
--------------------------
Signature
Signature Guaranteed:
<PAGE> 56
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold,
assigned and transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of any such Person.
Dated: ,
----------------------- ---- ---------------------
Signature
Signature Guaranteed:
<PAGE> 57
NOTICE
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE> 58
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate.)
To:
------------------------------
The undersigned hereby irrevocably elects to exercise ________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
- - -------------------------------------------------------------------------------
(Please print name and address)
- - -------------------------------------------------------------------------------
Please insert social security
or other identifying number:
---------------------------------------
If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to:
- - -------------------------------------------------------------------------------
(Please print name and address)
- - -------------------------------------------------------------------------------
Please insert social security
or other identifying number:
---------------------------------------
- - --------------------------------------------------------------------
Dated: ,
------------------------- ----
---------------------
Signature
Signature Guaranteed:
<PAGE> 59
Certificate
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) the Rights evidenced by this Rights Certificate [ ]
are [ ] are not being exercised by or on behalf of a Person who is or was an
Acquiring Person or an Affiliate or Associate of any such Person (as such terms
are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the
undersigned, it [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any Person who is, was or became an Acquiring Person or
an Affiliate or Associate of any such Person.
Dated: , 19
------------------------- ----- ---------------------
Signature
Signature Guaranteed:
<PAGE> 60
NOTICE
The signature to the foregoing Election to Purchase and
Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
<PAGE> 1
INVESTOR CONTACT: Suzanne DuLong
CIENA Corporation
(888) 243-6223
email: [email protected]
PRESS CONTACT: Denny Bilter
CIENA Corporation
(800) 921-1144
FOR IMMEDIATE RELEASE:
- - ---------------------
CIENA ADOPTS STOCKHOLDER RIGHTS PLAN
FILES FORM 8-K TO PROVIDE DETAILS OF PLAN; ALSO UPDATES DISCUSSION OF PIRELLI
LITIGATION
LINTHICUM, MD - December 29, 1997 - CIENA Corporation (NASDAQ: CIEN) announced
today that its Board of Directors has adopted a Stockholder Rights Plan.
Details of the Plan are set forth in a Form 8-K filed today with the Securities
and Exchange Commission (SEC). In an unrelated matter, the Company also
indicated it was providing in the Form 8-K an update to its discussion of the
Company's pending patent litigation with Pirelli SpA.
STOCKHOLDER RIGHTS PLAN
CIENA's Stockholder Rights Plan is designed to deter any potential coercive or
unfair takeover tactics in the future that may attempt to deprive the Company
and its stockholders of the opportunity to obtain the most attractive price for
their shares. This plan was adopted by CIENA's Board of Directors following
several months of evaluation and after consultation with its outside advisors,
as part of a review of overall corporate governance issues appropriate to a
newly public company.
The Rights Plan is similar to those adopted by more than 1,700 publicly-traded
companies. Under the Plan, the Board has granted Rights to CIENA's stockholders
at the rate of one Right for each share of Common Stock held of record as of
the close of business on January 8, 1998. Under certain circumstances, the
Rights become excercisable for shares of CIENA
<PAGE> 2
Common Stock, or shares of an acquiring entity's stock, having a value twice
that of the exercise price of the Rights. At the time of adoption of the
Rights Plan, the Rights are neither exercisable nor traded separately from the
Common Stock. The Rights will become exercisable only if a person or group
acquires 15% or more of the Company's Common Stock or announces a tender or
exchange offer which would result in its ownership of 15% or more of the
Company's Common Stock. Adoption of the Rights Plan is a pro-active move by
the Company's Board of Directors, intended to protect the rights of CIENA's
stockholders. The Plan was not undertaken in response to any acquisition
proposal or anticipated action to acquire the Company.
Investors and interested parties are referred to the Company's
Form 8-K filed with the SEC concurrently herewith for further details of the
Company's adoption of the Stockholder Rights Plan.
UPDATE ON PENDING LITIGATION
In its Form 10-K filed with the SEC on December 10, 1997, CIENA detailed the
status of its legal proceedings with Pirelli SpA (Pirelli) in a series of
related patent litigation disputes which have been ongoing in three
jurisdictions, including the U.S. District Court of Virginia and the U.S.
District Court in Delaware.
It its Form 8-K filed today, the Company updates those discussions to reflect
the effects of subsequent events including recent developments in the Virginia
proceedings and receipt of a new complaint filed in Delaware, alleging willful
infringement by the Company of two additional U.S. patents held by Pirelli.
The patent claims cited in the new Delaware complaint were known to and
evaluated by the Company prior to the new complaint. The Company continues to
believe that its MultiWave(R) systems do not infringe any valid claims of any
patents held by Pirelli, and will continue to defend itself vigorously.
Because of the complex nature of this ongoing litigation, investors and
interested parties are asked to refer to the Company's Form 8-K filed with the
SEC concurrently herewith to gain understanding of these latest developments in
the context of those which preceded.
# # #
ABOUT CIENA
CIENA Corporation is a worldwide market leader of open
architecture, dense wavelength division multiplexing (DWDM) systems for
long-distance and local exchange carriers. CIENA's DWDM solutions include the
multiwave(r) 1600 and MultiWave 4000 long-haul transport systems,
WaveWatcher(R) network management software, the MultiWave Optical Add/Drop
<PAGE> 3
Multiplexer, the MultiWave Sentry enhanced long-distance transport system and
the new MultiWave Firefly short-haul system.
CIENA's DWDM equipment expands the carrying capacity of fiber
optic networks by up to 24 times by dividing the optical signal into several
separate optical channels or wavelengths. An optical fiber without DWDM
technology carries a single color of laser light, or a single wavelength, on
which travels approximately 32,000 voice or data transmissions. CIENA's DWDM
technology divides the single wavelength into multiple colors, or channels,
thereby multiplying the capacity of the fiber by the number of channels and
enabling service providers to expand bandwidth without the expensive process of
adding more fibers.
Additional information about CIENA can be found on its World
Wide Website: http://www.ciena.com.
