RIGHTS AGREEMENT
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This Agreement, dated as of August 28, 2001, between DIRECT INSITE CORP., a
Delaware corporation (the "Company"), and MANHATTAN TRANSFER REGISTRAR COMPANY
(the "Rights Agent").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend distribution (the "Distribution") of one Right for each outstanding
share of the Common Stock, $.0001 par value, of the Company outstanding on
August 28, 2001 and has authorized the issuance of one Right in respect of each
share of Common Stock of the Company issued between August 28, 2001 and the
earlier of the Distribution Date, the Expiration Date or the Final Expiration
Date (as such terms are hereinafter defined), and under certain other
circumstances, each Right representing the right to purchase one share of Common
Stock of the Company 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 20% or more of the Common Stock of the
Company then Outstanding, but shall not include the Company, any wholly- owned
subsidiary of the Company, any employee benefit plan of the Company or any
wholly-owned subsidiary of the Company, any entity holding shares of Common
Stock for or pursuant to the terms of any such plan or any Person that purchases
Common Stock from the Company pursuant to a transaction approved by the Board of
Directors of the Company. Notwithstanding the foregoing, no Person shall become
an "Acquiring Person" as the result of an acquisition of Common Stock by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 20% or more
of the Common Stock of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 20% 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 Common Stock of the Company, then such Person shall be deemed to
be an "Acquiring Person." Notwithstanding any other provision in this Section
1(a), 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," as
defined pursuant to the foregoing provisions of this paragraph (a), then such
Person shall not be deemed to be an "Acquiring Person" for any purpose of this
Agreement.
(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") as in effect on
August 28, 2001.
(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, beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, 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, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such Person or any
such Person's Affiliates or Associates until such tendered securities are
accepted for purchase of exchange; or (B) the right to vote pursuant to any
agreement, arrangement or understanding; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant
to, and in accordance with, the applicable rules and regulations of the
Exchange Act and (2) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities) for the
purpose of acquiring, holding, voting (except to the extent contemplated by
the proviso to Section 1(c) (ii) (B)) or disposing of any securities of the
Company.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Company, shall mean the number of such
securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(d) "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.
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(e) "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.
(f) "Common Stock" when used with reference to the Company shall mean the
Common Stock, $.0001 par value, of the Company and when used with reference to
any Person other than the Company shall mean the capital stock with greatest
voting power, or the equity securities or other equity interest having power to
control or direct the management, of such Person.
(g) "Continuing Director" shall mean any member of the Board of Directors
of the Company, 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 or nominee of an Acquiring Person or of any such Affiliate or
Associate and was a member of the Board prior to the Shares Acquisition Date,
and any successor of a Continuing Director, while such successor is a member of
the Board, who is not an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or representative or nominee of an Acquiring Person or of any
such Affiliate or Associate, and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
(h) "Person" shall mean any individual, firm, corporation or other entity.
(i) "Shares Acquisition Date" shall mean the first date of public
announcement by the Company or Acquiring Person that an Acquiring Person has
become such.
(j) "Substantial Block" shall mean a number of shares of the Common Stock
which equals or exceeds 20% of the number of shares of the Common Stock then
outstanding.
(k) "Triggering Event" shall mean any event described in Section 11(a) (ii)
or Section 13(a).
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.
SECTION 3. Issue of Right Certificates. (a) Until the earlier of (i) the
tenth day after the Shares Acquisition Date or (ii) the tenth business day (or
such later date as may be determined by action of the Board of Directors prior
to such time as any Person becomes an Acquiring Person) after the date of the
commencement by any Person (other than the Company, and wholly-owned subsidiary
of the Company, any employee benefit plan of the Company or any wholly-owned
subsidiary of the Company or any Person holding Common Stock for or pursuant to
the terms of any such plan or in a transaction with the Company approved by the
Board of Directors) or the date of an announcement of an intention by any Person
to commence, a tender or exchange offer, the consummation of which would result
in a Person becoming the Beneficial Owner of Common Stock aggregating 20% or
more of the then outstanding Common Stock (including any such date which after
the date of this Agreement and prior to the issuance of the Rights; the earlier
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of such dates being herein referred to as "Distribution Date"), (x) the Rights
will be evidenced (subject to the provisions of Section 3(b) hereof) by the
certificates for Common Stock registered in the names of the holders thereof
(which certificates shall also be deemed to be Right Certificates) and not by
separate Right Certificates, and (y) the right to receive Right Certificates
will be transferable only in connection with transfer of Common Stock. As soon
as practicable after the Distribution Date, the Company will prepare and
execute, the Rights Agent will countersign, and the Company will send or cause
to be sent (and the Rights Agent will, if requested, send) by first-class,
insured, postage-prepaid mail to each record holder of Common 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 Right Certificate, substantially in the form of
Exhibit A hereto ( the "Right Certificate"), evidencing one Right for each share
of Common Stock so held. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) On August 28, 2001 or as soon as practicable thereafter, the Company
will send a copy of a Summary of Rights to Purchase Common Stock, in
substantially the form attached hereto as Exhibit B (the "Summary of Rights"),
by first-class, postage prepaid mail, to each record holder of the Common Stock
as of the close of business on August 28, 2001, at the address of such holder
shown on the records of the Company. In the event that the Company amends this
Agreement pursuant to the terms hereof, the effect of which amendment is to
require the amendment of the Summary of Rights, the Company will mail such
amended Summary of Rights to holders of record of Common Stock on the effective
date of any such amendment. With respect to certificates for the Common Stock
outstanding as of August 28, 2001, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock registered in the names
of the holders of the Common Stock with a copy of the Summary of Rights attached
thereto. Until the Distribution Date (or earlier redemption or expiration of the
Rights), the surrender for transfer of any of the certificates for the Common
Stock outstanding on August 28, 2001, even without a copy of the Summary of
Rights attached thereto, shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate.
(c) Rights shall be issued in respect of all shares of Common Stock issued
after August 28, 2001 but prior to the earlier of the Distribution Date or the
Expiration Date or the Final Expiration Date (as such terms are defined in
Section 7). Certificates representing such shares of Common Stock shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:
THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO CERTAIN
RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT, AS AMENDED, BETWEEN DIRECT
INSITE CORP. AND MANHATTAN TRANSFER REGISTRAR COMPANY, RIGHTS AGENT, DATED
AS OF AUGUST 28, 2001 AS SUBSEQUENTLY AMENDED AND RESTATED (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 DIRECT
INSITE CORP. 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. DIRECT INSITE CORP. WILL MAIL
TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS AGREEMENT (AS IN
EFFECT ON THE DATE OF MAILING) WITHOUT CHARGE PROMPTLY AFTER RECEIPT OF A
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WRITTEN REQUEST THEREFOR. RIGHTS WHICH ARE OR WERE BENEFICIALLY OWNED BY
ACQUIRING PERSONS OR THEIR AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
WILL BE NULL AND VOID.
With respect to such certificates containing the foregoing legend, until
the Distribution Date, the Rights associated with the Common Stock represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificate.
In addition, subject to Section 11 (a) (ii) hereof, in connection with the
issuance of Common Stock on or following the Distribution Date and prior to the
Final Expiration Date, the Company shall, with respect to Common Stock so issued
upon the exercise, conversion or exchange of options, warrants, securities,
notes or debentures issued by the Company prior to the Distribution Date (other
than shares issues upon exercise or exchange of the Rights), issue Right
Certificates representing the appropriate number of Rights in connection with
such issuance; provided, however, that, (i) no such Right Certificate shall be
issued if, and to the extent that, the Company shall be advised by counsel that
such issuance would create significant risk of material adverse tax consequences
to the Company or the Person to whom such Right Certificate would be issued, and
(ii) no such Right Certificate shall be issued if, and to the extent that,
appropriate adjustment (giving effect to the provisions of Sections 11(a)(ii)
and 13 hereto) shall otherwise have been made in lieu of the issuance thereof.
SECTION 4. Form of Right Certificates. (a) The Right Certificates (and the
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially the same as Exhibit A 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 or 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 22 hereof, the Right Certificates, whenever issued, shall
be dated as of August 28, 2001, and on their face shall entitle the holders
thereof to purchase such number of shares of the Common Stock as shall be set
forth therein at the price per share set forth therein (the "Purchase Price"),
but the number of such shares and the Purchase Price shall be subject to
adjustment as provided herein.
(b) Notwithstanding any other provision of this Agreement, any Right
Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents
Rights beneficially owned by (i) an Acquiring Person or any Associate or
Affiliate thereof, (ii) on or after the Distribution Date by any Person who
subsequently becomes an Acquiring Person (or an Affiliate or Associate of an
Acquiring Person), (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iv) 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 the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
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which has as a primary purpose or effect avoidance of Section 7(e) hereof, and
any Right Certificate issued at any time to any nominee of such Acquiring
Person, Associate or Affiliate, and any Right Certificate issued pursuant to
Section 6 or Section 11 upon transfer, exchange, replacement or adjustment of
any other Right Certificate referred to in this sentence, shall contain the
following legend:
THE RIGHTS REPRESENTED BY THIS RIGHT CERTIFICATE ARE OR WERE BENEFICIALLY
OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR
AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
ARE NULL AND VOID.
SECTION 5. Countersignature and Registration. The Right Certificates shall
be executed on behalf of the Company in the manner provided in the By-Laws of
the Company for Common Stock Certificates. The Right 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 Right Certificates shall cease to be such officer of the
Company before counter-
signature by the Rights Agent and issuance and delivery by the Company, such
Right Certificates, nevertheless, may be countersigned by the Rights Agent,
issued and delivered with the same force and effect as though the person who
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer of the Company to sign such Right Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at one of its offices in New York, New York, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
date of each of the Right Certificates.
SECTION 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of 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 (as such terms are
defined in Section 7 hereof), any Right Certificate or Right Certificates (other
than Right Certificates representing Rights that have become void pursuant to
Section 11 (a) (ii) hereof or that may have been exchanged pursuant to Section
24 hereof) may be transferred, split up, combined or exchanged for another Right
Certificate or Right Certificates, entitling the registered holder to purchase a
like number of shares of Common Stock as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any registered
holder desiring to transfer, split-up, combine or exchange any Right Certificate
shall make such request in writing delivered to the Rights Agent, and shall
surrender the Right Certificate or Right Certificates to be transferred, split
up, combined or exchanged at the principal office of the Rights Agent for such
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purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrendered Right
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Right Certificates 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 Right Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and reimbursement to the Company and
the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Right Certificate if
mutilated, the Company will make and deliver a new Right Certificate of like
tenor to the Rights Agent for delivery to the registered owner of lieu of the
Right 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 Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the principal
office of the Rights Agent in New York, New York, together with payment of the
Purchase Price for each share of the Common Stock as to which the Rights are
exercised, at or prior to the close of business on the earlier of (i) August 27,
2006 (the "Final Expiration Date"), or (ii) the date on which the Rights are
redeemed as provided in Section 23 (such earlier date being herein referred to
as the "Expiration Date"); or (iii) the time at which the Rights are exchanged
as provided in Section 24 hereof; provided, however, that if the number of
Rights exercised would entitle the holder thereof to receive any fraction of a
share of Common Stock greater than one-half of a share, the holder thereof shall
not be entitled to exercise such Rights unless such holder concurrently
purchases from the Company (and in such event the Company shall sell to such
holder), at a price in proportion to the Purchase Price, an additional fraction
of a share of Common Stock which, when added to the number of shares of Common
Stock to be received upon such exercise, will equal an integral number of shares
of Common Stock.
(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Right shall initially be $2.50, 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 Right Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for shares to be purchased and an amount equal to any
applicable transfer tax in cash, or by certified check or bank draft payable to
the order of the Company, the Rights Agent shall thereupon promptly (i)
requisition from any transfer agent of the Common Stock of the Company
certificates for the number of shares of the Common Stock to be purchased and
the Company hereby irrevocably authorizes its transfer agent to comply with all
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such requests, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14, (iii) after receipt of such certificates, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, any Rights
that are or were at any time on or after the earlier of the Distribution Date or
the Shares Acquisition Date 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 the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has as a primary purpose or effect the
avoidance of this Section 7(e), shall become null and void upon the occurrence
of a Triggering Event and no holder of such Rights shall have any right with
respect to such Rights under any provision of this Agreement from and after the
occurrence of a Triggering Event. The Company shall use all reasonable efforts
to insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Right Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the 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 Right Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
SECTION 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all cancelled Right Certificates to the Company, or shall, at the written
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request of the Company, destroy such cancelled Right Certificates, and in such
case shall deliver a certificate of destruction thereof to the Company.
SECTION 9. Reservation and Availability of Shares 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 Common Stock or its authorized and
issued Common Stock held in its treasury, the number of shares of the Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Rights.
(b) So long as the Common Stock issuable upon the exercise of Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable, all
shares reserved for such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the first occurrence of a Triggering Event, a registration
statement under the Securities Act of 1933 (the "Act"), with respect to the
Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the date of the expiration of the Rights. The
Company will also take such action as may be appropriate under the Blue Sky laws
of the various states. The Company may temporarily suspend, for a period of time
not to exceed ninety (90) days, the exercisability of the Rights in order to
prepare and file such registration statement. Upon any such suspension, the
Company shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of the Common Stock delivered upon
exercise of Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of the Common Stock upon the exercise of Rights. The Company shall
not, however, be required (a) to pay any transfer tax which may be payable in
respect of any transfer involved in the transfer or delivery of Right
Certificates or the issuance or delivery of certificates for the Common Stock in
a name other than that of the registered holder of the Right Certifi cate
evidencing Rights surrendered for exercise or (b) to issue or deliver any
certificates for shares of the Common Stock upon the exercise of any Rights
until any such tax shall have been paid (any such tax being payable by the
holder of such Right Certificate at the time of surrender) or until it has been
established to the Company's satisfaction that no such tax is due.
SECTION 10. Common Stock Record Date. Each person in whose name any
certificate for shares of the Common Stock is issued upon the exercise of Rights
shall for all purposes be deemed to have become the holder of record of the
Common Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
9
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Stock transfer books of the Company are
closed, such person shall be deemed to have become the record holder of such
shares on and such certificate shall be dated, the next succeeding business day
on which the Common Stock transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a shareholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
SECTION 11. Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number 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 Common Stock payable in shares of the
Common Stock, (B) subdivide the outstanding Common Stock, (C) combine the
outstanding Common Stock into a smaller number of shares or (D) issue any shares
of its capital stock in a reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), except as otherwise provided in this
Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Common Stock 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 Section 11(a)(i) and Section 11(a)(ii), the
adjustment provided for in this Section 11(a)(i) shall be in addition to, and
shall be made prior to any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person shall become an Acquiring Person, each holder
of a Right shall thereafter have a right to receive, upon exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of
shares of Common Stock for which a Right is then exercisable, in accordance with
the terms of this Agreement, 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 shares of Common Stock for which a Right is
then exercisable and dividing that product by (y) the Purchase Price or, if less
than the Purchase Price, the then current per share market price of the
Company's Common Stock (determined pursuant to Section 11(d) hereof) on the date
on which any Person shall become an Acquiring Person. In the event that any
Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
Notwithstanding the foregoing or anything in this Agreement to the
contrary, any Rights that are or were acquired or beneficially owned by any
Acquiring Person (or any Associate or Affiliate of such Acquiring Person) shall
be void and any holder of such Rights shall thereafter have no right to exercise
such Rights under any provision of this Agreement. No Right Certificate shall be
10
issued pursuant to Section 3 that represents Rights beneficially owned by an
Acquiring Person whose Rights would be void pursuant to the preceding sentence
or any Associate or Affiliate thereof; no Right Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Person whose Rights
would be void pursuant to the preceding sentence or any Associate or Affiliate
thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and
any Right Certificate delivered to the Rights Agent for transfer to an Acquiring
Person whose Rights would be void pursuant to the preceding sentence shall be
cancelled.
(b) In the case the Company shall fix a record date for the issuance of
rights or warrants to all holders of the Common Stock entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase the Common Stock (or securities convertible into the Common Stock)
at a price per share of the Common Stock (or having a conversion price per share
of the Common Stock, if a security is convertible into the Common Stock) less
than the current market price per share of the Common 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, of which the numerator
shall be the number of shares of the Common Stock outstanding on such record
date plus the number of shares of the Common Stock which the aggregate offering
price of the total number of shares of the Common 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 of which the
denominator shall be the number of shares of the Common Stock outstanding on
such record date plus the number of additional shares of the Common 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 of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent. Shares of the Common 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 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 has not been
fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness or assets (other than a
regular periodic cash dividend at a rate not in excess of 125% of the rate of
the last cash dividend theretofore paid or a dividend payable in Common 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, of which the numerator shall be the current market
price per share of the Common Stock (as defined in Section 11(d)) on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent) of the portion of the assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to one share of the Common Stock and of which the denominator shall
11
be such current market price per share of the Common Stock. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such distribution is not so made, the Purchase Price shall again be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(d) For the purpose of any computation under Section 11(b) or (c) hereof,
the "current market price" per, or value of a, share of the Common Stock on any
date of determination 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 the
purpose of any computation in Section 11(a)(ii) and Section 13, the "current
market price" per, or "value" of a, share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for 20 consecutive Trading Days immediately following such date; provided,
however, that in the event that the current market price (or value) per share of
the Common Stock is determined during the 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
shares of such Common Stock, or (ii) any sub-division, combination or
reclassification of such Common Stock, and prior to the expiration of 30 Trading
Days or 20 Trading Days, as the case may be, after the ex-dividend date for such
dividend or distribution, or the record date for such sub-division, combination
or reclassification, then, and in each such case, the "current market price" or
"value" 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 either case as reported in the
principal national securities exchange on which the shares of the Common Stock
are listed or admitted to trading or, if the shares of the 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 Nasdaq or such other
system then in use, or, if on any such date the shares of the Common Stock are
not quoted by such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company. 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 of Directors of the Company
shall be used. The term "Trading Day" shall mean a day on which the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business or, if the shares of
the Common Stock are not listed or admitted to trading on any national
securities exchange, 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
so listed or traded, "current market price" per share shall mean the fair value
per share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed with the Rights
Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made 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 as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
12
required by this Section 11 shall be made no later than the earlier of (i) three
years from the date of the transaction which mandates such adjustment or (ii)
the date of the expiration of the right to exercise any Rights.
(f) If, as a result of an adjustment made pursuant to Section 11(a), the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon exercise of any
Right shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the shares
contained in Section 11(a) through (c), inclusive, and the provisions of
Sections 7, 9, 10 and 13 with respect to the shares of the Common 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 shares of the Common
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 Section 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 shares (calculated to
the nearest ten-thousandth) obtained by (i) multiplying (x) the number of shares
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 substitution for any
adjustment in the number of shares of the Common Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of shares of the Common
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 the 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 to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14, 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
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
13
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 Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of shares of the Common Stock issuable upon the exercise of the Rights,
the Right Certificates theretofore and thereafter issued may continue to express
the Purchase Price per share and the number of shares which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the shares of the Common
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 nonassessable shares of
such Common Stock at such adjusted Purchase Price.
(1) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event the
issuing to the holder of any Right exercised after such record date the shares
of Common Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the shares of the Common 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 xxxx 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 consolidation or subdivision of the Common Stock, issuance wholly
for cash of any of the Common Stock at less than the current market price,
issuance wholly for cash of the Common Stock or securities which by their terms
are convertible into or exchangeable for Common Stock, stock dividends or
issuance of rights, options or warrants referred to hereinabove in this Section
11, hereafter made by the Company to holders of its Common Stock shall not be
taxable to such shareholders.
(n) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Sections 23 and 27 hereof, take (nor will it
permit any of its subsidiaries to take) any action if at the time such is taken
it is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights, unless
such action is approved by a majority of the Continuing Directors and the
Continuing Directors constitute a majority of the Board of Directors.
(o) The Company covenants and agrees that it shall not, at any time after
the Distribution Date, (i) consolidate with, (ii) merge with or into, or (iii)
sell or transfer (or permit any of its subsidiaries to sell or transfer), in one
or more 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 if at the time of or immediately after such consolidation,
14
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.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13, 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 Common Stock a copy
of such certificate and (c) mail a brief summary thereof to each holder of a
Right Certificate in accordance with Section 26. The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained.
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that, following the Distribution Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person, (y) any Person shall consolidate, merge with and into the Company,
the Company shall be the continuing or surviving corporation of such merger and,
in connection with such merger, all or part of the 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 or more
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, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right, except as provided in Section 7(e) hereof,
shall thereafter have the right to receive, upon the exercise thereof at the
then-current Purchase Price in accordance with the terms of this Agreement, such
number of shares of validly issued, fully paid, non-assessable and freely
tradable Common Stock of the Principal Party (as hereinafter defined), not
subject to any rights of call or first refusal, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the then number
of shares of Common Stock for which a Right is then exercisable and dividing
that product by (2) 50% of the current market price per share of the Common
Stock of such Principal Party (determined in the manner described in Section
11(d)) on the date of consummation of such consolidation, merger, sale or
transfer; (ii) the Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of section 11 hereof shall apply to
such Principal Party; (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 accordance with Section 9) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights; and (v) the provisions of Section 11(a)(ii) hereof shall be of no effect
following the first occurrence of any of the transactions described in Section
13(a) hereof.
(b) "Principal Party" shall mean
(1) in the case of any transaction described in (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
15
in such merger or consolidation, and if no securities are so issued, the
Person that is the other party to the merger or consolidation; and
(2) in the case of any transaction described in (z) of the first
sentence in this Section 13, the Person that is the other party to such
transaction;
provided, however, that in any such case, (x) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Securities Exchange Act of 1934, and
such Person is a direct or indirect subsidiary of another corporation the Common
Stock of which is and has been so registered, "Principal Party" shall refer to
such other corporation; (y) in case such Person is a subsidiary, directly or
indirectly, of more than one corporation, the Common Stocks of all of which are
and have been so registered, "Principal Party" shall refer to whichever of such
corporations is the issuer of the Common Stock having the greatest market value
of shares held by the public, and (z) in case such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not owned,
directly or indirectly, by the same Person, the rules set forth in (x) and (y)
above shall apply to each of the chains of ownership having an interest in such
joint venture as if such party were a "subsidiary" of both or all of such joint
venturers and the Principal Parties in each such chain shall bear the
obligations set forth in this Section 13 in the same ratio as their direct or
indirect interests in such Person bear to the total of such interests.
(c) The Company shall not consummate any such consolidation, merger, sale
or transfer unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
for the terms set forth in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of any consolidation,
merger or sale of assets mentioned in paragraph (a) of this Section 13, the
Principal Party will
(i) prepare and file a registration statement under the Securities Act
of 1933, as amended (the "Act") with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form,
will use its best efforts to cause such registration statement to become
effective as soon as practicable after such filing and will use its best
efforts to cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the date
of expiration of the Rights; and
(ii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply
in all respects with the requirements for registration on Form 10 under the
Securities Exchange Act of 1934.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that one of
the transactions described in Section 13(a) hereof shall occur at any time after
the occurrence of a transaction described in Section 11(a)(ii) hereof, the
Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
SECTION 14. Fractional Rights and Fractional Shares. (a) The Company shall
not be required to issue fractions of Rights or to distribute Right Certificates
which evidence fractional Rights. In lieu of such fractional Rights, there shall
be paid to the registered holders of the Right Certificates with regard to which
16
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For the purposes
of this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trading on any national
securities exchange, the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
NASDAQ or such other system then in use or, if on any such date the Rights are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Company. If on any such date no such
market maker is making a market in the Rights the fair value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue fractions of shares upon
exercise of the Rights or to distribute certificates which evidence fractional
shares. In lieu of fractional shares equal to one-half of a share or less, the
Company may pay to the registered holders of Right Certificates at the time such
Right Certificates are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of a share of the Common Stock.
Any exercise of Rights that would entitle the holder thereof to receive any
fraction of a share greater than one-half of a share shall be governed by
Section 7(a) hereof. For purposes of this Section 14(b), the current market
value of a share of the Common Stock shall be the closing price of a share of
the Common Stock (as determined pursuant to the second sentence of Section
11(d)) for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right by the acceptance of the Rights expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
SECTION 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement and subject to the limitations
set forth in such Right Certificates and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of, the obligations of any Person subject to this Agreement.
SECTION 16. Agreement of Right Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
17
(a) prior to the Distribution Date, the Rights will be transferrable only
in connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office of the Rights Agent, duly endorsed or accompanied by a proper instrument
of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in whose
name the Right Certificate (or, prior to the Distribution Date, the associated
Common Stock certificate) is registered as the absolute owner thereof and of the
Rights evidenced thereby (notwithstanding any notations of ownership or writing
on the Right 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 shall be affected by any notice to
the contrary.
SECTION 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Common 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
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a shareholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 24), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.
SECTION 18. Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its reasonable expenses
and counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any lost liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any Right Certificate or
certificate for the 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 19. Merger or Consolidation or Change of Name of Rights Agent. Any
corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
18
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 that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21. In case at the time such
successor Rights Agent shall succeed to the agency created by this Agreement,
any of the Right Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of the
predecessor so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with the legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
President, any Vice President, the 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.
(c) The Rights Agent shall be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except 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.
19
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any adjustment required under the provisions of Sections 11
or 13 or responsible for the manner, method or amount of any such adjustment or
the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after actual notice of any such adjustment); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of the Common Stock to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of the Common Stock will, when issued, be validly authorized and issued, fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer.
(h) The Rights Agent and any shareholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend interested 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 reasonable care was exercised in the selection
and continued employment thereof. (j) No provision of this Agreement shall
require the Rights Agent to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(k) If, with respect to any Right Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
20
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 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock by registered or certified mail, and to the holders of the
Right Certificates by first class mail. The Company may remove the Rights Agent
or any successor Rights Agent upon 30 days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock by registered or certified mail, and to the holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Right Certificate
(who shall, with such notice, submit his Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of New York), in good standing, having a principal
office in the State of New York, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority or 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 mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
SECTION 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in
accordance with the provisions of this Agreement.
SECTION 23. Redemption. (a) The Board of Directors of the Company may, at
its option, at any time prior to the earlier of (x) the Shares Acquisition Date,
or (y) the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.001 per Right appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
21
referred to as the "Redemption Price"). The Redemption of the Rights by the
Board of Directors may be made effective at such time on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, 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. The Company shall promptly give public notice of any such redemption;
provided, however, that the failure to give, or any defect in, any such notice
shall not affect the validity of such redemption. Within 10 days after the
action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the 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. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23, and other than in
connection with the repurchase of Common Stock prior to the Distribution Date.
SECTION 24. Exchange. (a) The Board of Directors of the Company 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)
hereof) for Common Stock at an exchange ratio of two shares 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
thereinafter referred to as the "Exchange Ratio"). Notwithstanding the
foregoing, the Board of Directors shall not be empowered to effect such exchange
at any time after any person (other than the Company, any wholly-owned
subsidiary of the Company, any employee benefit plan of the Company or any such
subsidiary or any entity holding Common Stock for or pursuant to the terms of
any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Stock then
outstanding.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to paragraph (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 the Common Stock for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
22
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) 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 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 of Common Stock, the Company
shall pay to the registered holders of the Right Certificates with regard to
which such fractional shares of Common Stock 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. In case the Company shall propose at
any time following the Distribution Date (a) to pay any dividend payable in
stock or any class to the holders of its Common Stock or to make any other
distribution to the holders of its Common Stock (other than a regular periodic
cash dividend at a rate not in excess of 125% of the rate of the last cash
dividend theretofore paid), or (b) to offer to the holders of its Common Stock
rights or warrants to subscribe for or to purchase any additional shares of the
Common Stock or shares of stock of any class or any other securities, rights or
options, or (c) to effect any reclassification of its Common Stock (other than a
reclassification involving only the subdivision of outstanding Common Stock), or
(d) 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 that 50% of the assets
or earning power of the Company and its subsidiaries (taken as a whole) to, any
other Person, or (e) 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
Right, in accordance with Section 26, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution of rights or Rights, or the date on which such reclassification,
consolidation, merger, sales transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Common 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 (a) or (b) above at least twenty
days prior to the record date for determining holders of the Common Stock for
purposes of such action, and in the case of any such other action, at least
twenty days prior to the date of the taking of such proposed action or the date
of participation therein by the holders of the Common Stock, whichever shall be
the earlier.
In case any of the events set forth in Section 11(a)(ii) of this Agreement
shall occur, then, in any such case, the Company shall as soon as practicable
thereafter give to each holder of a Right, in accordance with Section 26, 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 ll(a)(ii).
23
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 Right 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:
DIRECT INSITE CORP.
00 Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
MANHATTAN TRANSFER REGISTRAR COMPANY
00 Xxxxxxxxxx Xxxx Xxxx
Xxxxxxxxxx, Xxx Xxxx 00000
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first- class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. Supplements and Amendments. The Company and the Rights Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or (iii) prior to the
Distribution Date, to change or supplement the provisions hereunder which the
Company may deem necessary or desirable and in the best interests of the holders
of the Rights or (iv) following the Distribution Date, 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
Right Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, however, that this Agreement shall not be
supplemented or amended in any way (other than pursuant to clauses (i) and (ii)
above) unless such amendment is approved by a majority of the Continuing
Directors whose determination shall be final and the Continuing Directors
constitute a majority of the Board of Directors. 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 unless the
Rights Agent shall have determined in good faith that such supplement or
amendment would adversely affect its interests under this Agreement. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
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.
24
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 provisions of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under
the Exchange Act. The Board of Directors of the Company (and, where specifically
provided for herein, the Continuing Directors) shall have the exclusive power
and authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Company (or, as expressly provided,
the Continuing Directors), 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 a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purpose of clause (ii) below, all omissions with
respect to the foregoing) which are done or made by the Board (or, as provided
for, by the Continuing Directors) in good faith, shall (i) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Right
Certificates and all other parties, and (ii) not subject the Board or the
Continuing Directors to any liability to the holders of the Right Certificates.
SECTION 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be for the sole and
exclusive benefit of the Company, the Rights Agent and the registered holders of
the Right Certificates.
SECTION 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
SECTION 32. Governing Law. This Agreement and each Right Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
New York and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts to be made and performed
entirely within such State.
SECTION 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
25
SECTION 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: DIRECT INSITE CORP.
_______________________ By: /s/ Xxxxxx Xxxxxx
-----------------
Secretary Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
Attest: MANHATTAN TRANSFER REGISTRAR
COMPANY
_______________________ By: /s/ Xxxxxx Xxxx
------------------
Secretary Name: Xxxxxx Xxxx
Title: President
26
Exhibit A
[Form of Right Certificate]
Certificate No. R- _____________ Rights
NOT EXERCISABLE AFTER AUGUST 27, 2006 OR EARLIER IF NOTICE OF REDEMPTION OR
EXCHANGE IS GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $2.50 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. [IF
THE RIGHTS REPRESENTED BY THIS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). THIS RIGHT
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY ARE NULL AND VOID.]*
RIGHT CERTIFICATE
This certifies that __________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement dated as of August 28, 2001 (the "Rights
Agreement") between DIRECT INSITE CORP., a Delaware corporation (the "Company"),
and MANHATTAN TRANSFER REGISTRAR COMPANY (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such term is defined in
the Rights Agreement) and prior to 5:00 P.M. (New York City time) on August 27,
2006 at the principal office of the Rights Agent, or its successors as Rights
Agent, in Lake Ronkonkoma, New York, one fully paid non-assessable share of the
Common Stock, $.0001 par value (the "Common Stock"), of the Company, at a
purchase price of $2.50 per share (the "Purchase Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of 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 August 28, 2001, based on the shares of the Common Stock of the
Company as constituted at such date.
Upon the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer, became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Triggering Event.
A-1
As provided in the Rights Agreement, the Purchase Price and the number of
shares of the Common Stock which may be purchased upon the exercise of the
Rights evidenced by this Right Certificate are subject to modification and
adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the above-mentioned office of the Rights
Agent.
This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
shares of the Common Stock as the Rights evidenced by the Right Certificate or
Right Certificates surrendered shall have entitled such holder to purchase. If
this Right Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Right Certificate or Right Certificates
for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at its option at a
redemption price of $.001 per Right or (ii) may be exchanged in whole or in part
for shares of Common Stock.
No fractional shares of the Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu of fractions of a share
equal to one-half of a share or less, a cash payment will be made, as provided
in the Rights Agreement. No Rights may be exercised that would entitle the
holder to any fraction of a share of Common Stock greater than one-half of a
share unless concurrently therewith such holder purchases an additional fraction
of a share of Common Stock which, when added to the number of shares of Common
Stock to be received upon such exercise, equals an integral number of shares of
Common Stock, as provided in the Rights Agreement.
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Common 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
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or, to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
A-2
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of .
Attest: DIRECT INSITE CORP.
_____________________________ By: ______________________________
Secretary Name:
Title:
Countersigned:
MANHATTAN TRANSFER REGISTRAR
COMPANY, as Rights Agent
By: __________________________
Authorized Signature
A-3
(Form of Reverse Side of Right Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Right Certificates.)
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers
unto _______________________________________________________ (Please print name
and address of transferee) this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and
appoint_______________________________________________ Attorney, to transfer the
within Right Certificate on the books of the within-named Company, with full
power of substitution.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Company and the Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement) and such Assignment or
Election to Purchase will not be honored.
Dated: _____________, ____ ________________________
(month & day) (year) Signature
Signature Guaranteed:
-------------------------
A-4
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Right 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 Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: ____________, ____ ____________________
(month & day) (year) Signature
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Right Certificate in every
particular, without alteration or enlargement or any change whatsoever.
A-5
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Right Certificate.)
TO:
The undersigned hereby irrevocably elects to exercise ________________________
Rights represented by this Right Certificate to purchase the shares of the
Common Stock issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name
of:______________________________________________________________________.
Please insert social security or other identifying number:
_________________________________________________________________________
(Please print name and address)
If the number of Rights being exercised hereunder would entitle the undersigned
to receive any fraction of a share of Common Stock greater than one-half of a
share, the undersigned is concurrently herewith purchasing an additional
fraction of a share of Common Stock which, when added to the number of shares of
Common Stock issuable upon the exercise of such Rights, equals an integral
number of shares of Common Stock. If such number of Rights shall not be all the
Rights evidenced by this Right Certificate, a new Right Certificate for the
balance remaining of such Rights shall be registered in the name of and
delivered to:
number:_________________________________________________________________________
(Please insert social security or other identifying number)
number:_________________________________________________________________________
(Please print name and address)
number:_________________________________________________________________________
Dated: _______________
-----------------------------------
Signature
(Signature must conform in all respects to name of holder
as specified on the face of this Right Certificate)
Signature Guaranteed:
---------------------------
A-6
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Right Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _______________, ____
(month & day) (year)
--------------------------
Signature
NOTICE The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the fact of this Right Certificate
in every particular, without alteration or enlargement or any change whatsoever.
A-7
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE
COMMON STOCK
On August 28, 2001, the Board of Directors of DIRECT INSITE CORP. (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Common Stock, $.0001 par value (the "Common Stock"), of the Company.
The distribution is payable on August 28, 2001, to the shareholders of record on
August 28, 2001. Each Right entitles the registered holder to purchase from the
Company a share of Common Stock at a price of $2.50 per 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
MANHATTAN TRANSFER REGISTRAR COMPANY, as Rights Agent (the "Rights Agent").
Until the earlier to occur of (i) ten days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") acquired, or obtained the right to acquire, beneficial ownership of 20%
or more of the outstanding shares of the Common Stock or (ii) ten days following
the commencement or announcement of an intention to commence a tender offer or
exchange offer by any person if, upon consummation thereof, such person would be
an acquiring Person (the earlier of such dates being called the "Distribution
Date"), the Rights will be evidenced, with respect to any of the Common Stock
certificates outstanding as of August 28, 2001 by such Common Stock certificate
with a copy of this Summary of Rights attached thereto. The Rights Agreement
provides that, until the Distribution Date, the Rights will be transferred with
and only with the Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after August 28, 2001 upon transfer or new issuance of the Common Stock will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Common Stock certificates outstanding as of
the close of business on August 28, 2001 even without a copy of this Summary of
Rights attached thereto, will also constitute the transfer of the Rights
associated with the Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on August 27, 2006, unless earlier redeemed by the Company as described
below.
The Purchase Price payable, and the number of shares of the Common 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 Common
Stock, (ii) upon the grant to holders of the Common Stock of certain rights or
warrants to subscribe for shares of the Common Stock or convertible securities
at less than the current market price of the Common Stock or (iii) upon the
distribution to holders of the Common Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends out of earnings or retained
B-1
earnings at a rate not in excess of 125% of the rate of the last cash dividend
theretofore paid or dividends payable in the Common Stock) or of subscription
rights or warrants (other than those referred to above).
In the event that the Company were acquired in a merger or other business
combination transaction or that 50% or more of its assets or earning power were
sold, proper provision shall be made so that each holder of a Right other than
Rights that were or are beneficially owned by the Acquiring Person (which will
thereafter be void) shall thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction would have a market value of two times the exercise price of the
Right. In the event that the Company were the surviving corporation, in a merger
and its Common Stock were not changed or exchanged, or in the event that an
Acquiring Person engages in one of a number of self-dealing transactions
specified in the Rights Agreement, or if, in certain circumstances, an Acquiring
Person becomes the beneficial owner of 50% or more of the outstanding shares of
Common Stock, proper provision shall be made so that each holder of a Right,
other than Rights that were or are beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise that number of shares of the Common Stock having a market value of two
times the exercise price of the Right.
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 Common Stock
on the last trading date prior to the date of exercise. No Rights may be
exercised that would entitle the holder thereof to any fractional share greater
than one-half of a share unless concurrently therewith such holder purchases an
additional fraction of a share which, when added to the number of shares to be
received upon such exercise, equals an integral number of shares.
At any time prior to 5:00 P.M. New York time on the date of a public
announcement that a person or group of affiliated or associated persons has
acquired beneficial ownership of 20% or more of the outstanding shares of the
Common Stock of the Company (the "Shares Acquisition Date"), the Board of
Directors of the Company may redeem the Rights in whole, but not in part, at a
price of $.001 per Right (the "Redemption Price"). Immediately upon the action
of the Board of Directors of the Company electing to redeem the Rights, the
Company shall make announcement thereof, and upon such election, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including without limitation, the right
to vote or to receive dividends.
The provisions of the Rights Agreement may be amended by the Board of
Directors in order to cure any ambiguity or correct any defect or inconsistency
and by the Continuing Directors, prior to the Distribution Date, to make changes
deemed to be in the best interests of the holders of the Rights or after the
Distribution Date, to make such other changes which do not adversely affect the
interest of the holders of the Rights (excluding the interests of any Acquiring
Person and its Affiliates and Associates).
B-2
A copy of the Rights Agreement, as amended, has been filed with the
Securities and Exchange Commission as an Exhibit to a Registration Statement on
Form 8-A dated August 28, 2001. A copy of the Rights Agreement is available free
of charge from the Company. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by reference to the
Rights Agreement, which is hereby incorporated herein by reference.
