RIGHTS AGREEMENT
EXHIBIT
4.2
This
RIGHTS AGREEMENT, dated as of September 1, 2005 (this “Agreement”),
is
made and entered into by and between Cosine Communications, Inc., a Delaware
corporation (the “Company”),
and
Mellon Investor Services LLC, a New Jersey limited liability company, as Rights
Agent (the “Rights
Agent”).
RECITALS
WHEREAS,
on September 1, 2005, the Board of Directors of the Company authorized and
declared a dividend distribution of one right (a “Right”)
for
each share of Common Stock, par value $0.0001 per share, of the Company (a
“Common
Share”)
outstanding as of the Close of Business (as hereinafter defined) on September
12, 2005 (the “Record
Date”),
each
Right initially representing the right to purchase one one-hundredth of a
Preferred Share (as hereinafter defined), on the terms and subject to the
conditions herein set forth, and further authorized and directed the issuance
of
one Right (subject to adjustment as provided herein) with respect to each Common
Share issued or delivered by the Company (whether originally issued or delivered
from the Company’s treasury) after the Record Date but prior to the earlier of
the Distribution Date (as hereinafter defined) and the Expiration Date (as
hereinafter defined) or as provided in Section 22.
NOW,
THEREFORE, in consideration of the mutual agreements herein set forth, the
parties hereto hereby agree as follows:
1. Certain
Definitions.
For
purposes of this Agreement, the following terms have the meanings
indicated:
(a) “Acquiring
Person”
means
any Person (other than the Company, any Related Person or any Exempt Person)
who
or which, together with all Affiliates and Associates of such Person, is the
Beneficial Owner of 5% or more of the then-outstanding Common Shares;
provided,
however,
that
(i) any Person who would otherwise qualify as an Acquiring Person as of the
Close of Business on September 1, 2005 will not be deemed to be an Acquiring
Person for any purpose of this Agreement on and after such date unless and
until
such time as (A) such Person or any Affiliate or Associate of such Person
thereafter becomes the Beneficial Owner of additional Common Shares representing
1 % or more of the then-outstanding Common Shares, other than as a result of
a
stock dividend, stock split or similar transaction effected by the Company
in
which all holders of Common Shares are treated equally (such percentage increase
subject to downward adjustment if the Company’s Board of Directors, in its sole
discretion, determines that such percentage increase will jeopardize or endanger
the availability to the Company of its NOLs), or (B) any other Person who is
the
Beneficial Owner of Common Shares representing 1 % or more of the
then-outstanding Common Shares thereafter becomes an Affiliate or Associate
of
such Person (such percentage subject to downward adjustment if the Company’s
Board of Directors, in its sole discretion, determines that such percentage
increase will jeopardize or endanger the availability to the Company of its
NOLs), provided
that the
foregoing exclusion shall cease to apply with respect to any Person at such
time
as such Person, together with all Affiliates and Associates of such Person,
ceases to Beneficially Own 5% or more of the then-outstanding Common Shares,
and
(ii) a Person will not be deemed to have become an Acquiring Person solely
as a
result of a reduction in the number of Common Shares outstanding unless and
until such time as (A) such Person or any Affiliate or Associate of such Person
thereafter becomes the Beneficial Owner of additional Common Shares representing
1 % or more of the then-outstanding Common Shares, other than as a result of
a
stock dividend, stock split or similar transaction effected by the Company
in
which all holders of Common Shares are treated equally (such percentage increase
subject to downward adjustment if the Company’s Board of Directors, in its sole
discretion, determines that such percentage increase will jeopardize or endanger
the availability to the Company of its NOLs), or (B) any other Person who is
the
Beneficial Owner of Common Shares representing 1 % or more of the
then-outstanding Common Shares thereafter becomes an Affiliate or Associate
of
such Person (such percentage subject to downward adjustment if the Company’s
Board of Directors, in its sole discretion, determines that such percentage
increase will jeopardize or endanger the availability to the Company of its
NOLs). Notwithstanding the foregoing, if the Board 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 Section 1(a), has become such
inadvertently, and such Person divests as promptly as practicable a sufficient
number of Common Shares so that such Person would no longer be an “Acquiring
Person” as defined pursuant to the foregoing provisions of this Section 1(a),
then such Person shall not be deemed to be an “Acquiring Person” for any
purposes of this Agreement.
(b) “Affiliate”
and
“Associate”
will
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act, as in effect on the date of this
Agreement, and to the extent not included within the foregoing clause of this
Section 1(b), shall also include, with respect to any Person, any other Person
(other than a Related Person or an Exempt Person) whose Common Shares would
be
deemed constructively owned by such first Person pursuant to the provisions
of
Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”),
or
any successor provision or replacement provision, provided,
however,
that a
Person will not be deemed to be the Affiliate or Associate of another Person
solely because either or both Persons are or were Directors of the
Company.
(c) A
Person
will be deemed the “Beneficial
Owner”
of, and
to “Beneficially
Own,”
any
securities:
(i) the
beneficial ownership of which such Person or any of such Person’s Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing), or upon
the
exercise of conversion rights, exchange rights, warrants, options or other
rights (in each case, other than upon exercise or exchange of the Rights);
provided,
however,
that a
Person will not be deemed the Beneficial Owner of, or to Beneficially Own,
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person’s Affiliates or Associates until such
tendered securities are accepted for purchase or exchange; or
(ii) which
such Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has or shares the right to vote or dispose of, including pursuant
to
any agreement, arrangement or understanding (whether or not in writing);
or
2
(iii) of
which
any other Person is the Beneficial Owner, if such Person or any of such Person’s
Affiliates or Associates has any agreement, arrangement or understanding
(whether or not in writing) with such other Person (or any of such other
Person’s Affiliates or Associates) with respect to acquiring, holding, voting or
disposing of any securities of the Company; provided,
however,
that a
Person will not be deemed the Beneficial Owner of, or to Beneficially Own,
any
security (A) if such Person has the right to vote such security pursuant to
an
agreement, arrangement or understanding (whether or not in writing) which (1)
arises solely from a revocable proxy given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report), or (B) if such beneficial ownership arises solely as a result
of such Person’s status as a “clearing agency,” as defined in Section 3(a)(23)
of the Exchange Act; provided
further,
however,
that
nothing in this Section 1(c) will cause a Person engaged in business as an
underwriter of securities to be the Beneficial Owner of, or to Beneficially
Own,
any securities acquired through such Person’s participation in good faith in an
underwriting syndicate until the expiration of 40 calendar days after the date
of such acquisition, or such later date as the Directors of the Company may
determine in any specific case. Notwithstanding anything herein to the contrary,
to the extent not within the foregoing provisions of this Section 1(c), a Person
shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially
own” or have “beneficial ownership” of, and securities which such Person would
be deemed to constructively own pursuant to Section 382 of the Code, or any
successor provision or replacement provision.
(d) “Business
Day”
means
any day other than a Saturday, Sunday or a day on which banking institutions
in
the States of New York or New Jersey (or such other state in which the principal
office of the Rights Agent may be located) are authorized or obligated by law
or
executive order to close.
(e) “Close
of Business”
on any
given date means 5:00 p.m., Eastern time, on such date; provided,
however,
that if
such date is not a Business Day it means 5:00 p.m., Eastern time, on the next
succeeding Business Day.
(f) “Common
Shares”
when
used with reference to the Company means the shares of Common Stock, par value
$0.0001 per share, of the Company; provided,
however,
that if
the Company is the continuing or surviving corporation in a transaction
described in Section 1 3(a)(ii), “Common Shares” when used with reference to the
Company means shares of the capital stock or units of the equity interests
with
the greatest aggregate voting power of the Company. “Common Shares” when used
with reference to any corporation or other legal entity other than the Company,
including an Issuer, means shares of the capital stock or units of the equity
interests with the greatest aggregate voting power of such corporation or other
legal entity.
(g) “Company”
means
Cosine Communications, Inc., a Delaware corporation.
(h) “Distribution
Date”
means
the earlier of: (i) the Close of Business on the tenth calendar day following
the Share Acquisition Date, or (ii) the Close of Business on the tenth Business
Day (or, unless the Distribution Date shall have previously occurred, such
later
date as may be specified by the Board of Directors of the Company) after the
commencement of a tender or exchange offer by any Person (other than the
Company, any Related Person or any Exempt Person), if upon the consummation
thereof such Person would be the Beneficial Owner of 5% or more of the
then-outstanding Common Shares.
3
(i) “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(j) “Exempt
Person”
means a
Person whose Beneficial Ownership (together with all Affiliates and Associates
of such Person) of 5% or more of the then-outstanding Common Shares will not,
as
determined by the Company’s Board of Directors in its sole discretion,
jeopardize or endanger the availability to the Company of its NOLs, provided,
however,
that
such a Person will cease to be an “Exempt Person” if the Board makes a contrary
determination with respect to the effect of such Person’s Beneficial Ownership
(together with all Affiliates and Associates of such Person) upon the
availability to the Company of its NOLs.
(k) “Expiration
Date”
means
the earliest of (i) the Close of Business on the Final Expiration Date, (ii)
the
time at which the Rights are redeemed as provided in Section 23, and (iii)
the
time at which all exercisable Rights are exchanged as provided in Section
24.
(l) “Final
Expiration Date”
means
the second anniversary of the Record Date.
(m) “Flip-in
Event”
means
any event described in clauses (A), (B) or (C) of Section 11
(a)(ii).
(n) “Flip-over
Event”
means
any event described in clauses (i), (ii) or (iii) of Section 13(a).
(o) “Issuer”
has the
meaning set forth in Section 13(b).
(p) “Nasdaq”
means
The Nasdaq Stock Market.
(q) “NOLs”
means
the Company’s net operating loss carryforwards, to be used to offset its taxable
income in the current year or future year.
(r) “Person”
means
any individual, firm, corporation or other legal entity, and includes any
successor (by merger or otherwise) of such entity.
(s) “Preferred
Shares”
means
shares of Series A Junior Participating Preferred Stock, par value $0.0001
per
share, of the Company having the rights and preferences set forth in the form
of
Certificate of Designation of Series A Junior Participating Preferred Stock
attached as Exhibit
A.
(t) “Purchase
Price”
means
initially $3.00 per one one-hundredth of a Preferred Share, subject to
adjustment from time to time as provided in this Agreement.
(u) “Record
Date”
has the
meaning set forth in the Recitals to this Agreement.
4
(v) “Redemption
Price”
means
$0.01 per Right, subject to adjustment by resolution of the Board of Directors
of the Company to reflect any stock split, stock dividend or similar transaction
occurring after the Record Date.
(w) “Related
Person”
means
(i) any Subsidiary of the Company or (ii) any employee benefit or stock
ownership plan of the Company or of any Subsidiary of the Company or any entity
holding Common Shares for or pursuant to the terms of any such
plan.
(x) “Right”
has the
meaning set forth in the Recitals to this Agreement.
(y) “Right
Certificates”
means
certificates evidencing the Rights, in substantially the form attached as
Exhibit
B.
(z) “Rights
Agent”
means
Mellon Investor Services LLC, unless and until a successor Rights Agent has
become such pursuant to the terms of this Agreement, and thereafter, “Rights
Agent” means such successor Rights Agent.
(aa) “Securities
Act”
means
the Securities Act of 1933, as amended.
(bb) “Share
Acquisition Date”
means
the first date of public announcement by the Company (by press release, filing
made with the Securities and Exchange Commission or otherwise) that an Acquiring
Person has become such.
(cc) “Subsidiary”
when
used with reference to any Person means any corporation or other legal entity
of
which a majority of the voting power of the voting equity securities or equity
interests is owned, directly or indirectly, by such Person; provided,
however,
that
for purposes of Section 13(b), “Subsidiary” when used with reference to any
Person means any corporation or other legal entity of which at least 20% of
the
voting power of the voting equity securities or equity interests is owned,
directly or indirectly, by such Person.
(dd) “Trading
Day”
means
any day on which the principal national securities exchange on which the Common
Shares are listed or admitted to trading is open for the transaction of business
or, if the Common Shares are not listed or admitted to trading on any national
securities exchange, a Business Day.
(ee) “Triggering
Event”
means
any Flip-in Event or Flip-over Event.
2. Appointment
of Rights Agent.
The
Company hereby appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment and hereby certifies that it complies with the
requirements of the New York Stock Exchange governing transfer agents and
registrars. The Company may from time to time act as Co-Rights Agent or appoint
such Co-Rights Agents as it may deem necessary or desirable. Prior to the
appointment of a Co-Rights Agent, the specific duties and obligations of each
such Co-Rights Agents shall be set forth in writing and delivered to
the
Rights Agent and the proposed Co-Rights Agent. Any actions which may be taken
by
the Rights Agent pursuant to the terms of this Agreement may be taken by any
such Co-Rights Agent. To the extent that any Co-Rights Agent takes any action
pursuant to this Agreement, such Co-Rights Agent will be entitled to all of
the
rights and protections of, and subject to all of the applicable duties and
obligations imposed upon, the Rights Agent pursuant to the terms of this
Agreement. The Rights Agent shall have no duty to supervise, and in no event
shall be liable for, the acts or omissions of any such Co-Rights
Agent.
5
3. Issue
of Right Certificates.
(a) Until
the Distribution Date, (i) the Rights will be evidenced by the certificates
representing Common Shares registered in the names of the record holders thereof
(which certificates representing Common Shares will also be deemed to be Right
Certificates), (ii) the Rights will be transferable only in connection with
the
transfer of the underlying Common Shares, and (iii) the surrender for transfer
of any certificates evidencing Common Shares in respect of which Rights have
been issued will also constitute the transfer of the Rights associated with
the
Common Shares evidenced by such certificates. On or as promptly as practicable
after the Record Date, the Company will send by first class, postage prepaid
mail, to each record holder of Common Shares as of the Close of Business on
the
Record Date, at the address of such holder shown on the records of the Company
as of such date, a copy of a Summary of Rights to Purchase Preferred Stock
in
substantially the form attached as Exhibit
C.
(b) Rights
will be issued by the Company in respect of all Common Shares (other than Common
Shares issued upon the exercise or exchange of any Right) issued or delivered
by
the Company (whether originally issued or delivered from the Company’s treasury)
after the Record Date but prior to the earlier of the Distribution Date and
the
Expiration Date. Certificates evidencing such Common Shares will have stamped
on, impressed on, printed on, written on, or otherwise affixed to them the
following legend or such similar legend as the Company may deem appropriate
and
as is not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
transaction reporting system on which the Common Shares may from time to time
be
listed or quoted, or to conform to usage:
This
Certificate also evidences and entitles the holder hereof to certain Rights
as
set forth in a Rights Agreement between Cosine Communications, Inc. and Mellon
Investor Services LLC, dated as of September 1, 2005 (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 Cosine Communications,
Inc. The Rights are not exercisable prior to the occurrence of certain events
specified in the Rights Agreement. Under certain circumstances, as set forth
in
the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire,
may be amended, or may be evidenced by separate certificates and no longer
be
evidenced by this Certificate. Cosine Communications, Inc. will mail to the
holder of this Certificate a copy of the Rights Agreement, as in effect on
the
date of mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances as set forth in the Rights Agreement,
Rights that are or were beneficially owned by an Acquiring Person or any
Affiliate or Associate of an Acquiring Person (as such terms are defined in
the
Rights Agreement) may become null and void.
6
(c) Any
Right
Certificate issued pursuant to this Section 3 that represents Rights
beneficially owned by an Acquiring Person or any Associate or Affiliate thereof
and any Right Certificate issued at any time upon the transfer of any Rights
to
an Acquiring Person or any Associate or Affiliate thereof or to any nominee
of
such Acquiring Person, Associate or Affiliate and any Right Certificate issued
pursuant to Section 6 or 11 hereof upon transfer, exchange, replacement or
adjustment of any other Right Certificate referred to in this sentence, shall
be
subject to and contain the following legend or such similar legend as the
Company may deem appropriate and as is not inconsistent with the provisions
of
this Agreement, or as may be required to comply with any applicable law or
with
any rule or regulation made pursuant thereto or with any rule or regulation
of
any stock exchange on which the Rights may from time to time be listed, or
to
conform to usage:
The
Rights represented by this Right Certificate are or were beneficially owned
by a
Person who was 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 may become null and void in the
circumstances specified in Section 11 (a)(ii) or Section 13 of the Rights
Agreement.
(d) As
promptly as practicable after the Distribution Date, the Company will prepare
and execute, the Rights Agent will countersign and the Company will send or
cause to be sent (and the Rights Agent will, if requested and if provided with
all necessary information, send), by first class, insured, postage prepaid
mail,
to each record holder of Common Shares as of the Close of Business on the
Distribution Date, at the address of such holder shown on the records of the
Company, a Right Certificate evidencing one Right for each Common Share so
held,
subject to adjustment as provided herein. As of and after the Distribution
Date,
the Rights will be evidenced solely by such Right Certificates. The Company
shall promptly notify the Rights Agent in writing upon the occurrence of the
Distribution Date and, if such notification is given orally, the Company shall
confirm same in writing on or prior to the Business Day next following. Until
such notice is received by the Rights Agent, the Rights Agent may presume
conclusively that the Distribution Date has not occurred.
(e) In
the
event that the Company purchases or otherwise acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares will be deemed canceled and retired so that the Company
will
not be entitled to exercise any Rights associated with the Common Shares so
purchased or acquired.
4. Form
of Right Certificates.
The
Right Certificates (and the form of election to purchase and the form of
assignment to be printed on the reverse thereof) will be substantially in the
form attached as Exhibit
B
with
such changes and marks of identification or designation, and such legends,
summaries or endorsements printed thereon, as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement, or as may
be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
transaction reporting system on which the Rights may from time to time be listed
or quoted, or to conform to usage. Subject to the provisions of Section 22,
the
Right Certificates, whenever issued, on their face will entitle the holders
thereof to purchase such number of one one-hundredths of a Preferred Share
as
are set forth therein at the Purchase Price set forth therein, but the Purchase
Price, the number and kind of securities issuable upon exercise of each Right
and the number of Rights outstanding will be subject to adjustment as provided
herein.
7
5. Countersignature
and Registration.
(a) The
Right Certificates will be executed on behalf of the Company by its Chairman
of
the Board, its President or any Vice President, either manually or by facsimile
signature, and will have affixed thereto the Company’s seal or a facsimile
thereof which will be attested by the Secretary or an Assistant Secretary of
the
Company, either manually or by facsimile signature. The Right Certificates
will
be manually countersigned by the Rights Agent and will not be valid for any
purpose unless so countersigned. In case any officer of the Company who signed
any of the Right Certificates ceases to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, is a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Rights Agreement any such person
was not such officer.
(b) Following
the Distribution Date, receipt by the Rights Agent of notice to that effect
and
all other relevant information referred to in Section 3(d), the Rights Agent
will keep or cause to be kept, at the office of the Rights Agent designated
for
such purpose and at such other offices as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with
any
rule or regulation of any stock exchange or any transaction reporting system
on
which the Rights may from time to time be listed or quoted, books for
registration and transfer of the Right Certificates issued hereunder. Such
books
will show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
6. Transfer,
Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates.
(a)
Subject
to the provisions of Sections 7(d) and 14, at any time after the Close of
Business on the Distribution Date and prior to the Expiration Date, any Right
Certificate or Right Certificates representing exercisable Rights may be
transferred, split up, combined or exchanged for an other Right Certificate
or
Right Certificates, entitling the registered holder to purchase a like number
of
one one-hundredths of a Preferred Share (or other securities, as the case may
be) as the Right Certificate or Right Certificates surrendered then entitled
such holder (or former holder in the case of a transfer) to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any such
Right Certificate or Rights Certificates must make such request in a writing
delivered to the Rights Agent and must surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office
of
the Rights Agent designated for such purpose. The Right Certificates are
transferable only on the registry books of the Rights Agent. Neither the Rights
Agent nor the Company shall be obligated to take any action whatsoever with
respect to the transfer of any such surrendered Right Certificate or
Certificates until the registered holder thereof shall have (i) completed and
signed the certificate contained in the form of assignment set forth on the
reverse side of each such Right Certificate, (ii) provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
thereof and of the Rights evidenced thereby and the Affiliates and Associates
of
such Beneficial Owner (or former Beneficial Owner) as the Company or the Rights
Agent shall reasonably request, and (iii) paid a sum sufficient to cover any
tax
or charge that may be imposed in connection with any transfer, split up,
combination or exchange of Right Certificates as required by Section 9(d)
hereof. Thereupon the Rights Agent shall countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case may
be,
as so requested, registered in such name or names as may be designated by the
surrendering registered holder. The Rights Agent shall promptly forward any
such
sum collected by it to the Company or to such Persons as the Company shall
specify by written notice. The Rights Agent shall have no duty or obligation
under this Section unless and until it is satisfied that all such taxes and/or
governmental charges have been paid.
8
(b) Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Right Certificate
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, if requested by the Company, reimbursement to the
Company and the Rights Agent of all reasonable expenses incidental thereto,
and
upon surrender to the Rights Agent and cancellation of the Right Certificate
if
mutilated, the Company will prepare, execute and deliver a new Right Certificate
of like tenor to the Rights Agent and the Rights Agent will countersign and
deliver such new Right Certificate to the registered holder in lieu of the
Right
Certificate so lost, stolen, destroyed or mutilated.
7. Exercise
of Rights; Purchase Price; Expiration Date of Rights.
(a) The
registered holder of any Right Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Expiration Date, upon surrender
of
the Right Certificate, with the form of election to purchase on the reverse
side
thereof duly executed, to the Rights Agent at the office or offices of the
Rights Agent designated for such purpose, together with payment in cash, in
lawful money of the United States of America by certified check or bank draft
payable to the order of the Company, equal to the sum of (i) the Purchase Price
for the total number of securities as to which such surrendered Rights are
exercised and (ii) an amount equal to any applicable tax or charge required
to
be paid by the holder of such Right Certificate in accordance with the
provisions of Section 9 (d ).
(b) Upon
receipt of a Right Certificate representing exercisable Rights with the form
of
election to purchase duly and properly executed, accompanied by payment of
the
Purchase Price for the shares to be purchased and an amount equal to any
applicable tax or charge required to be paid under Section 9(d) hereof by
certified check, cashier’s check, bank draft or money order payable to the order
of the Company, the Rights Agent will promptly (i) (A) requisition from any
transfer agent of the Preferred Shares certificates representing the number
of
one one-hundredths of a Preferred Share to be purchased (and the Company hereby
irrevocably authorizes and directs its transfer agent to comply with all such
requests), or (B), if the Company elects to deposit Preferred Shares issuable
upon exercise of the Rights hereunder with a depositary agent, requisition
from
the depositary agent depositary receipts representing such number of one
one-hundredths of a Preferred Share as are to be purchased (and the Company
hereby irrevocably authorizes and directs such depositary agent to comply with
all such requests), (ii) after receipt of such certificates (or depositary
receipts, as the case may be), cause the same to be delivered to or upon the
order of the registered holder of such Right Certificate, registered in such
name or names as may be designated by such holder, (iii) when appropriate,
requisition from the Company or any transfer agent therefor certificates
representing the number of equivalent common shares to be issued in lieu of
the
issuance of Common Shares in accordance with the provisions of Section 11
(a)(iii), (iv) when appropriate, after receipt of such certificates , cause
the
same to be delivered to or upon the order of the registered holder of such
Right
Certificate, registered in such name or names as may be designated by such
holder, (v) when appropriate, requisition from the Company the amount of cash
to
be paid in lieu of the issuance of fractional shares in accordance with the
provisions of Section 14 or in lieu of the issuance of Common Shares in
accordance with the provisions of Section 11 (a)(iii), (vi) when appropriate,
after receipt, deliver such cash to or upon the order of the registered holder
of such Right Certificate, and (vii) when appropriate, deliver any due xxxx
or
other instrument provided to the Rights Agent by the Company for delivery to
the
registered holder of such Right Certificate as provided by Section
11(1).
9
(c) In
case
the registered holder of any Right Certificate exercises less than all the
Rights evidenced thereby, the Rights Agent will prepare, execute and deliver
a
new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof.
(d) Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company will be obligated to undertake any action with respect to any purported
transfer, split up, combination or exchange of any Right Certificate pursuant
to
Section 6 or exercise of a Right Certificate as set forth in this Section 7
unless the registered holder of such Right Certificate has (i) duly and properly
completed and signed the certificate following the form of assignment or the
form of election to purchase, as applicable, set forth on the reverse side
of
the Right Certificate surrendered for such transfer, split up, combination,
exchange or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights
evidenced thereby and Affiliates and Associates thereof as the Company or the
Rights Agent may reasonably request.
8. Cancellation
and Destruction of Right Certificates.
All
Right Certificates surrendered for the purpose of exercise, transfer, split
up,
combination or exchange will, if surrendered to the Company or to any of its
stock transfer agents, be delivered to the Rights Agent for cancellation or
in
canceled form, or, if surrendered to the Rights Agent, will be canceled by
it,
and no Right Certificates will be issued in lieu thereof except as expressly
permitted by the provisions of this Agreement. The Company will deliver to
the
Rights Agent for cancellation and retirement, and the Rights Agent will so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent will deliver
all canceled Right Certificates to the Company, or will, at the written request
of the Company, destroy such canceled Right Certificates, and in such case
will
deliver a certificate of destruction thereof to the Company.
9. Company
Covenants Concerning Securities and Rights.
The
Company covenants and agrees that:
10
(a) It
will
cause to be reserved and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its treasury, a number of
Preferred Shares that will be sufficient to permit the exercise in full of
all
outstanding Rights in accordance with Section 7.
(b) So
long
as the Preferred Shares (and, following the occurrence of a Triggering Event,
Common Shares and/or other securities) issuable upon the exercise of the Rights
may be listed on a national securities exchange, or quoted on Nasdaq, it will
endeavor to cause, from and after such time as the Rights become exercisable,
all securities reserved for issuance upon the exercise of Rights to be listed
on
such exchange, or quoted on Nasdaq, upon official notice of issuance upon such
exercise.
(c) It
will
take all such action as may be necessary to ensure that all Preferred Shares
(and, following the occurrence of a Triggering Event, Common Shares and/or
other
securities) delivered upon exercise of Rights, at the time of delivery of the
certificates for such securities, will be (subject to payment of the Purchase
Price) duly authorized, validly issued, fully paid and nonassessable
securities.
(d) It
will
pay when due and payable any and all federal and state taxes and charges that
may be payable in respect of the issuance or delivery of the Right Certificates
and of any certificates representing securities issued upon the exercise of
Rights; provided,
however,
that
the Company will not be required to pay any tax or charge which may be payable
in respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts
representing securities issued upon the exercise of Rights in a name other
than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or deliver any certificates or depositary
receipts representing securities issued upon the exercise of any Rights until
any such tax or charge has been paid (any such tax or charge being payable
by
the holder of such Right Certificate at the time of surrender) or until it
has
been established to the Company’s reasonable satisfaction that no such tax is
due.
(e) If
the
Company determines that registration under the Securities Act is required,
then
the Company shall use its best efforts (i) to file, as soon as practicable
following the later of the Share Acquisition Date and the Distribution Date,
on
an appropriate form, a registration statement under the Securities Act with
respect to the securities issuable upon exercise of the Rights, (ii) to cause
such registration statement to become effective as soon as practicable after
such filing, and (iii) to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities
Act)
until the earlier of (A) the date as of which the Rights are no longer
exercisable for such securities and (B) the Expiration Date. The Company will
also take such action as may be appropriate under, or to ensure compliance
with,
the securities or “blue sky” laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time after the date set forth in clause (i) of the first sentence of this
Section 9(e), the exercisability of the Rights in order to prepare and file
such
registration statement and to permit it to become effective. Upon any such
suspension, the Company will issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. The Company
shall notify the Rights Agent in writing whenever it makes a public announcement
pursuant to this Section 9(e) and give the Rights Agent a copy of such
announcement. In addition, if the Company determines that a registration
statement should be filed under the Securities Act or any state securities
laws
following the Distribution Date, the Company may temporarily suspend the
exercisability of the Rights in each relevant jurisdiction until such time
as a
registration statement has been declared effective and, upon any such
suspension, the Company will issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding anything in this Agreement to the contrary, the Rights will
not
be exercisable in any jurisdiction if the requisite registration or
qualification in such jurisdiction has not been effected or the exercise of
the
Rights is not permitted under applicable law.
11
(f) Notwithstanding
anything in this Agreement to the contrary, after the later of the Share
Acquisition Date and the Distribution Date it will not take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will eliminate or otherwise diminish
the
benefits intended to be afforded by the Rights.
(g) In
the
event that the Company is obligated to issue other securities of the Company
and/or pay cash pursuant to Section 11, 13, 14 or 24 it will make all
arrangements necessary so that such other securities and/or cash are available
for distribution by the Rights Agent, if and when appropriate.
10. Record
Date.
Each
Person in whose name any certificate representing Preferred Shares (or Common
Shares and/or other securities, as the case may be) is issued upon the exercise
of Rights will for all purposes be deemed to have become the holder of record
of
the Preferred Shares (or Common Shares and/or other securities, as the case
may
be) represented thereby on, and such certificate will be dated, the date upon
which the Right Certificate evidencing such Rights was duly surrendered and
payment of the Purchase Price (and all applicable transfer taxes) was made;
provided, however, that if the date of such surrender and payment is a date
upon
which the transfer books of the Company for the Preferred Shares (or Common
Shares and/or other securities, as the case may be) are closed, such Person
will
be deemed to have become the record holder of such securities on, and such
certificate will be dated, the next succeeding Business Day on which the
transfer books of the Company for the Preferred Shares (or Common Shares and/or
other securities, as the case may be) are open. Prior to the exercise of the
Rights evidenced thereby, the holder of a Right Certificate will not be entitled
to any rights of a holder of any security for which the Rights are or may become
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions, or to exercise any preemptive rights, and
will
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
11. Adjustment
of Purchase Price, Number and Kind of Securities or Number of
Rights.
The
Purchase Price, the number and kind of securities issuable upon exercise of
each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In
the event that the Company at any time after the Record Date (A) declares a
dividend on the Preferred Shares payable in Preferred Shares, (B) subdivides
the
outstanding Preferred Shares, (C) combines the outstanding Preferred Shares
into
a smaller number of Preferred Shares, or (D) issues any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a), the Purchase Price in effect at the time of
the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification and/or the number and/or kind of shares of
capital stock issuable on such date upon exercise of a Right, will be
proportionately adjusted so that the holder of any Right exercised after such
time is entitled to receive upon payment of the Purchase Price then in effect
the aggregate number and kind of shares of capital stock which, if such Right
had been exercised immediately prior to such date and at a time when the
transfer books of the Company for the Preferred Shares were open, the holder
of
such Right would have owned upon such exercise (and, in the case of a
reclassification, would have retained after giving effect to such
reclassification ) and would have been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided,
however,
that in
no event shall the consideration to be paid upon the exercise of one Right
be
less than the aggregate par value of the shares of capital stock issuable upon
exercise of one Right. If an event occurs which would require an adjustment
under both this Section 11 (a)(i )and Section 11(a)(ii) or Section 13, the
adjustment provided for in this Section 11 (a)(i) will be in addition to, and
will be made prior to, any adjustment required pursuant to Section 11 (a)(ii)
or
Section 13.
12
(ii) Subject
to the provisions of Section 24, if:
(1) any
Person becomes an Acquiring Person; or
(2) any
Acquiring Person or any Affiliate or Associate of any Acquiring Person, directly
or indirectly, (1) merges into the Company or otherwise combines with the
Company and the Company is the continuing or surviving corporation of such
merger or combination (other than in a transaction subject to Section 13),
(2)
merges or otherwise combines with any Subsidiary of the Company, (3) in one
or
more transactions (otherwise than in connection with the exercise, exchange
or
conversion of securities exercisable or exchangeable for or convertible into
shares of any class of capital stock of the Company or any of its Subsidiaries)
transfers cash, securities or any other property to the Company or any of its
Subsidiaries in exchange (in whole or in part) for shares of any class of
capital stock of the Company or any of its Subsidiaries or for securities
exercisable or exchangeable for or convertible into shares of any class of
capital stock of the Company or any of its Subsidiaries, or otherwise obtains
from the Company or any of its Subsidiaries, with or without consideration,
any
additional shares of any class of capital stock of the Company or any of its
Subsidiaries or securities exercisable or exchangeable for or convertible into
shares of any class of capital stock of the Company or any of its Subsidiaries
(otherwise than as part of a pro rata distribution to all holders of shares
of
any class of capital stock of the Company, or any of its Subsidiaries), (4)
sells, purchases, leases, exchanges, mortgages, pledges, transfers or otherwise
disposes (in one or more transactions) to, from, with or of, as the case may
be,
the Company or any of its Subsidiaries (otherwise than in a transaction subject
to Section 13), any property, including securities, on terms and conditions
less
favorable to the Company than the Company would be able to obtain in an
arm’s-length transaction with an unaffiliated third party, (5) receives any
compensation from the Company or any of its Subsidiaries other than compensation
as a director or a regular full-time employee, in either case at rates
consistent with the Company’s (or its Subsidiaries’) past practices, or (6)
receives the benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantage provided by the Company
or
any of its Subsidiaries; or
13
(3) during
such time as there is an Acquiring Person, there is any reclassification of
securities of the Company (including any reverse stock split), or any
recapitalization of the Company, or any merger or consolidation of the Company
with any of its Subsidiaries, or any other transaction or series of transactions
involving the Company or any of its Subsidiaries (whether or not with or into
or
otherwise involving an Acquiring Person), other than a transaction subject
to
Section 13, which has the effect, directly or indirectly, of increasing by
more
than 1 % the proportionate share of the outstanding shares of any class of
equity securities of the Company or any of its Subsidiaries, or of securities
exercisable or exchangeable for or convertible into equity securities of the
Company or any of its Subsidiaries, of which an Acquiring Person, or any
Affiliate or Associate of any Acquiring Person, is the Beneficial Owner equally
(such percentage increase subject to downward adjustment if the Company’s Board
of Directors, in its sole discretion, determines that such percentage increase
will jeopardize or endanger the availability to the Company of its NOLs); then,
and in each such case, from and after the latest of the Distribution Date,
the
Share Acquisition Date and the date of the occurrence of such Flip-in Event,
proper provision will be made so that each holder of a Right, except as provided
below, will thereafter have the right to receive, upon exercise thereof in
accordance with the terms of this Agreement at an exercise price per Right
equal
to the product of the then-current Purchase Price multiplied by the number
of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the occurrence of such Flip-in Event (or,
if
any other Flip-in Event shall have previously occurred, the product of the
then-current Purchase Price multiplied by the number of one one-hundredths
of a
Preferred Share for which a Right was exercisable immediately prior to the
date
of the first occurrence of a Flip-in Event), in lieu of Preferred Shares, such
number of Common Shares as equals the result obtained by (x) multiplying the
then-current Purchase Price by the number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to the date of the
occurrence of such Flip-in Event (or, if any other Flip-in Event shall have
previously occurred, multiplying the then-current Purchase Price by the number
of one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the date of the first occurrence of a Flip-in Event),
and
dividing that product by (y) 50% of the current per share market price of the
Common Shares (determined pursuant to Section 11(d)) on the date of the
occurrence of such Flip-in Event. Notwithstanding anything in this Agreement
to
the contrary, from and after the first occurrence of a Flip-in Event, any Rights
that are Beneficially Owned by (A) any Acquiring Person (or any Affiliate or
Associate of any Acquiring Person), (B) a transferee of any Acquiring Person
(or
any such Affiliate or Associate) who becomes a transferee after the occurrence
of a Flip -in Event, or (C) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who became a transferee prior to or concurrently with
the occurrence of a Flip-in Event pursuant to either (1) a transfer from an
Acquiring Person to holders of its equity securities or to any Person with
whom
it has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (2) a transfer which the Directors of the Company have
determined is part of a plan, arrangement or understanding which has the purpose
or effect of avoiding the provisions of this Section 11 (a)(ii), and subsequent
transferees of any of such Persons, will be void without any further action
and
any holder of such Rights will thereafter have no rights whatsoever with respect
to such Rights under any provision of this Agreement. The Company will use
all
reasonable efforts to ensure that the provisions of this Section 11 (a)(ii)
are
complied with, but will have no liability to any holder of Right Certificates
or
any other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder. Upon the occurrence of a Flip-in Event, no Right Certificate that
represents Rights that are or have become void pursuant to the provisions of
this Section 11 (a)(ii) will thereafter be issued pursuant to Section 3 or
Section 6, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of
this Section 11 (a)(ii) will be canceled. Upon the occurrence of a Flip-over
Event, any Rights that shall not have been previously exercised pursuant to
this
Section 11 (a)(ii) shall thereafter be exercisable only pursuant to Section
13
and not pursuant to this Section 11(a)(ii).
14
(iii) Upon
the
occurrence of a Flip-in Event, if there are not sufficient Common Shares
authorized but unissued or issued but not outstanding to permit the issuance
of
all the Common Shares issuable in accordance with Section 11(a)(ii) upon the
exercise of a Right, the Board of Directors of the Company will use its best
efforts promptly to authorize and, subject to the provisions of Section 9(e),
make available for issuance additional Common Shares or other equity securities
of the Company having equivalent voting rights and an equivalent value (as
determined in good faith by the Board of Directors of the Company) to the Common
Shares (for purposes of this Section 11 (a)(iii), “equivalent common shares”).
In the event that equivalent common shares are so authorized, upon the exercise
of a Right in accordance with the provisions of Section 7, the registered holder
will be entitled to receive (A) Common Shares, to the extent any are available,
and (B) a number of equivalent common shares, which the Board of Directors
of
the Company has determined in good faith to have a value equivalent to the
excess of (x) the aggregate current per share market value on the date of the
occurrence of the most recent Flip-in Event of all the Common Shares issuable
in
accordance with Section 11 (a)(ii) upon the exercise of a Right (the “Exercise
Value”) over (y) the aggregate current per share market value on the date of the
occurrence of the most recent Flip-in Event of any Common Shares available
for
issuance upon the exercise of such Right; provided,
however,
that if
at any time after 90 calendar days after the latest of the Share Acquisition
Date, the Distribution Date and the date of the occurrence of the most recent
Flip-in Event, there are not sufficient Common Shares and/or equivalent common
shares available for issuance upon the exercise of a Right, then the Company
will be obligated to deliver, upon the surrender of such Right and without
requiring payment of the Purchase Price, Common Shares (to the extent
available), equivalent common shares (to the extent available) and then cash
(to
the extent permitted by applicable law and any agreements or instruments to
which the Company is a party in effect immediately prior to the Share
Acquisition Date), which securities and cash have an aggregate value equal
to
the excess of (1) the Exercise Value over (2) the product of the then-current
Purchase Price multiplied by the number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to the date of the
occurrence of the most recent Flip-in Event (or, if any other Flip-in Event
shall have previously occurred, the product of the then-current Purchase Price
multiplied by the number of one one-hundredths of a Preferred Share for which
a
Right would have been exercisable immediately prior to the date of the
occurrence of such Flip-in Event if no other Flip-in Event had previously
occurred). To the extent that any legal or contractual restrictions prevent
the
Company from paying the full amount of cash payable in accordance with the
foregoing sentence, the Company will pay to holders of the Rights as to which
such payments are being made all amounts which are not then restricted on a
pro
rata basis and will continue to make payments on a pro rata basis as promptly
as
funds become available until the full amount due to each such Rights holder
has
been paid.
15
(b) In
the
event that the Company fixes a record date for the issuance of rights, options
or warrants to all holders of Preferred Shares entitling them (for a period
expiring within 45 calendar days after such record date) to subscribe for or
purchase Preferred Shares (or securities having equivalent rights, privileges
and preferences as the Preferred Shares (for purposes of this Section 11(b),
“equivalent
preferred shares”))
or
securities convertible into Preferred Shares or equivalent preferred shares
at a
price per Preferred Share or equivalent preferred share (or having a conversion
price per share, if a security convertible into Preferred Shares or equivalent
preferred shares) less than the current per share market price of the Preferred
Shares (determined pursuant to Section 11(d))on such record date, the Purchase
Price to be in effect after such record date will be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which is the number of Preferred Shares outstanding
on such record date plus the number of Preferred Shares which the aggregate
offering price of the total number of Preferred Shares and/or equivalent
preferred shares so to be offered (and/or the aggregate initial conversion
price
of the convertible securities so to be offered) would purchase at such current
per share market price and the denominator of which is the number of Preferred
Shares outstanding on such record date plus the number of additional Preferred
Shares and/or equivalent preferred shares to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible); provided,
however,
that in
no event shall the consideration to be paid upon the exercise of one Right
be
less than the aggregate par value of the shares of capital stock issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which is in a form other than cash, the value
of
such consideration will be as determined in good faith by the Board of Directors
of the Company, whose determination will be described in a statement filed
with
the Rights Agent. Preferred Shares owned by or held for the account of the
Company will not be deemed outstanding for the purpose of any such computation.
Such adjustment will be made successively whenever such a record date is fixed,
and in the event that such rights, options or warrants are not so issued, the
Purchase Price will be adjusted to be the Purchase Price which would then be
in
effect if such record date had not been fixed.
(c) In
the
event that the Company fixes a record date for the making of a distribution
to
all holders of Preferred Shares (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation) of evidences of indebtedness, cash (other than a
regular periodic cash dividend), assets, stock (other than a dividend payable
in
Preferred Shares) or subscription rights, options or warrants (excluding those
referred to in Section 11(b)), the Purchase Price to be in effect after such
record date will be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
is
the current per share market price of the Preferred Shares (as determined
pursuant to Section 11(d)) on such record date or, if earlier, the date on
which
Preferred Shares begin to trade on an ex-dividend or when issued basis for
such
distribution, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination will be described in
a
statement filed with the Rights Agent) of the portion of the evidences of
indebtedness, cash, assets or stock so to be distributed or of such subscription
rights, options or warrants applicable to one Preferred Share, and the
denominator of which is such current per share market price of the Preferred
Shares; provided,
however
that in
no event shall the consideration to be paid upon the exercise of one Right
be
less than the aggregate par value of the shares of capital stock issuable upon
exercise of one Right. Such adjustments will be made successively whenever
such
a record date is fixed; and in the event that such distribution is not so made,
the Purchase Price will again be adjusted to be the Purchase Price which would
then be in effect if such record date had not been fixed.
16
(d) (i)For
the
purpose of any computation hereunder, the “current
per share market price”
of
Common Shares on any date will be deemed to be the average of the daily closing
prices per share of such Common Shares for the 30 consecutive Trading Days
immediately prior to such date; provided,
however,
that in
the event that the current per share market price of the Common Shares is
determined during a period following the announcement by the issuer of such
Common Shares of (A) a dividend or distribution on such Common Shares payable
in
such Common Shares or securities convertible into such Common Shares (other
than
the Rights) or (B) any subdivision, combination or reclassification of such
Common Shares, and prior to the expiration of 30 Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for
such
subdivision, combination or reclassification, then, and in each such case,
the
current per share market price will be appropriately adjusted to take into
account ex-dividend trading or to reflect the current per share market price
per
Common Share equivalent. The closing price for each day will be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange
or,
if the Common Shares are not listed or admitted to trading on the New York
Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Common Shares are listed or admitted to trading or, if the Common
Shares are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by Nasdaq
or such other system then in use, or, if on any such date the Common Shares
are
not quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the Common
Shares selected by the Board of Directors of the Company. If the Common Shares
are not publicly held or not so listed or traded, or are not the subject of
available bid and asked quotes, “current per share market price” will mean the
fair value per share as determined in good faith by the Board of Directors
of
the Company, whose determination will be described in a statement filed with
the
Rights Agent.
(ii) For
the
purpose of any computation hereunder, the “current
per share market price”
of the
Preferred Shares will be determined in the same manner as set forth above for
Common Shares in Section 11(d)(i), other than the last sentence thereof. If
the
current per share market price of the Preferred Shares cannot be determined
in
the manner provided above, the “current per share market price” of the Preferred
Shares will be conclusively deemed to be an amount equal to the current per
share market price of the Common Shares multiplied by one hundred (as such
number may be appropriately adjusted to reflect events such as stock splits,
stock dividends, recapitalization s or similar transactions relating to the
Common Shares occurring after the date of this Agreement). If neither the Common
Shares nor the Preferred Shares are publicly held or so listed or traded, or
the
subject of available bid and asked quotes, “current per share market price” of
the Preferred Shares will mean the fair value per share as determined in good
faith by the Board of Directors of the Company, whose determination will be
described in a statement filed with the Rights Agent. For all purposes of this
Agreement, the current per share market price of one one-hundredth of a
Preferred Share will be equal to the current per share market price of one
Preferred Share divided by one hundred.
17
(e) Except
as
set forth below, no adjustment in the Purchase Price will be required unless
such adjustment would require an increase or decrease of at least 1 % in such
price; provided,
however,
that
any adjustments which by reason of this Section 11(e) are not required to be
made will be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 will be made to the nearest
cent or to the nearest one one-millionth of a Preferred Share or one
ten-thousandth of a Common Share or other security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 will be made no later than the earlier of (i) three
years from the date of the transaction which requires such adjustment and (ii)
the Expiration Date.
(f) If
as a
result of an adjustment made pursuant to Section 11(a), the holder of any Right
thereafter exercised becomes entitled to receive any securities of the Company
other than Preferred Shares, thereafter the number and/or kind of such other
securities so receivable upon exercise of any Right (and/or the Purchase Price
in respect thereof) will be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with respect
to the Preferred Shares (and the Purchase Price in respect thereof) contained
in
this Section 11, and the provisions of Sections 7, 9, 10, 13 and 14 with respect
to the Preferred Shares (and the Purchase Price in respect thereof) will apply
on like terms to any such other securities (and the Purchase Price in respect
thereof).
(g) All
Rights originally issued by the Company subsequent to any adjustment made to
the
Purchase Price hereunder will evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-hundredths of a Preferred Share issuable
from time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless
the Company has exercised its election as provided in Section 11(i), upon each
adjustment of the Purchase Price pursuant to Section 11(b) or Section 11(c),
each Right outstanding immediately prior to the making of such adjustment will
thereafter evidence the right to purchase, at the adjusted Purchase Price,
that
number of one one-hundredths of a Preferred Share (calculated to the nearest
one
one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number
of one one-hundredths of a Preferred Share issuable upon exercise of a Right
immediately prior to such adjustment of the Purchase Price by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price
and
(ii) dividing the product so obtained by the Purchase Price in effect immediate/
y 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 one one-hundredths of a Preferred Share issuable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights will be exercisable for the number of one one-hundredths of a Preferred
Share for which a Right was exercisable immediately prior to such adjustment.
Each Right held of record prior to such adjustment of the number of Rights
will
become that number of Rights (calculated to the nearest one ten-thousandth)
obtained by dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in effect immediately
after adjustment of the Purchase Price. The Company will make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. The Company will also notify the Rights Agent in writing
of same pursuant to Section 9(e) hereof and give the Rights Agent a copy of
such
announcement. Such record date may be the date on which the Purchase Price
is
adjusted or any day thereafter, but, if the Right Certificates have been issued,
will be at least 10 calendar days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment
of
the number of Rights pursuant to this Section 11(i), the Company will, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
the
provisions of Section 14, the additional Rights to which such holders are
entitled as a result of such adjustment, or, at the option of the Company,
will
cause to be distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders prior to the date
of
adjustment, and upon surrender thereof if required by the Company, new Right
Certificates evidencing all the Rights to which such holders are entitled after
such adjustment. Right Certificates so to be distributed will be issued,
executed, and countersigned in the manner provided for herein (and may bear,
at
the option of the Company, the adjusted Purchase Price) and will be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
18
(j) Without
respect to any adjustment or change in the Purchase Price and/or the number
and/or kind of securities issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price and the number and kind of securities which were expressed in
the
initial Right Certificate issued hereunder.
(k) Before
taking any action that would cause an adjustment reducing the Purchase Price
below one one-hundredth of the then par value, if any, of the Preferred Shares
or below the then par value, if any, of any other securities of the Company
issuable upon exercise of the Rights, the Company will take any corporate action
which may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and nonassessable Preferred Shares
or
such other securities, as the case may be, at such adjusted Purchase
Price.
(l) In
any
case in which this Section 11 otherwise requires that an adjustment in the
Purchase Price be made effective as of a record date for a specified event,
the
Company may elect to defer until the occurrence of such event the issuance
to
the holder of any Right exercised after such record date the number of Preferred
Shares or other securities of the Company, if any, issuable upon such exercise
over and above the number of Preferred Shares or other securities of the
Company, if any, issuable upon such exercise on the basis of the Purchase Price
in effect prior to such adjustment; provided,
however,
that
the Company delivers to such holder a due xxxx or other appropriate instrument
evidencing such holder’s right to receive such additional Preferred Shares or
other securities upon the occurrence of the event requiring such
adjustment.
19
(m) Notwithstanding
anything in this Agreement to the contrary, the Company will be entitled to
make
such reductions in the Purchase Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that in its good
faith judgment the Board of Directors of the Company determines to be advisable
in order that any (i) consolidation or subdivision of the Preferred Shares,
(ii)
issuance wholly for cash of Preferred Shares at less than the current per share
market price therefor, (iii) issuance wholly for cash of Preferred Shares or
securities which by their terms are convertible into or exchangeable for
Preferred Shares, (iv) stock dividends, or (v) issuance of rights, options
or
warrants referred to in this Section 11, hereafter made by the Company to
holders of its Preferred Shares is not taxable to such
stockholders.
(n) Notwithstanding
anything in this Agreement to the contrary, in the event that the Company at
any
time after the Record Date prior to the Distribution Date (i) pays a dividend
on
the outstanding Common Shares payable in Common Shares, (ii) subdivides the
outstanding Common Shares, (iii) combines the outstanding Common Shares into
a
smaller number of shares, or (iv) issues any shares of its capital stock in
a
reclassification of the outstanding Common Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), the number of Rights
associated with each Common Share then outstanding, or issued or delivered
thereafter but prior to the Distribution Date, will be proportionately adjusted
so that the number of Rights thereafter associated with each Common Share
following any such event equals the result obtained by multiplying the number
of
Rights associated with each Common Share immediately prior to such event by
a
fraction the numerator of which is the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
is
the total number of Common Shares outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11(n)
will be made successively whenever such a dividend is paid or such a
subdivision, combination or reclassification is effected.
12. Certificate
of Adjusted Purchase Price or Number of Securities.
Whenever an adjustment is made or any event affecting the Rights or their
exercisability (including without limitation an event which causes Rights to
become null and void) occurs as provided in Section 11 or Section 13 hereof,
the
Company will promptly (a) prepare a certificate setting forth such adjustment
and a brief, reasonably detailed statement of the facts, computations and
methodology accounting for such adjustment, (b) file with the Rights Agent
and
with each transfer agent for the Preferred Shares and the Common Shares a copy
of such certificate, and (c) mail a brief summary of such adjustment to each
holder of a Right Certificate in accordance with Section 25 and Section 26
hereof.
13. Consolidation,
Merger or Sale or Transfer of Assets or Fanning Power.
(a)
In the
event that:
(i) at
any
time after a Person has become an Acquiring Person, the Company consolidates
with, or merges with or into, any other Person and the Company is not the
continuing or surviving corporation of such consolidation or merger;
or
20
(ii) at
any
time after a Person has become an Acquiring Person, any Person consolidates
with
the Company, or merges with or into the Company, and the Company is the
continuing or surviving corporation of such merger or consolidation and, in
connection with such merger or consolidation, all or part of the Common Shares
is changed into or exchanged for stock or other securities of any other Person
or cash or any other property; or
(iii) at
any
time after a Person has become an Acquiring Person, the Company, directly or
indirectly, sells or otherwise transfers (or one or more of its Subsidiaries
sells or otherwise transfers), in one or more transactions, assets or earning
power (including without limitation securities creating any obligation on the
part of the Company and/or any of its Subsidiaries) representing in the
aggregate more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons other than the Company
or one or more of its wholly owned Subsidiaries; then, and in each such case,
proper provision will be made so that from and after the latest of the Share
Acquisition Date, the Distribution Date and the date of the occurrence of such
Flip-over Event (A) each holder of a Right thereafter has the right to receive,
upon the exercise thereof in accordance with the terms of this Agreement at
an
exercise price per Right equal to the product of the then-current Purchase
Price
multiplied by the number of one one-hundredths of a Preferred Share for which
a
Right was exercisable immediately prior to the Share Acquisition Date, such
number of duly authorized, validly issued, fully paid, non assessable and freely
tradeable Common Shares of the Issuer, free and clear of any liens, encumbrances
and other adverse claims and not subject to any rights of call or first refusal,
as equals the result obtained by (x) multiplying the then-current Purchase
Price
by the number of one one-hundredths of a Preferred Share for which a Right
is
exercisable immediately prior to the Share Acquisition Date and dividing that
product by (y) 50% of the current per share market price of the Common Shares
of
the Issuer (determined pursuant to Section 11(d)), on the date of the occurrence
of such Flip-over Event; (B) the Issuer will thereafter be liable for, and
will
assume, by virtue of the occurrence of such Flip-over Event, all the obligations
and duties of the Company pursuant to this Agreement; (C) the term “Company”
will
thereafter be deemed to refer to the Issuer; and (D) the Issuer will take such
steps (including without limitation the reservation of a sufficient number
of
its Common Shares to permit the exercise of all outstanding Rights) in
connection with such consummation as may be necessary to assure that the
provisions hereof are thereafter applicable, as nearly as reasonably may be
possible, in relation to its Common Shares thereafter deliverable upon the
exercise of the Rights.
(b) For
purposes of this Section 13, “Issuer”
means
(i) in the case of any Flip-over Event described in Sections 13(a)(i) or (ii)
above, the Person that is the continuing, surviving, resulting or acquiring
Person (including the Company as the continuing or surviving corporation of
a
transaction described in Section 13(a)(ii) above), and (ii) in the case of
any
Flip-over Event described in Section 13(a)(iii) above, the Person that is the
party receiving the greatest portion of the assets or earning power (including
without limitation securities creating any obligation on the part of the Company
and/or any of its Subsidiaries) transferred pursuant to such transaction or
transactions; provided,
however,
that,
in any such case, (A) if (1) no class of equity security of such Person is,
at
the time of such merger, consolidation or transaction and has been continuously
over the preceding 12-month period, registered pursuant to Section 12 of the
Exchange Act, and (2) such Person is a Subsidiary, directly or indirectly,
of
another Person, a class of equity security of which is and has been so
registered, the term “Issuer” means such other Person; and (B) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person, a
class
of equity security of two or more of which are and have been so registered,
the
term “Issuer” means whichever of such Persons is the issuer of the equity
security having the greatest aggregate market value. Notwithstanding the
foregoing, if the Issuer in any of the Flip over Events listed above is not
a
corporation or other legal entity having outstanding equity securities, then,
and in each such case, (x) if the Issuer is directly or indirectly wholly owned
by a corporation or other legal entity having outstanding equity securities,
then all references to Common Shares of the Issuer will be deemed to be
references to the Common Shares of the corporation or other legal entity having
outstanding equity securities which ultimately controls the Issuer, and (y)
if
there is no such corporation or other legal entity having outstanding equity
securities, (1) proper provision will be made so that the Issuer creates or
otherwise makes available for purposes of the exercise of the Rights in
accordance with the terms of this Agreement, a kind or kinds of security or
securities having a fair market value at least equal to the economic value
of
the Common Shares which each holder of a Right would have been entitled to
receive if the Issuer had been a corporation or other legal entity having
outstanding equity securities; and (2) all other provisions of this Agreement
will apply to the issuer of such securities as if such securities were Common
Shares.
21
(c) The
Company will not consummate any Flip-over Event if, (i) at the time of or
immediately after such Flip-over Event, there are or would be any rights,
warrants, instruments or securities outstanding or any agreements or
arrangements in effect which would eliminate or substantially diminish the
benefits intended to be afforded by the Rights, (ii) prior to, simultaneously
with or immediately after such Flip-over Event, the stockholders of the Person
who constitutes, or would constitute, the Issuer for purposes of Section 13(a)
shall have received a distribution of Rights previously owned by such Person
or
any of its Affiliates or Associates, or (iii) the form or nature of the
organization of the Issuer would preclude or limit the exercisability of the
Rights. In addition, the Company will not consummate any Flip-over Event unless
the Issuer has a sufficient number of authorized Common Shares (or other
securities as contemplated in Section 13(b) above) which have not been issued
or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior to such consummation the Company and
the
Issuer have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in subsections (a) and (b) of this Section
13
and further providing that as promptly as practicable after the consummation
of
any Flip-over Event, the Issuer will:
(i) prepare
and file a registration statement under the Securities Act with respect to
the
Rights and the securities issuable upon exercise of the Rights on an appropriate
form, and use its best efforts to cause such registration statement to (1)
become effective as soon as practicable after such filing and (2) remain
effective (with a prospectus at all times meeting the requirements of the
Securities Act) until the Expiration Date;
(ii) take
all
such action as may be appropriate under, or to ensure compliance with, the
securities or “blue sky” laws of the various states in connection with the
exercisability of the Rights; and
22
(iii) deliver
to holders of the Rights historical financial statements for the Issuer and
each
of its Affiliates which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
(d) The
provisions of this Section 13 will similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Flip-over Event
occurs at any time after the occurrence of a Flip-in Event, except for Rights
that have become void pursuant to Section 11 (a)(ii), Rights that shall not
have
been previously exercised will cease to be exercisable in the manner provided
in
Section 11 (a)(ii) and will thereafter be exercisable in the manner provided
in
Section 13(a).
14. Fractional
Rights and Fractional Securities.
(a)
The
Company will not be required to issue fractions of Rights or to distribute
Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, the Company will pay as promptly as practicable to the registered
holders of the Right Certificates with regard to which such fractional Rights
otherwise would be issuable, an amount in cash equal to the same fraction of
the
current market value of one Right. For the purposes of this Section 14(a),
the
current market value of one Right is the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights
otherwise would have been issuable. The closing price for any day is the last
sale price, regular way, or, in case no such sale takes place on such day,
the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange
or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are
not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use, or, if on any such date the Rights are not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker making a market in the Rights selected by the
Board of Directors of the Company. If the Rights are not publicly held or are
not so listed or traded, or are not the subject of available bid and asked
quotes, the current market value of one Right will mean the fair value thereof
as determined in good faith by the Board of Directors of the Company, whose
determination will be described in a statement filed with the Rights
Agent.
(b) The
Company will not be required to issue fractions of Preferred Shares (other
than
fractions which are integral multiples of one one-hundredth of a Preferred
Share) upon exercise of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share). Fractions of Preferred Shares in
integral multiples of one one-hundredth of a Preferred Share may, at the
election of the Company, be evidenced by depositary receipts pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement provides that the holders of such depositary
receipts have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company may
pay to any Person to whom or which such fractional Preferred Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For purposes of this Section 14(b),
the current market value of one Preferred Share is the closing price of the
Preferred Shares (as determined in the same manner as set forth for Common
Shares in the second sentence of Section 11 (d)(i)) for the Trading Day
immediately prior to the date of such exercise; provided,
however
that if
the closing price of the Preferred Shares cannot be so determined, the closing
price of the Preferred Shares for such Trading Day will be conclusively deemed
to be an amount equal to the closing price of the Common Shares (determined
pursuant to the second sentence of Section 11 (d)(i)) for such Trading Day
multiplied by one hundred (as such number may be appropriately adjusted to
reflect events such as stock splits, stock dividends, recapitalization s or
similar transactions relating to the Common Shares occurring after the date
of
this Agreement); provided
further, however,
that if
neither the Common Shares nor the Preferred Shares are publicly held or listed
or admitted to trading on any national securities exchange, or the subject
of
available bid and asked quotes, the current market value of one Preferred Share
will mean the fair value thereof as determined in good faith by the Board of
Directors of the Company, whose determination will be described in a statement
filed with the Rights Agent.
23
(c) Following
the occurrence of a Triggering Event, the Company will not be required to issue
fractions of Common Shares or other securities issuable upon exercise or
exchange of the Rights or to distribute certificates which evidence any such
fractional securities. In lieu of issuing any such fractional securities, the
Company may pay to any Person to whom or which such fractional securities would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of one such security. For purposes of this Section 14(c),
the current market value of one Common Share or other security issuable upon
the
exercise or exchange of Rights is the closing price thereof (as determined
in
the same manner as set forth for Common Shares in the second sentence of Section
11 (d)(i)) for the Trading Day immediately prior to the date of such exercise
or
exchange; provided,
however,
that if
neither the Common Shares nor any such other securities are publicly held or
listed or admitted to trading on any national securities exchange, or the
subject of available bid and asked quotes, the current market value of one
Common Share or such other security will mean the fair value thereof as
determined in good faith by the Board of Directors of the Company, whose
determination will mean the fair value thereof as will be described in a
statement filed with the Rights Agent.
15. Rights
of Action.
(a)
All
rights of action in respect of this Agreement, excepting the rights of action
given to the Rights Agent under Section 18 and Section 20 hereof, are vested
in
the respective registered holders of the Right Certificates (and, prior to
the
Distribution Date, the registered holders of the Common Shares); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Shares), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
holder of any Common Shares), may in his own behalf and for his own benefit
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Right Certificate in the manner provided in such
Right Certificate and in this Agreement. Without limiting the foregoing or
any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under this Agreement, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to this
Agreement.
24
(b) Notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights
Agent will have any liability to any holder of a Right or other Person as a
result of its inability to perform any of its obligations under this Agreement
by reason of any preliminary or permanent injunction or other order, decree
or
ruling issued by a court of competent jurisdiction or by a governmental,
regulatory, self-regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of
such
obligation; provided,
however
that the
Company will use its best efforts to have any such order, decree or ruling
lifted or otherwise overturned as soon as possible.
16. Agreement
of Rights Holders.
Every
holder of a Right by accepting the same consents and agrees with the Company
and
the Rights Agent and with every other holder of a Right that:
(a) Prior
to
the Distribution Date, the Rights are transferable only in connection with
the
transfer of the Common Shares;
(b) After
the
Distribution Date, the Right Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the office of the Rights Agent
designated for such purpose, duly endorsed or accompanied by a proper instrument
of transfer;
(c) The
Company and the Rights Agent may deem and treat the person in whose name the
Right Certificate (or, prior to the Distribution Date, the associated Common
Share certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on
the
Right Certificate or the associated Common Share certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent will be affected by any notice to
the
contrary; and
(d) Such
holder expressly waives any right to receive any fractional Rights and any
fractional securities upon exercise or exchange of a Right, except as otherwise
provided in Section 14.
17. Right
Certificate Holder Not Deemed a Stockholder.
No
holder, as such, of any Right Certificate will be entitled to vote, receive
dividends, or be deemed for any purpose the holder of Preferred Shares or any
other securities of the Company which may at any time be issuable upon the
exercise of the Rights represented thereby, nor will anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or
any
right to vote for the election of Directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
of
this Agreement or exchanged pursuant to the provisions of Section
24.
25
18. Concerning
the Rights Agent.
(a)
The
Company will pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and counsel fees and other disbursements incurred in
the
preparation, delivery, amendment, administration and execution of this Agreement
and the exercise and performance of its duties hereunder. The Company will
also
indemnify the Rights Agent for, and hold it harmless against, any loss,
liability, damage, judgment, fine, penalty, claim, demand, settlement suit,
action, proceeding or expense, incurred without gross negligence, bad faith,
or
willful misconduct on the part of the Rights Agent (which gross negligence,
bad
faith or willful misconduct must be determined by a final, non-appealable order,
judgment decree or ruling of a court of competent jurisdiction), for anything
done or omitted to be done by the Rights Agent in connection with the
acceptance, administration, exercise and performance of its duties under this
Agreement. The costs and expenses of defending against any claim of liability
arising therefrom, directly or indirectly, shall be paid by the Company. The
provisions of this Section 18 and Section 20 below shall survive the termination
of this Agreement, the exercise or expiration of the Rights and the resignation,
replacement or removal of the Rights Agent.
(b) The
Rights Agent will be authorized and protected and will incur no liability for
or
in respect of any action taken, suffered, or omitted by it in connection with
its acceptance and administration of this Agreement and the exercise and
performance of its duties hereunder, in reliance upon any Right Certificate
or
certificate evidencing Preferred Shares or Common Shares or other securities
of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed, and, where necessary, verified or acknowledged, by the proper
Person or Persons.
19. Merger
or Consolidation or Change of Name of Rights Agent.
(a)
Any
Person into which the Rights Agent or any successor Rights Agent may be merged
or with which it may be consolidated, or any Person resulting from any merger
or
consolidation to which the Rights Agent or any successor Rights Agent is a
party, will be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any
of
the parties hereto, provided that such Person would be eligible for appointment
as a successor Rights Agent under the provisions of Section 21 . If at the
time
such successor Rights Agent succeeds to the agency created by this Agreement
any
of the Right Certificates shall have been countersigned but not delivered,
any
such successor Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Right Certificates so countersigned ; and if
at
that time any of the Right Certificates shall not have been countersigned,
any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates will have the full force
provided in the Right Certificates and in this Agreement.
(b) If
at any
time the name of the Rights Agent changes and at such time any of the Right
Certificates have been countersigned but not delivered, the Rights Agent may
adopt the countersignature under its prior name and deliver Right Certificates
so countersigned; and if at that time any of the Right Certificates have not
been countersigned, the Rights Agent may countersign such Right Certificates
either in its prior name or in its changed name; and in all such cases such
Right Certificates will have the full force provided in the Right Certificates
and in this Agreement.
26
20. Duties
of Rights Agent.
The
Rights Agent undertakes to perform only the duties and obligations expressly
imposed by this Agreement (and no implied duties) upon the following terms
and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, will be bound:
(a) The
Rights Agent may consult with legal counsel (who may be legal counsel for the
Company or an employee of the Rights Agent), and the advice or opinion of such
counsel will be full and complete authorization and protection to the Rights
Agent and the Rights Agent shall incur no liability for or in respect of any
action taken or omitted in accordance with such opinion.
(b) Whenever
in the performance of its duties under this Agreement the Rights Agent deems
it
necessary or desirable that any fact or matter (including, without limitation,
the identity of an Acquiring Person and the determination of the current per
share market price of any security) be proved or established by the Company
prior to taking, omitting or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may
be deemed to be conclusively proved and established by a certificate signed
by
any one of the Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer of the Company and delivered to the Rights Agent,
and
such certificate will be full and complete authorization to the Rights Agent
for
any action taken, omitted or suffered by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The
Rights Agent will be liable hereunder only for its own gross negligence, bad
faith or willful misconduct (which gross negligence, bad faith or willful
misconduct must be determined by a final, non-appealable order, judgment, decree
or ruling of a court of competent jurisdiction). Anything to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
punitive, indirect, consequential or incidental loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights
Agent
has been advised of the likelihood of such loss or damage. Any liability of
the
Rights Agent under this Agreement will be limited to the amount of annual fees
paid by the Company to the Rights Agent.
(d) The
Rights Agent will not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Right Certificates
(except its countersignature thereof) or be required to verify the same, but
all
such statements and recitals are and will be deemed to have been made by the
Company only.
(e) The
Rights Agent will not have any liability for or be under any responsibility
in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution and delivery hereof by the Rights Agent) or in respect
of the validity or execution of any Right Certificate (except its
countersignature thereof); nor will it be responsible for any breach by the
Company of any covenant contained in this Agreement or in any Right Certificate;
nor will it be responsible for any adjustment required under the provisions
of
Sections 11 or 13 (including any adjustment which results in Rights becoming
void) or responsible for the manner, method or amount of any such adjustment
or
the ascertaining of the existence of facts that would require any such
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of the Certificate described in Section 12 hereof,
upon which the Rights Agent may rely); nor will it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of stock or other securities to be issued pursuant
to
this Agreement or any Right Certificate or as to whether any shares of stock
or
other securities will, when issued, be duly authorized, validly issued, fully
paid and nonassessable.
27
(f) The
Company will perform, execute, acknowledge and deliver or cause to be performed,
executed, acknowledged and delivered all such further and other acts,
instruments and assurances as may reasonably be required by the Rights Agent
for
the carrying out or performing by the Rights Agent of the provisions of this
Agreement.
(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 such instructions shall be full authorization
and protection to the Rights Agent, and it will not be liable for any action
taken or suffered to be taken by it in accordance with instructions of any
such
officer or for any delay in acting while waiting for those instructions. The
Rights Agent shall be fully authorized and protected in relying upon the most
recent instructions received by any such officer. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken, suffered or omitted
by the Rights Agent under this Agreement and the date on and/or after which
such
action shall be taken or suffered or such omission shall be effective. The
Rights Agent shall not be liable for any action taken or suffered by, or
omission of, the Rights Agent in accordance with a proposal included in any
such
application on or after the date specified in such application (which date
shall
not be less than five Business Days after the date any officer of the Company
actually receives such application, unless any such officer shall have consented
in writing to an earlier date) unless, prior to taking any such action (or
the
effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action
to be
taken, suffered or omitted..
(h) The
Rights Agent and any stockholder, director, officer or employee of the Rights
Agent may buy, sell or deal in any of the Rights or other securities of the
Company or become pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company or otherwise
act as fully and freely as though it were not Rights Agent under this Agreement.
Nothing herein will preclude the Rights Agent from acting in any other capacity
for the Company or for any other Person.
(i) The
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself (through its directors,
officers and employees) or by or through its attorneys or agents, and the Rights
Agent will not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct absent gross
negligence, bad faith or willful misconduct in the selection and continued
employment thereof (which gross negligence, bad faith or willful misconduct
must
be determined by a final, non-appealable order, judgment, decree or ruling
of an
court of competent jurisdiction). The Rights Agent will not be under any duty
or
responsibility to ensure compliance with any applicable federal or state
securities laws in connection with the issuance, transfer or exchange of Right
Certificates.
28
(j) If,
with
respect to any Right Certificate surrendered to the Rights Agent for exercise,
transfer, split up, combination or exchange, either (i) the certificate attached
to the form of assignment or form of election to purchase, as the case may
be,
has either not been completed or indicates an affirmative response to clause
1
or 2 thereof, or (ii) any other actual or suspected irregularity exists, the
Rights Agent will not take any further action with respect to such requested
exercise, transfer, split up, combination or exchange without first consulting
with the Company, and will thereafter take further action with respect thereto
only in accordance with the Company’s written instructions.
(k) 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 it believes that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
21. Change
of Rights Agent.
The
Rights Agent or any successor Rights Agent may resign and be discharged from
its
duties under this Agreement upon 30 calendar days’ notice in writing mailed to
the Company and to each transfer agent of the Preferred Shares or the Common
Shares known to the Rights Agent 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 calendar days’ notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case
may
be, and to each transfer agent of the Preferred Shares and the Common Shares
by
registered or certified mail, and to the holders of the Right Certificates
by
first class mail. If the Rights Agent resigns or is removed or otherwise becomes
incapable of acting, the Company will appoint a successor to the Rights Agent.
If the Company fails to make such appointment within a period of 30 calendar
days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Right Certificate (who will, with such
notice, submit his Right Certificate for inspection by the Company), then the
registered holder of any Right Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, will be a Person
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 Person
is authorized to do business as a banking institution in the State of New York),
in good standing, having a principal office in the State of New York, which
is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority
and
which has at the time of its appointment as Rights Agent a combined capital
and
surplus of at least $50 million. After appointment, the successor Rights Agent
will be vested with the same powers, rights, duties and responsibilities as
if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent will deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver
any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent
of
the Preferred Shares or the Common Shares, and mail a notice thereof in writing
to the registered holders of the Right Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, will not affect
the legality or validity of the resignation or removal of the Rights Agent
or
the appointment of the successor Rights Agent, as the case may be.
29
22. Issuance
of New Right Certificates.
Notwithstanding any of the provisions of this Agreement or of the Rights to
the
contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors
to
reflect any adjustment or change in the Purchase Price per share and the number
or kind of securities issuable upon exercise of the Rights made in accordance
with the provisions of this Agreement. In addition, in connection with the
issuance or sale by the Company of Common Shares following the Distribution
Date
and prior to the Expiration Date, the Company (a) will, with respect to Common
Shares so issued or sold pursuant to the exercise, exchange or conversion of
securities (other than Rights) issued prior to the Distribution Date which
are
exercisable or exchangeable for, or convertible into Common Shares, and (b)
may,
in any other case, if deemed necessary, appropriate or desirable by the Board
of
Directors of the Company, issue Right Certificates representing an equivalent
number of Rights as would have been issued in respect of such Common Shares
if
they had been issued or sold prior to the Distribution Date, as appropriately
adjusted as provided herein as if they had been so issued or sold; provided,
however,
that
(i) no such Right Certificate will be issued if, and to the extent that, in
its
good faith judgment the Board of Directors of the Company determines that the
issuance of such Right Certificate could have a material adverse tax consequence
to the Company or to the Person to whom or which such Right Certificate
otherwise would be issued and (ii) no such Right Certificate will be issued
if,
and to the extent that, appropriate adjustment otherwise has been made in lieu
of the issuance thereof.
23. Redemption.
(a)
Prior to
the Expiration Date, the Board of Directors of the Company may, at its option,
redeem all but not less than all of the then-outstanding Rights at the
Redemption Price at any time prior to the Close of Business on the later of
(i)
the Distribution Date and (ii) Share Acquisition Date. Any such redemption
will
be effective immediately upon the action of the Board of Directors of the
Company ordering the same, unless such action of the Board of Directors of
the
Company expressly provides that such redemption will be effective at a
subsequent time or upon the occurrence or nonoccurrence of one or more specified
events (in which case such redemption will be effective in accordance with
the
provisions of such action of the Board of Directors of the
Company).
(b) Immediately
upon the effectiveness of the redemption of the Rights as provided in Section
23(a), and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights will be to receive the Redemption Price, without interest thereon.
Promptly after the effectiveness of the redemption of the Rights as provided
in
Section 23(a), the Company will publicly announce such redemption (with prompt
written notice thereof to the Rights Agent) and, within 10 calendar days
thereafter, will give notice of such redemption to the holders of the
then-outstanding Rights by mailing such notice to all such holders at their
last
addresses as they appear upon the registry books of the Company; provided,
however, that the failure to give, or any defect in, any such notice will not
affect the validity of the redemption of the Rights. Any notice that is mailed
in the manner herein provided will be deemed given, whether or not the holder
receives the notice. The notice of redemption mailed to the holders of Rights
will state the method by which the payment of the Redemption Price will be
made.
The Company may, at its option, pay the Redemption Price in cash, Common Shares
(based upon the current per share market price of the Common Shares (determined
pursuant to Section 11(d)) at the time of redemption), or any other form of
consideration deemed appropriate by the Board of Directors of the Company (based
upon the fair market value of such other consideration, determined by the Board
of Directors of the Company in good faith) or any combination thereof. The
Company may, at its option, combine the payment of the Redemption Price with
any
other payment being made concurrently to holders of Common Shares and, to the
extent that any such other payment is discretionary, may reduce the amount
thereof on account of the concurrent payment of the Redemption Price. If legal
or contractual restrictions prevent the Company from paying the Redemption
Price
(in the form of consideration deemed appropriate by the Board of Directors)
at
the time of redemption, the Company will pay the Redemption Price, without
interest, promptly after such time as the Company ceases to be so prevented
from
paying the Redemption Price.
30
24. Exchange.
(a)
The
Board of Directors of the Company may, at its option, at any time after the
later of the Share Acquisition Date and the Distribution Date, exchange all
or
part of the then-outstanding and exercisable Rights (which will not include
Rights that have become void pursuant to the provisions of Section 11 (a)(ii))
for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the Record Date (such exchange ratio being
hereinafter referred to as the “Exchange
Ratio”).
Any
such exchange will be effective immediately upon the action of the Board of
Directors of the Company ordering the same, unless such action of the Board
of
Directors of the Company expressly provides that such exchange will be effective
at a subsequent time or upon the occurrence or nonoccurrence of one or more
specified events (in which case such exchange will be effective in accordance
with the provisions of such action of the Board of Directors of the Company).
Notwithstanding the foregoing, the Board of Directors of the Company will not
be
empowered to effect such exchange at any time after any Person (other than
the
Company, any Related Person or any Exempt Person), who or which, together with
all Affiliates and Associates of such Person, becomes the Beneficial Owner
of
50% or more of the then-outstanding Common Shares.
(b) Immediately
upon the effectiveness of the exchange of any Rights as provided in Section
24(a), and without any further action and without any notice, the right to
exercise such Rights will terminate and the only right with respect to such
Rights thereafter of the holder of such Rights will be to receive that number
of
Common Shares equal to the number of such Rights held by such holder multiplied
by the Exchange Ratio. Promptly after the effectiveness of the exchange of
any
Rights as provided in Section 24(a), the Company will publicly announce such
exchange (with prompt written notice thereof to the Rights Agent) and, within
10
calendar days thereafter, will give notice of such exchange to all of the
holders of such Rights at their last addresses as they appear upon the registry
books of the Rights Agent; provided,
however,
that
the failure to give, or any defect in, such notice will not affect the validity
of such exchange. Any notice that is mailed in the manner herein provided will
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares
for
Rights will be effected and, in the event of any partial exchange, the number
of
Rights which will be exchanged. Any partial exchange will be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11 (a)(ii)) held by each holder of
Rights.
31
(c) In
any
exchange pursuant to this Section 24, the Company, at its option, may substitute
for any Common Share exchangeable for a Right (i) equivalent common shares
(as
such term is used in Section 11(a)(iii)), (ii) cash, (iii) debt securities
of
the Company, (iv) other assets, or (v) any combination of the foregoing, in
any
event having an aggregate value, as determined in good faith by the Board of
Directors of the Company (whose determination will be described in a statement
filed with the Rights Agent), equal to the current market value of one Common
Share (determined pursuant to Section 11(d))on the Trading Day immediately
preceding the date of the effectiveness of the exchange pursuant to this Section
24.
25. Notice
of Certain Events.
(a)
If the
Company proposes (i) to pay any dividend payable in stock of any class to the
holders of Preferred Shares or to make any other distribution to the holders
of
Preferred Shares (other than a regular periodic cash dividend), (ii) to offer
to
the holders of Preferred Shares rights, options or warrants to subscribe for
or
to purchase any additional Preferred Shares or shares of stock of any class
or
any other securities, rights or options, (iii) to effect any reclassification
of
its Preferred Shares (other than a reclassification involving only the
subdivision of outstanding Preferred Shares), (iv) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one
or
more transactions, of assets or earning power (including, without limitation,
securities creating any obligation on the part of the Company and/or any of
its
Subsidiaries) representing more than 50% of the assets and earning power of
the
Company and its Subsidiaries, taken as a whole, to any other Person or Persons
other than the Company or one or more of its wholly owned Subsidiaries, (v)
to
effect the liquidation, dissolution or winding up of the Company, or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or
to
effect a subdivision, combination or reclassification of the Common Shares
then,
in each such case, the Company will give to the Rights Agent and, to the extent
feasible, to each holder of a Right Certificate, in accordance with Section
26,
a notice of such proposed action, which specifies the record date for the
purposes of such stock dividend, distribution or offering of rights, options
or
warrants, or the date on which such reclassification , consolidation, merger,
sale, transfer, liquidation, dissolution or winding up is to take place and
the
date of participation therein by the holders of the Common Shares and/or
Preferred Shares, if any such date is to be fixed, and such notice will be
so
given, in the case of any action covered by clause (i) or (ii) above, at least
10 calendar days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and, in the case of any such
other
action, at least 10 calendar days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares and/or Preferred Shares, whichever is the earlier.
(b) In
case
any Triggering Event occurs, then, in any such case, the Company will as soon
as
practicable thereafter give to the Rights Agent and each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of the occurrence
of
such event, which specifies the event and the consequences of the event to
holders of Rights.
26. Notices.
(a)
Notices
or demands authorized by this Agreement to be given or made by the Rights Agent
or by the holder of any Right Certificate to or on the Company will be
sufficiently given or made if sent by first class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent)
as
follows:
Cosine
Communications, Inc.
000
Xxxxx
Xxxxxxxxxx Xxxx., Xxx 000
Xxx
Xxxx,
XX 00000
Attention:
President
(b) Subject
to the provisions of Section 21 hereof, any notice or demand authorized by
this
Agreement to be given or made by the Company or by the holder of any Right
Certificate to or on the Rights Agent will be sufficiently given or made if
sent
by first-class mail, postage prepaid, addressed (until another address is filed
in writing with the Company) as follows:
Mellon
Investor Services LLC
00
Xxxxxxxxxx Xxxx
Xxxxxxxxxx
Xxxx, Xxx Xxxxxx 00000-0000
Attention:
General Counsel
(c) 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 (or, if prior the
Distribution Date, to the holder of any certificate evidencing Common Shares)
will be sufficiently given or made if sent by first class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
27. Supplements
and Amendments.
Subject
to this Section 27, the Company may in its sole and absolute discretion, and
the
Rights Agent will if the Company so directs, supplement or amend any provision
of this Agreement in any respect without the approval of any holders of Rights
or Common Shares, any such supplement or amendment to be evidenced by a writing
signed by the Company and the Rights Agent. From and after the time at which
the
Rights cease to be redeemable pursuant to Section 23, and subject to the last
sentence of this Section 27, the Company may, and the Rights Agent will if
the
Company so directs, supplement or amend this Agreement without the approval
of
any holders of Rights or Common Shares in order (i) to cure any ambiguity,
(ii)
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) to shorten or lengthen
any time period hereunder, or (iv) to supplement or amend the provisions
hereunder in any manner which the Company may deem desirable; provided, however,
that no such supplement or amendment shall adversely affect the interests of
the
holders of Rights as such (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person), and no such supplement or amendment shall
cause the Rights again to become redeemable or cause this Agreement again to
become supplementable or amendable otherwise than in accordance with the
provisions of this sentence. Without limiting the generality or effect of the
foregoing, this Agreement may be supplemented or amended to provide for such
voting powers for the Rights and such procedures for the exercise thereof,
if
any, as the Board of Directors of the Company may determine to be appropriate.
Upon the delivery of a certificate from an officer of the Company and, if
requested by the Rights Agent, an opinion of counsel, which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent will execute such supplement or amendment. Notwithstanding
anything in this Agreement to the contrary, (a) no supplement or amendment
may
be made which decreases the stated Redemption Price to an amount less than
$0.01
per Right; and (b) the Rights Agent may, and shall not be obligated to, enter
into any supplement or amendment that affects the Rights Agent’s own rights,
duties, obligations or immunities under this Agreement.
32
28. Successors:
Certain Covenants.
All the
covenants and provisions of this Agreement by or for the benefit of the Company
or the Rights Agent will be binding on and inure to the benefit of their
respective successors and assigns hereunder.
29. Benefits
of This Agreement.
Nothing
in this Agreement will be construed to give to any Person other than the
Company, the Rights Agent, and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Shares) any legal or equitable
right, remedy or claim under this Agreement. This Agreement will be for the
sole
and exclusive benefit of the Company, the Rights Agent, and the registered
holders of the Right Certificates (or prior to the Distribution Date, the Common
Shares).
30. Governing
Law.
This
Agreement, each Right and each Right Certificate issued hereunder will be deemed
to be a contract made under the internal substantive laws of the State of
Delaware and for all purposes will be governed by and construed in accordance
with the internal substantive laws of such State applicable to contracts to
be
made and performed entirely within such State; provided,
however,
that
all provisions regarding the rights, obligations and duties of the Rights Agent
shall be governed by and construed in accordance with the laws of the state
of
New York.
31. Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction or other authority to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement will remain in full force and effect and will in no way be affected,
impaired or invalidated; provided, however, that nothing contained in this
Section 31 will affect the ability of the Company under the provisions of
Section 27 to supplement or amend this Agreement to replace such invalid, void
or unenforceable term, provision, covenant or restriction with a legal, valid
and enforceable term, provision, covenant or restriction.
32. Descriptive
Headings, Etc.
Descriptive headings of the several Sections of this Agreement are inserted
for
convenience only and will not control or affect the meaning or construction
of
any of the provisions hereof. Unless otherwise expressly provided, references
herein to Articles, Sections and Exhibits are to Articles, Sections and Exhibits
of or to this Agreement.
33
33. Determinations
and Actions by the Board.
For all
purposes of this Agreement, any calculation of the number of Common Shares
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding Common Shares of which any Person
is
the Beneficial Owner, will be made in accordance with, as applicable, the last
sentence of Rule 1 3d-3(d)(1 )(i) of the General Rules and Regulations under
the
Exchange Act or the provisions of Section 382 of the Code, or any successor
provision or replacement provision. The Board of Directors of the Company will
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors
of
the Company or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including without limitation the right and
power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including without limitation any determination contemplated by
Section 1(a) or any determination as to whether particular Rights shall have
become void). All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, any omission with respect to
any
of the foregoing) which are done or made by the Board of Directors of the
Company in good faith will (x) be final, conclusive and binding on the Company,
the Rights Agent, the holders of the Rights and all other parties and (y) not
subject the Board of Directors of the Company to any liability to any Person,
including without limitation the Rights Agent and the holders of the Rights.
The
Rights Agent shall always be entitled to assume that the Board of Directors
acted in good faith and shall be fully protected and incur no liability in
reliance thereon.
34. Counterparts.
This
Agreement may be executed in any number of counterparts and each of such
counterparts will for all purposes be deemed to be an original, and all such
counterparts will together constitute but one and the same
instrument.
[Signatures
on Following Page]
34
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the day and year first above written.
COSINE
COMMUNICATIONS, INC.
By: ____________________________
Name:
Xxxxx Xxxxxx
Title:
President
MELLON
INVESTOR SERVICES LLC
By: ____________________________
Name:
Title:
35
EXHIBIT
A
CERTIFICATE
OF DESIGNATION
of
SERIES
A
JUNIOR PARTICIPATING
PREFERRED
STOCK
of
COSINE
COMMUNICATIONS, INC.
(Pursuant
to Section 151 of the
General
Corporation Law of the State of Delaware)
Cosine
Communications, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “Company”),
DOES
HEREBY CERTIFY:
That,
pursuant to authority vested in the Board of Directors of the Company by its
Certificate of Incorporation, and pursuant to the provisions of Section 151
of
the General Corporation Law, the Board of Directors of the Company has adopted
the following resolution providing for the issuance of a series of Preferred
Stock:
RESOLVED,
that pursuant to the authority expressly granted to and vested in the Board
of
Directors of the Company (the “Board
of Directors”
or the
“Board”)
by the
Certificate of Incorporation of the Company, a series of Preferred Stock, par
value $0.0001 per share (the “Preferred
Stock”),
of
the Company be, and it hereby is, created, and that the designation and amount
thereof and the powers, designations, preferences and relative, participating,
optional and other special rights of the shares of such series, and the
qualifications, limitations or restrictions thereof are as follows:
I.
Designation
and Amount
The
shares of such series will be designated as Series A Junior Participating
Preferred Stock (the “Series
A Preferred”)
and
the number of shares constituting the Series A Preferred is 220,000. Such number
of shares may be increased or decreased by resolution of the Board; provided,
however, that no decrease will reduce the number of shares of Series A Preferred
to a number less than the number of shares then outstanding plus the number
of
shares reserved for issuance upon the exercise of outstanding options, rights
or
warrants or upon the conversion of any outstanding securities issued by the
Company any convertible into Series A Preferred.
II.
Dividends
and Distributions
(a) Subject
to the rights of the holders of any shares of any series of Preferred Stock
ranking prior to the Series A Preferred with respect to dividends, the holders
of shares of Series A Preferred, in preference to the holders of Common Stock,
par value $0.0001 per share (the “Common
Stock”),
of
the Company, and of any other junior stock, will be entitled to receive, when,
as and if declared by the Board out of funds legally available for the purpose,
dividends payable in cash (except as otherwise provided below) on such dates
as
are from time to time established for the payment of dividends on the Common
Stock (each such date being referred to herein as a “Dividend
Payment Date”),
commencing on the first Dividend Payment Date after the first issuance of a
share or fraction of a share of Series A Preferred (the “First
Dividend Payment Date”),
in an
amount per share (rounded to the nearest cent) equal to, subject to the
provision for adjustment hereinafter set forth, one hundred times the aggregate
per share amount of all cash dividends, and one hundred times the aggregate
per
share amount (payable in kind) of all non-cash dividends, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares
of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Dividend Payment Date or, with respect to the
First Dividend Payment Date, since the first issuance of any share or fraction
of a share of Series A Preferred. In the event that the Company at any time
(i)
declares a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii)
combines the outstanding shares of Common Stock into a smaller number of shares,
or (iv) issues any shares of its capital stock in a reclassification of the
outstanding shares of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such case and regardless of whether
any
shares of Series A Preferred are then issued or outstanding, the amount to
which
holders of shares of Series A Preferred would otherwise be entitled immediately
prior to such event under clause (ii) of the preceding sentence will be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
36
(b) The
Company will declare a dividend on the Series A Preferred as provided in the
immediately preceding paragraph immediately after it declares a dividend on
the
Common Stock (other than a dividend payable in shares of Common Stock). Each
such dividend on the Series A Preferred will be payable immediately prior to
the
time at which the related dividend on the Common Stock is payable.
(c) Dividends
will accrue on outstanding shares of Series A Preferred from the Dividend
Payment Date next preceding the date of issue of such shares, unless (i) the
date of issue of such shares is prior to the record date for the First Dividend
Payment Date, in which case dividends on such shares will accrue from the date
of the first issuance of a share of Series A Preferred or (ii) the date of
issue
is a Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred entitled to receive
a
dividend and before such Dividend Payment Date, in either of which events such
dividends will accrue from such Dividend Payment Date. Accrued but unpaid
dividends will cumulate from the applicable Dividend Payment Date but will
not
bear interest. Dividends paid on the shares of Series A Preferred in an amount
less than the total amount of such dividends at the time accrued and payable
on
such shares will be allocated pro rata on a share-by-share basis among all
such
shares at the time outstanding. The Board may fix a record date for the
determination of holders of shares of Series A Preferred entitled to receive
payment of a dividend or distribution declared thereon, which record date will
be not more than 60 calendar days prior to the date fixed for the payment
thereof.
37
III.
Voting
Rights
The
holders of shares of Series A Preferred will have the following voting
rights:
(a) Subject
to the provision for adjustment hereinafter set forth, each share of Series
A
Preferred will entitle the holder thereof to one hundred votes on all matters
submitted to a vote of the stockholders of the Company. In the event the Company
at any time (i) declares a dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivides the outstanding shares of
Common Stock, (iii) combines the outstanding shares of Common Stock into a
smaller number of shares, or (iv) issues any shares of its capital stock in
a
reclassification of the outstanding shares of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, in each such case
and
regardless of whether any shares of Series A Preferred are then issued or
outstanding, the number of votes per share to which holders of shares of Series
A Preferred would otherwise be entitled immediately prior to such event will
be
adjusted by multiplying such number by a fraction, the numerator of which is
the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except
as
otherwise provided herein, in any other Preferred Stock Designation creating
a
series of Preferred Stock or any similar stock, or by law, the holders of shares
of Series A Preferred and the holders of shares of Common Stock and any other
capital stock of the Company having general voting rights will vote together
as
one class on all matters submitted to a vote of stockholders of the
Company.
(c) Except
as
set forth in the Amended and Restated Certificate of Incorporation or herein,
or
as otherwise provided by law, holders of shares of Series A Preferred will
have
no voting rights.
IV.
Certain
Restrictions
(a) Whenever
dividends or other dividends or distributions payable on the Series A Preferred
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
outstanding have been paid in full, the Company will not:
(i) Declare
or pay dividends, or make any other distributions, on any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the shares of Series A Preferred;
(ii) Declare
or pay dividends, or make any other distributions, on any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution
or
winding up) with the shares of Series A Preferred, except dividends paid ratably
on the shares of Series A Preferred and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
38
(iii) Redeem,
purchase or otherwise acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up)
to the shares of Series A Preferred; provided,
however,
that
the Company may at any time redeem, purchase or otherwise acquire shares of
any
such junior stock in exchange for shares of any stock of the Company ranking
junior (either as to dividends or upon dissolution, liquidation or winding
up)
to the shares of Series A Preferred; or
(iv) Redeem,
purchase or otherwise acquire for consideration any shares of Series A
Preferred, or any shares of stock ranking on a parity with the shares of Series
A Preferred, except in accordance with a purchase offer made in writing or
by
publication (as determined by the Board) to all holders of such shares upon
such
terns as the Board, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and classes,
may determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The
Company will not permit any majority-owned subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the Company unless
the Company could, under paragraph (a) of this Article IV, purchase or otherwise
acquire such shares at such time and in such manner.
V.
Reacquired
Shares
Any
shares of Series A Preferred purchased or otherwise acquired by the Company
in
any manner whatsoever will be retired and canceled promptly after the
acquisition thereof. All such shares will upon their cancellation become
authorized but unissued shares of Preferred Stock and may be reissued as part
of
a new series of Preferred Stock subject to the conditions and restrictions
on
issuance set forth herein, in the Amended and Restated Certificate of
Incorporation of the Company, or in any other Preferred Stock Designation
creating a series of Preferred Stock or any similar stock or as otherwise
required bylaw.
VI.
Liquidation,
Dissolution or Winding Up
Upon
any
liquidation, dissolution or winding up of the Company, no distribution will
be
made (a) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the shares of
Series A Preferred unless, prior thereto, the holders of shares of Series A
Preferred have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the
date
of such payment; provided,
however,
that
the holders of shares of Series A Preferred will be entitled to receive an
aggregate amount per share, subject to the provision for adjustment hereinafter
set forth, equal to one hundred times the aggregate amount to be distributed
per
share to holders of shares of Common Stock or (b) to the holders of shares
of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the shares of Series A Preferred, except
distributions made ratably on the shares of Series A Preferred and all such
parity stock in proportion to the total amounts to which the holders of all
such
shares are entitled upon such liquidation, dissolution or winding up. In the
event the Company at any time (i) declares a dividend on the outstanding shares
of Common Stock payable in shares of Common Stock, (ii) subdivides the
outstanding shares of Common Stock, (iii) combines the outstanding shares of
Common Stock into a smaller number of shares, or (iv) issues any shares of
its
capital stock in a reclassification of the outstanding shares of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), then,
in each such case and regardless of whether any shares of Series A Preferred
are
then issued or outstanding, the aggregate amount to which each holder of shares
of Series A Preferred would otherwise be entitled immediately prior to such
event under the proviso in clause (a) of the preceding sentence will be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
39
VII.
Consolidation,
Merger, Etc.
In
the
event that the Company enters into any consolidation, merger, combination or
other transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property, then,
in
each such case, each share of Series A Preferred will at the same time be
similarly exchanged for or changed into an amount per share, subject to the
provision for adjustment hereinafter set forth, equal to one hundred times
the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common
Stock
is changed or exchanged. In the event the Company at any time (a) declares
a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (b) subdivides the outstanding shares of Common Stock, (c) combines
the
outstanding shares of Common Stock in a smaller number of shares, or (d) issues
any shares of its capital stock in a reclassification of the outstanding shares
of Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, in each such case and regardless of whether any shares
of
Series A Preferred are then issued or outstanding, the amount set forth in
the
preceding sentence with respect to the exchange or change of shares of Series
A
Preferred will be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
VIII.
Redemption
The
shares of Series A Preferred are not redeemable.
IX.
Rank
The
Series A Preferred rank, with respect to the payment of dividends and the
distribution of assets, junior to all other series of the Company’s Preferred
Stock.
X.
Amendment
Notwithstanding
anything contained in the Certificate of Incorporation of the Company to the
contrary and in addition to any other vote required by applicable law, the
Certificate of Incorporation of the Company may not be amended in any manner
that would materially alter or change the powers, preferences or special rights
of the Series A Preferred so as to affect them adversely without the affirmative
vote of the holders of at least 80% of the outstanding shares of Series A
Preferred, voting together as a single series.
40
IN
WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the
Company by its President and Secretary this 1st day of September
2005.
By: ___________________________
Name:
Xxxxx Xxxxxx
Title:
President and Secretary
41
EXHIBIT
B
FORM
OF
RIGHT CERTIFICATE
Certificate
No. R-__________________
|
_________________
Rights
|
NOT
EXERCISABLE AFTER [INSERT
FINAL EXPIRATION DATE]
OR
EARLIER IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION,
EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH
IN
THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS
AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON
OR
AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF MAY BECOME NULL AND
VOID.
Right
Certificate
COSINE
COMMUNICATIONS, INC.
This
certifies that ___________, or registered assigns, is the registered owner
of
the number of Rights set forth above, each of which entitles the owner thereof,
subject to the terms, provisions, and conditions of the Rights Agreement, dated
as of September 1, 2005 (the “Rights
Agreement”),
between Cosine Communications, Inc., a Delaware corporation (the”Company”),
and
Mellon Investor Services LLC (the “Rights
Agent”),
to
purchase from the Company at any time after the Distribution Date (as such
term
is defined in the Rights Agreement) and prior to 5:00 p.m. (Eastern time) on
the
Expiration Date (as such term is defined in the Rights Agreement) at the
principal office or offices of the Rights Agent designated for such purpose,
one
one-hundredth of a fully paid nonassessable share of Series A Junior
Participating Preferred Stock, par value $0.0001 per share (the “Preferred
Shares”),
of
the Company, at a purchase price of $3.00 per one one-hundredth of a Preferred
Share (the “Purchase
Price”),
upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase and related Certificate duly executed. If this Right Certificate
is
exercised in part, the holder will be entitled to receive upon surrender hereof
another Right Certificate or Right Certificates for the number of whole Rights
not exercised. The number of Rights evidenced by this Right Certificate (and
the
number of one one-hundredths of a Preferred Share which may be purchased upon
exercise thereof) set forth above, and the Purchase Price set forth above,
are
the number and Purchase Price as of the date of the Rights Agreement, based
on
the Preferred Shares as constituted at such date.
As
provided in the Rights Agreement, the Purchase Price and/or the number and/or
kind of securities issuable upon the exercise of the Rights evidenced by this
Right Certificate are subject to adjustment upon the occurrence of certain
events.
This
Right Certificate is subject to all of the terms, provisions and conditions
of
the Rights Agreement, which terms, provisions and conditions are hereby
incorporated herein by reference and made apart hereof and to which Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of the Right Certificates, which limitations of
rights include the temporary suspension of the exercisability of the Rights
under the circumstances specified in the Rights Agreement. Copies of the Rights
Agreement are on file at the abovementioned office of the Rights Agent and
can
be obtained from the Company without charge upon written request therefor.
Terms
used herein with initial capital letters and not defined herein are used herein
with the meanings ascribed thereto in the Rights Agreement.
Pursuant
to the Rights Agreement, from and after the occurrence of a Flip-in Event,
any
Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate
or Associate of any Acquiring Person), (ii) a transferee of any Acquiring Person
(or any such Affiliate or Associate) who becomes a transferee after the
occurrence of a Flip-in Event, or (iii) a transferee of any Acquiring Person
(or
any such Affiliate or Associate) who became a transferee prior to or
concurrently with the Flip-in Event pursuant to either (a) a transfer from
an
Acquiring Person to holders of its equity securities or to any Person with
whom
it has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (b) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding certain provisions of the Rights Agreement, and
subsequent transferees of any of such Persons, will be void without any further
action and any holder of such Rights will thereafter have no rights whatsoever
with respect to such Rights under any provision of the Rights Agreement. From
and after the occurrence of a Flip-in Event, no Right Certificate will be issued
that represents Rights that are or have become void pursuant to the provisions
of the Rights Agreement, and any Right Certificate delivered to the Rights
Agent
that represents Rights that are or have become void pursuant to the provisions
of the Rights Agreement will be canceled.
This
Right Certificate, with or without other Right Certificates, may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates entitling the holder to purchase a like number of one
one-hundredths of a Preferred Share (or other securities, as the case may be)
as
the Right Certificate or Right Certificates surrendered entitled such holder
(or
former holder in the case of a transfer) to purchase, upon presentation and
surrender hereof at the principal office of the Rights Agent designated for
such
purpose, with the Form of Assignment (if appropriate) and the related
Certificate duly executed.
42
Subject
to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Company at its option at a redemption price
of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement
may be supplemented and amended by the Company, as provided
therein.
The
Company is not required to issue fractions of Preferred Shares (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the option of the Company, be evidenced by depositary
receipts) or other securities issuable upon the exercise of any Right or Rights
evidenced hereby. In lieu of issuing such fractional Preferred Shares or other
securities, the Company may make a cash payment, as provided in the Rights
Agreement.
No
holder
of this Right Certificate, as such, will be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or
of
any other securities of the Company which may at any time be issuable upon
the
exercise of the Right or Rights represented hereby, nor will anything contained
herein or in the Rights Agreement be construed to confer upon the holder hereof,
as such, any of the rights of a stockholder of the Company or any right to
vote
for the election of directors or upon any ratter submitted to stockholders
at
any meeting thereof, or to give or withhold consent to any corporate action,
or
to receive notice of meetings or other actions affecting stockholders (except
as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate have been exercised in accordance with the provisions of the Rights
Agreement.
This
Right Certificate will not be valid or obligatory for any purpose until it
has
been countersigned by the Rights Agent.
WITNESS
the facsimile signature of the proper officers of the Company and its corporate
seal. Dated as of _______________, ______.
COSINE COMMUNICATIONS, INC. | ||
|
|
|
By: | /s/ | |
Name: Xxxxx Xxxxxx |
||
Title: President |
Countersigned:
MELLON
INVESTOR SERVICES LLC
By: ___________________________
Authorized
Signature
43
Form
of
Reverse Side of Right Certificate
FORM
OF ASSIGNMENT
(To
be
executed by the registered holder if such
holder
desires to transfer the Right Certificate)
FOR
VALUE
RECEIVED, __________ hereby sells, assigns and transfers unto
________________________________________________________________________
(Please
print name and address of transferee)
___________________________________________________________________________
this Right Certificate, together with all right, title and interest therein,
and
does hereby irrevocably constitute and appoint ___________ Attorney, to transfer
the within Right Certificate on the books of the within-named Company, with
full
power of substitution.
Dated
:_____________, _____________
________________________________
Signature
Signature
Guaranteed:__________________________
44
CERTIFICATE
The
undersigned hereby certifies by checking the appropriate boxes
that:
(1) the
Rights evidenced by this Right Certificate [
] are
[
]
are not
being sold, assigned, transferred, split up, combined or exchanged by or on
behalf of a Person who is or was an Acquiring Person or an Affiliate or
Associate of any such Person (as such terms are defined in the Rights
Agreement);
(2) after
due
inquiry and to the best knowledge of the undersigned, it [
]
did
[
]
did not
acquire the Rights evidenced by this Right Certificate from any Person who
is,
was or became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated:
_________, __________________
______________________
Signature
45
FORM
OF
ELECTION TO PURCHASE
(To
be
executed if holder desires to
exercise
the Right Certificate)
To
Cosine
Communications, Inc.:
The
undersigned hereby irrevocably elects to exercise ___________ Rights represented
by this Right Certificate to purchase the one one-hundredths of a Preferred
Share or other securities issuable upon the exercise of such Rights and requests
that certificates for such securities be issued in the name of and delivered
to:
Please
insert social
security
or other identifying number:_______________________________________________
____________________________________________________________________________
(Please
print name and address)
_____________________________________________________________________________
If
such
number of Rights is not all the Rights evidenced by this Right Certificate,
a
new Right Certificate for the balance remaining of such Rights will be
registered in the name of and delivered to:
Please
insert social
security
or other identifying number:_______________________________________________
____________________________________________________________________________
(Please
print name and address)
_____________________________________________________________________________
Dated:
_______________, ____________________
__________________________
Signature
Signature
Guaranteed: _____________________
46
CERTIFICATE
The
undersigned hereby certifies by checking the appropriate boxes
that:
(1) the
Rights evidenced by this Right Certificate [ ] are [ ] are not being exercised
by or on behalf of a Person who is or was an Acquiring Person or an Affiliate
or
Associate of any such Person (as such terms are defined pursuant to the Rights
Agreement);
(2) after
due
inquiry and to the best knowledge of the undersigned, it [ ] did [ ] did not
acquire the Rights evidenced by this Right Certificate from any Person who
is,
was, or became an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.
Dated:
________________, ______________
_______________________
Signature
NOTICE
Signatures
on the foregoing Form of Assignment and Form of Election to Purchase and in
the
related Certificates must correspond to the name as written upon the face of
this Right Certificate in every particular, without alteration or enlargement
or
any change whatsoever.
Signatures
must be guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an approved
medallion signature program) pursuant to Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended.
47
EXHIBIT
C
SUMMARY
OF RIGHTS TO PURCHASE PREFERRED STOCK
On
September 1, 2005, the Board of Directors of Cosine Communications, Inc. adopted
a rights plan and declared a dividend of one preferred share purchase right
for
each outstanding share of our common stock. The dividend is payable on September
12, 2005 to our stockholders of record on that date. The terms of the rights
and
the rights plan are set forth in a Rights Agreement, dated as of September
1,
2005, by and between Cosine Communications, Inc. and Mellon Investor Services
LLC, as rights agent.
This
summary of rights provides a general description of the rights plan. Because
it
is only a summary, this description should be read together with the entire
rights plan, which we incorporate in this summary by reference. Upon written
request, we will provide a copy of the rights plan free of charge to any
stockholder.
Our
Board
adopted the rights plan to protect stockholder value by protecting our
stockholders from coercive takeover practices or takeover bids that are
inconsistent with their best interests, and by protecting our ability to carry
forward our net operating losses (“NOLs”). We have experienced substantial
operating losses in previous years. Under the Internal Revenue Code and rules
promulgated by the Internal Revenue Service, we may “carry forward” these losses
in certain circumstances to offset current and future earnings and thus reduce
our federal income tax liability, subject to certain requirement is and
restrictions. We believe that we will be able to carry forward several million
dollars of NOLs and that these NOLs constitute a substantial asset to us. If
we
experience an “Ownership Change,” as defined in Section 382 of the Internal
Revenue Code, our ability to use the NOLs could be substantially limited or
lost
altogether.
In
general terms, the rights plan imposes a significant penalty upon any person
or
group that acquires 5% or more of our outstanding common stock without the
prior
approval of our Board. Stockholders that owned 5% or more of our outstanding
common stock as of the close of business on September 1, 2005 may acquire up
to
an additional 1% of our outstanding common stock without penalty so long as
they
maintain their ownership above the 5% level (such increase subject to downward
adjustment by our Board if it determines that such increase will endanger the
availability of our NOLs). In addition, our Board may exempt any person or
group
that owns 5% or more if the Board determines that the person or group’s
ownership will not endanger the availability of our NOLs. A person or group
that
acquires a percentage of our common stock in excess of the applicable threshold
is called an “acquiring person.” Any rights held by an acquiring person are void
and may not be exercised.
The
Rights.
Our
Board of Directors authorized the issuance of one right per each outstanding
share of our common stock on September 1, 2005. If the rights become
exercisable, each right would allow its holder to purchase from us one
one-hundredth of a share of our Series A Junior Participating Preferred Stock
for a purchase price of $3.00. Each fractional share of preferred stock would
give the stockholder approximately the same dividend, voting and liquidation
rights as does one share of our common stock. Prior to exercise, however, a
right does not give its holder any dividend, voting or liquidation
rights.
48
Exercisability.
The
rights will not be exercisable until the earlier of:
·
|
10
days after a public announcement by Cosine Communications, Inc. that
a
person or group has become an acquiring person;
and
|
·
|
10
business days (or a later date determined by our Board) after a person
or
group begins a tender or exchange offer that, if completed, would
result
in that person or group becoming an acquiring
person.
|
We
refer
to the date that the rights become exercisable as the “distribution date.” Until
the distribution date, our common stock certificates will also evidence the
rights and will contain a notation to that effect. Any transfer of shares of
common stock prior to the distribution date will constitute a transfer of the
associated rights. After the distribution date, the rights will separate from
the common stock and be evidenced by rights certificates, which we will mail
to
all holders of rights that have not become void.
Flip-in
Event.
After
the distribution date, if a person or group already is or becomes an acquiring
person, all holders of rights, except the acquiring person, may exercise their
rights upon payment of the purchase price to purchase shares of our common
stock
(or other securities or assets as determined by the Board) with a market value
of two times the purchase price.
Flip-over
Event.
After
the distribution date, if a flip-in event has already occurred and Cosine
Communications, Inc. is acquired in a merger or similar transaction, all holders
of rights except the acquiring person may exercise their rights upon payment
of
the purchase price, to purchase shares of the acquiring corporation with a
market value of two times the purchase price of the rights.
Rights
may be exercised to purchase our preferred shares only after the distribution
date occurs and prior to the occurrence of a flip-in event as described above.
A
distribution date resulting from the commencement of a tender offer or exchange
offer described in the second bullet point above could precede the occurrence
of
a flip-in event, in which case the rights could be exercised to purchase our
preferred shares. A distribution date resulting from any occurrence described
in
the first bullet point above would necessarily follow the occurrence of a
flip-in event, in which case the rights could be exercised to purchase shares
of
common stock or other securities as described above.
Expiration.
The
rights will expire on September 1, 2007 unless earlier redeemed or
exchanged.
Redemption.
Our
Board may redeem all (but not less the an all) of the rights for a redemption
price of $0.01 per right at any time before the later of the distribution date
and the date of the first public announcement or disclosure by Cosine
Communications, Inc. that a person or group has become an acquiring person.
Once
the rights are redeemed, the right to exercise rights will terminate, and the
only right of the holders of rights will be to receive the redemption price.
The
redemption price will be adjusted if we declare a stock split or issue a stock
dividend on our common stock.
Exchange.
After
the later of the distribution date and the date of the first public announcement
by Cosine Communications, Inc. that a person or group has become an acquiring
person, but before an acquiring person owns 50% or more of our outstanding
common stock, our Board may exchange each right (other than rights that have
become void) for one share of common stock or an equivalent
security.
49
Anti-Dilution
Provisions.
Our
Board may adjust the purchase price of the preferred shares, the number of
preferred shares issuable and the number of outstanding rights to prevent
dilution that may occur as a result of certain events, including among others,
a
stock dividend, a stock split or a reclassification of the preferred shares
or
our common stock. No adjustments to the purchase price of less than 1 % will
be
made.
Amendments.
Before
the time rights cease to be redeemable, our Board may amend or supplement the
rights plan without the consent of the holders of the rights, except that no
amendment may decrease the redemption price below $0.01 per right. At any time
thereafter, our Board may amend or supplement the rights plan only to cure
an
ambiguity, to alter time period provisions, to correct inconsistent provisions
or to make any additional changes to the rights plan, but only to the extent
that those changes do not impair or adversely affect any rights holder and
do
not result in the rights again becoming redeemable.
*
*
*
50
__________________________________________________________________________
RIGHTS
AGREEMENT
DATED
AS
OF SEPTEMBER 1, 2005,
BY
AND
BETWEEN
COSINE
COMMUNICATIONS, INC.
AND
MELLON
INVESTOR SERVICES LLC,
AS
RIGHTS
AGENT
_____________________________________________________________________
51
TABLE
OF CONTENTS
Page
|
||
CERTAIN
DEFINITIONS
|
1
|
|
2.
|
APPOINTMENT
OF RIGHTS AGENT
|
5
|
3.
|
ISSUE
OF RIGHT CERTIFICATES
|
6
|
4.
|
FORM
OF RIGHT CERTIFICATES
|
7
|
5.
|
COUNTERSIGNATURE
AND REGISTRATION
|
8
|
6.
|
TRANSFER,
SPLIT UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED,
DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES
|
8
|
7.
|
EXERCISE
OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS
|
9
|
8.
|
CANCELLATION
AND DESTRUCTION OF RIGHT CERTIFICATES
|
10
|
9.
|
COMPANY
COVENANTS CONCERNING SECURITIES AND RIGHTS
|
10
|
10.
|
RECORD
DATE
|
12
|
11.
|
ADJUSTMENT
OF PURCHASE PRICE, NUMBER AND KIND OF SECURITIES OR NUMBER OF
RIGHTS
|
12
|
12.
|
CERTIFICATE
OF ADJUSTED PURCHASE PRICE OR NUMBER OF SECURITIES
|
20
|
13.
|
CONSOLIDATION,
MERGER OR SALE OR TRANSFER OF ASSETS OR FANNING POWER
|
20
|
14.
|
FRACTIONAL
RIGHTS AND FRACTIONAL SECURITIES
|
23
|
15.
|
RIGHTS
OF ACTION
|
24
|
16.
|
AGREEMENT
OF RIGHTS HOLDERS
|
25
|
17.
|
RIGHT
CERTIFICATE HOLDER NOT DEEMED A XXXXXXXXXXX
|
00
|
00.
|
CONCERNING
THE RIGHTS AGENT
|
26
|
19.
|
MERGER
OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
|
26
|
20.
|
DUTIES
OF RIGHTS AGENT
|
27
|
21.
|
CHANGE
OF RIGHTS AGENT
|
29
|
22.
|
ISSUANCE
OF NEW RIGHT CERTIFICATES
|
30
|
23.
|
REDEMPTION
|
30
|
24.
|
EXCHANGE
|
31
|
25.
|
NOTICE
OF CERTAIN EVENTS
|
32
|
26.
|
NOTICES
|
33
|
27.
|
SUPPLEMENTS
AND AMENDMENTS
|
33
|
28.
|
SUCCESSORS:
CERTAIN COVENANTS
|
34
|
29.
|
BENEFITS
OF THIS AGREEMENT
|
34
|
30.
|
GOVERNING
LAW
|
34
|
31.
|
SEVERABILITY
|
34
|
32.
|
DESCRIPTIVE
HEADINGS, ETC
|
34
|
33.
|
DETERMINATIONS
AND ACTIONS BY THE BOARD
|
35
|
34.
|
COUNTERPARTS
|
35
|
EXHIBIT
A
|
37
|
|
EXHIBIT
B
|
43
|
|
EXHIBIT
C
|
50
|
52