SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF THE
SECURITIES EXCHANGE ACT OF 1934
AWARE, INC.
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2911026
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(State of incorporation or organization) (IRS Employer
Identification No.)
40 Middlesex Turnpike, Bedford, MA 01730
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(Address of principal executive offices) (Zip Code)
If this form relates to the registration of a If this form relates to the registration of a
class of securities pursuant to class of securities pursuant to
Section 12(b) of the Exchange Act and is Section 12(g) of the Exchange Act and is
effective pursuant to General effective pursuant to General
Instruction A.(c), check the following box: [ ] Instruction A.(d), check the following box. [X]
Securities Act registration statement file number to which this form relates (if
applicable): Not applicable.
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None.
Securities to be registered pursuant to Section 12(g) of the Act:
Rights to Purchase Series A
Participating Cumulative Preferred Stock
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(Title of Class)
Item 1. Description of Securities to be Registered.
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On October 2, 2001, our board of directors declared a distribution of
one right for each outstanding share of our common stock. We will issue these
rights to our stockholders of record on October 15, 2001. After that date,
unless the rights have been redeemed or have expired, we will issue rights with
respect to shares of common stock issued before the rights become exercisable as
described below and, in certain circumstances, with respect to shares of common
stock issued after the rights become exercisable. Each right, when it becomes
exercisable will initially entitle the holder to purchase from us one
ten-thousandth (1/10,000) of a share of series A preferred stock for $40. The
description and terms of the rights are set forth in a rights agreement between
us and EquiServe Trust Company, N.A., which is acting as the rights agent.
Initially the rights are not exercisable and the certificates
representing shares of common stock evidence the rights. Accordingly, the rights
are initially transferable only with the common stock. The rights become
exercisable upon the earliest of the following dates:
o the date on which we first publicly announce that a person or group
has become an "acquiring person"
o the date, if any, that our board of directors may designate following
the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer which could result in the
potential buyer becoming the beneficial owner of 15% or more of our
outstanding common stock, including common stock that we will issue
upon the exchange or redemption of exchangeable shares
Subject to certain exceptions, an "acquiring person" is any person or
group that, together with its affiliates and associates, has acquired, or has
obtained the right to acquire, beneficial ownership of 15% or more of our
outstanding common stock, including common stock that we will issue upon the
exchange or redemption of exchangeable shares. As soon as practicable following
the date that the rights become exercisable, we will mail separate certificates
evidencing the rights to stockholders of record as of the close of business on
that date. Thereafter, the separate right certificates will evidence the rights.
The rights will expire on October 2, 2011, unless we redeem them on an earlier
date.
If our common stock or series A preferred stock changes in any way,
then our board of directors may adjust any of the following in order to preserve
the actual or potential economic value of the rights:
o the number of shares of series A preferred stock or other securities
issuable upon exercise of a right
o the exercise price of series A preferred stock
o the redemption price of series A preferred stock
o the number of rights associated with each share of common stock
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We may issue shares of series A preferred stock in fractions which are
an integral multiple of one ten-thousandth (1/10,000) of a share of series A
preferred stock. Though not required to do so, we may issue fractions of shares
upon the exercise of rights. In lieu of fractional shares, we may issue
certificates or utilize a depository arrangement as provided by the terms of the
series A preferred stock. In the case of fractions other than one ten-thousandth
(1/10,000) of a share of series A preferred stock or integral multiples thereof,
we may make a cash payment based on the market price of these shares.
When there is an acquiring person, the rights will entitle each holder
to purchase, for $40, that number of one ten-thousandths (1/10,000) of a share
of our series A preferred stock equivalent to the number of shares of our common
stock which at the time of the transaction would have a market value of $80.
However, the rights held by an acquiring person will be null and void and
nontransferable, and any holder, purported transferee or subsequent holder of
these rights will lack any right to exercise or transfer these rights.
The rights plan contains provisions that are intended to substantially
preserve the value of the rights after they become exercisable if we merge or
consolidate with an acquiring person or its affiliates or associates. Likewise,
the rights plan contains provisions that are intended to substantially preserve
the value of the rights after they become exercisable if we sell, lease,
exchange or transfer 50% or more of our assets, or assets representing 50% or
more of our earning power, to an acquiring person or its affiliates or
associates.
At any time after there is an acquiring person, our board of directors
may exchange all or part of the then-outstanding rights, other than those rights
that are null and void and nontransferable as described above. The consideration
per right for this exchange will consist of one-half of the securities that
otherwise would have been issuable to the holder of each right upon exercise of
the right. In substitution for shares of series A preferred stock, we may also
issue shares of common stock having an equivalent market value to the shares of
series A preferred stock if at that time either of the following conditions
applies:
o we have a sufficient number of shares of common stock issued but not
outstanding
o we have a sufficient number of shares of common stock authorized but
unissued
Our board may redeem all, but not less than all, of the rights at a
price of $.001 per right at any time prior to the earlier of the following
dates:
o the date on which the rights expire
o the date on which we first publicly announce that there is an
acquiring person
Our board may pay the redemption price either in cash, in shares of our
common stock, or in any of our securities that our board deems to be at least
equivalent in value.
If our board elects to redeem the rights, then we will announce the
redemption. Once we announce the redemption, the right to exercise the rights
will terminate and the holders of the rights will be entitled to receive the
redemption price. Until a right is exercised, holders will
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have no additional rights as stockholders. Such additional rights include,
without limitation, additional rights to vote or to receive dividends.
We may supplement or amend the rights agreement in any way and at any
time before the rights become exercisable, except that we may not do so in order
to reduce the redemption price or provide for an earlier expiration of the
rights. Our authority to supplement or amend the rights agreement includes the
provisions concerning the date on which the rights become exercisable, the time
during which we may redeem the rights, and the terms of the series A preferred
stock. We may supplement or amend the rights agreement without the approval of
any holder of the rights.
The rights have certain anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire us without
conditioning the offer on substantially all the rights being acquired. However,
the rights will not interfere with any merger or other business combination with
a third party for which our board of directors grants its approval. This is so
because our board may amend the rights plan or redeem the then-outstanding
rights before that third party has become an acquiring person.
We have filed the rights agreement specifying the terms of the rights,
the terms of our series A preferred stock (exhibit A to the rights agreement)
and the form of right certificate (exhibit B to the Rights Agreement) as
exhibits attached to this filing. We do not claim that the description of the
rights provided here is complete. This description is qualified in its entirety
by reference to the exhibits listed here, which are incorporated by reference.
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Item 2. Exhibits.
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1. Rights Agreement, dated as of October 2, 2001, between Aware,
Inc. and EquiServe Trust Company, N.A., as Rights Agent.
2. Terms of Series A Participating Cumulative Preferred Stock of
Aware, Inc. (which is attached as Exhibit A to the Rights
Agreement filed as Exhibit 1 hereto).
3. Form of Right Certificate (which is attached as Exhibit B to the
Rights Agreement filed as Exhibit 1 hereto).
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
AWARE, INC.
Dated: October 3, 2001 By:/s/ Michael A. Tzannes
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Michael A. Tzannes
Chief Executive Officer
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EXHIBIT INDEX
Exhibit
Number: Description:
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1. Rights Agreement, dated as of October 2, 2001, between Aware, Inc.
and EquiServe Trust Company, N.A., as Rights Agent.
2. Terms of Series A Participating Cumulative Preferred Stock of
Aware, Inc. (which is attached as Exhibit A to the Rights
Agreement filed as Exhibit 1 hereto).
3. Form of Right Certificate (which is attached as Exhibit B to the
Rights Agreement filed as Exhibit 1 hereto).
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RIGHTS AGREEMENT
Dated as of October 2, 2001
between
AWARE, INC.
and
EQUISERVE TRUST COMPANY, N.A.
as Rights Agent
TABLE OF CONTENTS
PAGE
SECTION 1. CERTAIN DEFINITIONS....................................................................1
SECTION 2. APPOINTMENT OF RIGHTS AGENT............................................................7
SECTION 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES.................................................7
SECTION 4. FORM OF RIGHT CERTIFICATES.............................................................8
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION...........................................8
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT CERTIFICATES; MUTILATED,
DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES; UNCERTIFICATED RIGHTS....................9
SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS.........................................10
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES....................................11
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES......................................11
SECTION 10. PREFERRED SHARES RECORD DATE..........................................................12
SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON; EXCHANGE OF RIGHTS FOR
SHARES; BUSINESS COMBINATIONS.........................................................13
SECTION 12. CERTAIN ADJUSTMENTS...................................................................16
SECTION 13. CERTIFICATE OF ADJUSTMENT.............................................................17
SECTION 14. ADDITIONAL COVENANTS..................................................................17
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES...............................................18
SECTION 16. RIGHTS OF ACTION......................................................................19
SECTION 17. TRANSFER AND OWNERSHIP OF RIGHTS AND RIGHT CERTIFICATES...............................19
SECTION 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.....................................19
SECTION 19. CONCERNING THE RIGHTS AGENT...........................................................20
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF RIGHTS AGENT.....................................20
SECTION 21. DUTIES OF RIGHTS AGENT................................................................21
SECTION 22. CHANGE OF RIGHTS AGENT................................................................22
SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES..................................23
SECTION 24. REDEMPTION AND TERMINATION............................................................24
SECTION 25. NOTICES...............................................................................24
SECTION 26. SUPPLEMENTS AND AMENDMENTS............................................................25
SECTION 27. SUCCESSORS............................................................................25
SECTION 28. BENEFITS OF RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY THE BOARD OF
DIRECTORS, ETC........................................................................25
SECTION 29. SEVERABILITY..........................................................................26
SECTION 30. GOVERNING LAW.........................................................................26
SECTION 31. COUNTERPARTS; EFFECTIVENESS...........................................................26
SECTION 32. DESCRIPTIVE HEADINGS..................................................................26
EXHIBITS
A Terms of Series A Participating Cumulative Preferred Stock
B Form of Right Certificate
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This RIGHTS AGREEMENT, dated as of October 2, 2001, is made between
AWARE, INC., a Massachusetts corporation (the "Company"), and EQUISERVE TRUST
COMPANY, N.A., a transfer agent, as Rights Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
distribution of one Right (as hereinafter defined) for each share of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") outstanding
at the Close of Business (as hereinafter defined) on October 15, 2001 (the
"Record Date"), and has authorized the issuance of one Right (as such number may
hereafter be adjusted pursuant to the provisions of this Rights Agreement) with
respect to each share of Common Stock that shall become outstanding between the
Record Date and the earliest of the Distribution Date, the Redemption Date or
the Expiration Date (as such terms are hereinafter defined); PROVIDED, HOWEVER,
that Rights may be issued with respect to shares of Common Stock that shall
become outstanding after the Distribution Date and prior to the earlier of the
Redemption Date or the Expiration Date in accordance with the provisions of
Section 23. Each Right shall initially represent the right to purchase one
ten-thousandth (1/10,000th) of a share of Series A Participating Cumulative
Preferred Stock, par value $1.00 per share, of the Company (the "Preferred
Shares"), having the powers, rights and preferences set forth in the Certificate
of Designation, the terms of which are attached as Exhibit A.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. CERTAIN DEFINITIONS. For purposes of this Rights Agreement,
the following terms have the meanings indicated:
"ACQUIRING PERSON" shall mean any Person who or which, alone or
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of Common Shares then outstanding that equals or exceeds such
Person's Ownership Threshold, but shall not include (A) the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any of
its Subsidiaries, or any Person holding Common Shares for or pursuant to the
terms of any such employee benefit plan, (B) any such Person who or which has
become such a Beneficial Owner solely because (i) of a change in the aggregate
number of Common Shares outstanding since the last date on which such Person
acquired Beneficial Ownership of any Common Shares or (ii) it acquired such
Beneficial Ownership in the good faith belief that such acquisition would not
cause such Beneficial Ownership to exceed such Person's Ownership Threshold, or
(C) any such Person for so long as such Person qualifies under Rule 13d-1(b)(1)
of the General Rules and Regulations under the Exchange Act (or any successor
rule or regulation thereto) to report its Beneficial Ownership of Common Shares
on Schedule 13G (or any successor schedule thereto) and otherwise satisfies the
criteria of Rule 13d-1(b)(1) of the General Rules and Regulations under the
Exchange Act (or any successor rule or regulation thereto). Notwithstanding
clause (B) of the immediately preceding sentence of this definition, if any
Person that is not an Acquiring Person due to such clause (B) does not reduce
its percentage of Beneficial Ownership of Common Shares to an amount less than
such Person's Ownership Threshold by the Close of Business on the fifth Business
Day after notice from the Company (the date of notice being the first day) that
such Person's Beneficial Ownership of Common Shares so exceeds such Person's
Ownership Threshold, such Person shall, at the end of such five Business Day
period, become an Acquiring Person (and such clause (B) shall no longer apply to
such Person). For purposes of this definition, the determination whether any
Person acted in "good faith" shall be conclusively determined by the Board of
Directors of the Company. Notwithstanding clause (C) of the third preceding
sentence of this definition, if any Person that is not an Acquiring Person due
to such
clause (C) both (i) ceases to qualify under Rule 13d-1(b)(1) of the General
Rules and Regulations under the Exchange Act (or any successor rule or
regulation thereto) to report its Beneficial Ownership of Common Shares on
Schedule 13G (or any successor schedules thereto) or otherwise ceases to satisfy
the criteria of Rule 13d-1(b)(1) of the General Rules and Regulations under the
Exchange Act (or any successor rule or regulation thereto) (including, without
limitation, by reason of Rule 13d-1(e) or (g) or any successor rules or
regulations thereto) and (ii) does not reduce its percentage of Beneficial
Ownership of Common Shares to an amount less than such Person's Ownership
Threshold by the Close of Business on the date that such Person is obligated to
file a statement on Schedule 13D or an amendment to its Schedule 13G, as
applicable (or, in either case, any successor schedule thereto), such Person
shall, at the Close of Business on such date, become an Acquiring Person (and
such clause (C) shall no longer apply to such Person).
"AFFILIATE" and "ASSOCIATE", when used with reference to any Person,
shall have the respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect on the date
of this Rights Agreement.
A Person shall be deemed the "BENEFICIAL OWNER" of, and shall be deemed
to "BENEFICIALLY OWN", and shall be deemed to have "BENEFICIAL OWNERSHIP" of,
any securities:
(i) which such Person or any of such Person's Affiliates or
Associates is deemed to "beneficially own" within the meaning of
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on the date of this Rights Agreement;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is
exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (written
or oral), or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or
otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, or to have
Beneficial Ownership of, 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 thereunder, or
(B) the right to vote pursuant to any agreement, arrangement or
understanding (written or oral); PROVIDED, HOWEVER, that a Person
shall not be deemed the Beneficial Owner of, or to beneficially
own, any security if (1) the agreement, arrangement or
understanding (written or oral) to vote such security arises
solely from a revocable proxy or consent given to such Person
pursuant to a definitive proxy statement filed with the
Securities and Exchange Commission and otherwise in accordance
with, the applicable rules and regulations under the Exchange Act
and (2) the beneficial ownership of such security is not also
then reportable on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
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(iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or
understanding (written or oral) for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as
described in clause (ii)(B) of this definition) or disposing of
any securities of the Company.
Notwithstanding the foregoing, nothing contained in this definition shall cause
a Person ordinarily engaged in business as an underwriter of securities to be
the "Beneficial Owner" of, or to "beneficially own", any securities acquired in
a bona fide firm commitment underwriting pursuant to an underwriting agreement
with the Company.
"BOOK VALUE", when used with reference to Common Shares issued by any
Person, shall mean the amount of equity of such Person applicable to each Common
Share, determined (i) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (ii) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (iii) after giving
effect to (A) the exercise of all rights, options and warrants to purchase such
Common Shares (other than the Rights), and the conversion of all securities
convertible into such Common Shares, at an exercise or conversion price, per
Common Share, which is less than such Book Value before giving effect to such
exercise or conversion (whether or not exercisability or convertibility is
conditioned upon occurrence of a future event), (B) all dividends and other
distributions on the capital stock of such Person declared prior to the date as
of which such Book Value is to be determined and to be paid or made after such
date, and (C) any other agreement, arrangement or understanding (written or
oral), or transaction or other action prior to the date as of which such Book
Value is to be determined which would have the effect of thereafter reducing
such Book Value.
"BUSINESS COMBINATION" shall have the meaning set forth in Section
11(c)(I).
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in Boston, Massachusetts
or the city in which the principal office of the Rights Agent is located, are
authorized or obligated by law or executive order to close.
"CERTIFICATE OF DESIGNATION" shall mean the Certificate of Vote of
Directors Establishing a Series of a Class of Stock setting forth the powers,
preferences, rights, qualifications, limitations and restrictions of Series A
Participating Cumulative Preferred Stock of the Company, the terms of which are
attached as EXHIBIT A.
"CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m., Boston
time, on such date; PROVIDED, however, that, if such date is not a Business Day,
"Close of Business" shall mean 5:00 p.m., Boston time, on the next succeeding
Business Day.
"COMMON SHARES", when used with reference to the Company prior to a
Business Combination, shall mean the shares of Common Stock or any other shares
of capital stock of the Company into which the Common Stock shall be
reclassified or changed. "Common Shares", when used with reference to any Person
(other than the Company prior to a Business Combination), shall mean shares of
capital stock of such Person (if such Person is a corporation)
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of any class or series, or units of equity interests in such Person (if such
Person is not a corporation) of any class or series, the terms of which do not
limit (as a maximum amount and not merely in proportional terms) the amount of
dividends or income payable or distributable on such class or series or the
amount of assets distributable on such class or series upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person and do not
provide that such class or series is subject to redemption at the option of such
Person, or any shares of capital stock or units of equity interests into which
the foregoing shall be reclassified or changed; PROVIDED, HOWEVER, that, if at
any time there shall be more than one such class or series of capital stock or
equity interests of such Person, "Common Shares" of such Person shall include
all such classes and series substantially in the proportion of the total number
of shares or other units of each such class or series outstanding at such time.
"COMMON STOCK" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement.
"COMPANY" shall have the meaning set forth in the heading of this
Rights Agreement; PROVIDED, HOWEVER, that if there is a Business Combination,
"Company" shall have the meaning set forth in Section 11(c)(III).
The term "CONTROL" with respect to any Person shall mean the power to
direct the management and policies of such Person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other Persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
"DISTRIBUTION DATE" shall have the meaning set forth in Section 3(b).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as in
effect on the date in question, unless otherwise specifically provided.
"EXCHANGE CONSIDERATION" shall have the meaning set forth in Section
11(b)(I).
"EXERCISE PRICE" with respect to each Right shall mean $40, as such
amount may from time to time be adjusted as provided herein, and shall be
payable in lawful money of the United States of America. All references herein
to the Exercise Price shall mean the Exercise Price as in effect at the time in
question.
"EXPIRATION DATE" shall have the meaning set forth in Section 7(a).
"FORMULA NUMBER" shall have the meaning set forth in Section 2 of the
Certificate of Designation.
"MAJOR PART", when used with reference to the assets of the Company and
its Subsidiaries as of any date, shall mean assets (i) having a fair market
value aggregating 50% or more of the total fair market value of all the assets
of the Company and its Subsidiaries (taken as a whole) as of the date in
question, (ii) accounting for 50% or more of the total value (net of
depreciation and amortization) of all the assets of the Company and its
Subsidiaries (taken as a whole) as would be shown on a consolidated or combined
balance sheet of the Company and its Subsidiaries as of the date in question,
prepared in accordance with generally accepted accounting principles then in
effect, or (iii) accounting for 50% or more of the total amount of earnings
before interest, taxes, depreciation and amortization or revenues of the Company
and its Subsidiaries (taken as a
4
whole) as would be shown on, or derived from, a consolidated or combined
statement of income of the Company and its Subsidiaries for the period of 12
months ending on the last day of the Company's monthly accounting period next
preceding the date in question, prepared in accordance with generally accepted
accounting principles then in effect.
"MARKET VALUE", when used with reference to any class of Common Shares
on any date, shall be deemed to be the average of the daily closing prices, per
share, of any such class for the period which is the shorter of (1) 30
consecutive Trading Days immediately prior to the date in question or (2) the
number of consecutive Trading Days beginning on the Trading Day immediately
after the date of the first public announcement of a Business Combination with
an Acquiring Person or Affiliate or Associate of an Acquiring Person requiring a
determination of the Market Value and ending on the Trading Day immediately
prior to the record date of such Business Combination; PROVIDED, HOWEVER, that,
in the event that the Market Value of such class of Common Shares is to be
determined in whole or in part during a period following the announcement by the
issuer of such class of Common Shares of any action of the type described in
Section 12(a) that would require an adjustment thereunder, then, and in each
such case, the Market Value of such class shall be appropriately adjusted to
reflect the effect of such action on the market price of such class. The closing
price for each Trading Day shall be the closing price quoted on the composite
tape for securities listed on the New York Stock Exchange, or, if such
securities are not quoted on such composite tape or if such securities are not
listed on such exchange, on the principal United States securities exchange
registered under the Exchange Act (or any recognized foreign stock exchange) on
which such securities are listed, or, if such securities are not listed on any
such 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 with respect to a
share of such securities as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use, or if no such quotations are available, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
such securities selected by the Board of Directors of the Company. If on any
such Trading Day no market maker is making a market in such securities for any
reason, the closing price of such securities on such Trading Day shall be deemed
to be the fair value of such securities as determined in good faith by the Board
of Directors of the Company (whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent,
the holders of Rights and all other Persons); PROVIDED, HOWEVER, that for the
purpose of determining the closing price of the Preferred Shares for any Trading
Day on which there is no such market maker for the Preferred Shares the closing
price on such Trading Day shall be deemed to be the Formula Number times the
closing price of the Common Stock of the Company on such Trading Day.
"OWNERSHIP THRESHOLD" shall mean, with respect to any Person,
Beneficial Ownership of the GREATER of (A) 15 % of the Common Shares at any time
outstanding or (B) the percentage of the outstanding Common Shares Beneficially
Owned by such Person on the date of this Rights Agreement, plus in the case of
this clause (B) 1% of the Common Shares outstanding on such date.
"PERSON" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
"PREFERRED SHARES" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement. Any reference in this Rights Agreement to
Preferred Shares shall be deemed to include any authorized fraction of a
Preferred Share, unless the context otherwise requires.
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"PREFERRED STOCK" shall mean the Preferred Stock, par value $1.00 per
share, of the Company.
"PRINCIPAL PARTY" shall mean the Surviving Person in a Business
Combination; PROVIDED, HOWEVER, that, if such Surviving Person is a direct or
indirect Subsidiary of any other Person, "Principal Party" shall mean the Person
which is the ultimate parent of such Surviving Person and which is not itself a
Subsidiary of another Person. In the event ultimate control of such Surviving
Person is shared by two or more Persons, "Principal Party" shall mean that
Person that is immediately controlled by such two or more Persons.
"RECORD DATE" shall have the meaning set forth in the introductory
paragraph of this Rights Agreement.
"REDEMPTION DATE" shall have the meaning set forth in Section 24(a).
"REDEMPTION PRICE" with respect to each Right shall mean $.001, as such
amount may from time to time be adjusted in accordance with Section 12. All
references herein to the Redemption Price shall mean the Redemption Price as in
effect at the time in question.
"REGISTERED COMMON SHARES" shall mean Common Shares which are, as of
the date of consummation of a Business Combination, and have continuously been
for the 12 months immediately preceding such date, registered under Section 12
of the Exchange Act.
"RIGHT CERTIFICATE" shall mean a certificate evidencing a Right in
substantially the form attached as EXHIBIT B.
"RIGHTS" shall mean the rights to purchase Preferred Shares (or other
securities) as provided in this Rights Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as in effect on
the date in question, unless otherwise specifically provided.
"SUBSIDIARY" shall mean a Person, at least a majority of the total
outstanding voting power (being the power under ordinary circumstances (and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation)) of
which is owned, directly or indirectly, by another Person or by one or more
other Subsidiaries of such other Person or by such other Person and one or more
other Subsidiaries of such other Person.
"SURVIVING PERSON" shall mean (1) the Person which is the continuing or
surviving Person in a consolidation or merger specified in Section 11(c)(I)(i)
or 11(c)(I)(ii) or (2) the Person to which the Major Part of the assets of the
Company and its Subsidiaries is sold, leased, exchanged or otherwise transferred
or disposed of in a transaction specified in Section 11(c)(I)(iii); PROVIDED,
HOWEVER, that, if the Major Part of the assets of the Company and its
Subsidiaries is sold, leased, exchanged or otherwise transferred or disposed of
in one or more related transactions specified in Section 11(c)(I)(iii) to more
than one Person, the "Surviving Person" in such case shall mean the Person that
acquired assets of the Company and/or its Subsidiaries with the greatest fair
market value in such transaction or transactions.
"TRADING DAY" when used with reference to the Market Value of a
security, shall mean a day on which the principal national securities exchange
(or principal recognized foreign stock
6
exchange, as the case may be) on which such securities are listed or admitted to
trading is open for the transaction of business or, if such securities in
question are not listed or admitted to trading on any national securities
exchange (or recognized foreign stock exchange, as the case may be), a Business
Day.
SECTION 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. The
Company may from time to time appoint one or more co-Rights Agents as it may
deem necessary or desirable, upon ten (10) days prior written notice to the
Rights Agent (the term "Rights Agent" being used herein to refer, collectively,
to the Rights Agent together with any such co-Rights Agents). 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. In the event the Company appoints one
or more co-Rights Agents, the respective duties of the Rights Agent and any
co-Rights Agents shall be as the Company shall determine.
SECTION 3. ISSUE OF RIGHTS AND RIGHT CERTIFICATES.
(a) One Right shall be associated with each Common Share
outstanding on the Record Date, each additional Common Share that shall become
outstanding between the Record Date and the earliest of the Distribution Date,
the Redemption Date or the Expiration Date and each additional Common Share with
which Rights are issued after the Distribution Date but prior to the earlier of
the Redemption Date or the Expiration Date as provided in Section 23, in each
case subject to the provisions of Section 12.
(b) Until the earlier of (i) such time as the Company learns that
a Person has become an Acquiring Person or (ii) the Close of Business on such
date, if any, as may be designated by the Board of Directors of the Company
following the commencement of, or first public disclosure of an intent to
commence, a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any of
its Subsidiaries, or any Person holding Common Shares for or pursuant to the
terms of any such employee benefit plan) for outstanding Common Shares, if upon
consummation of such tender or exchange offer such Person's Beneficial Ownership
of Common Shares then outstanding could equal or exceed such Person's Ownership
Threshold (the Close of Business on the earlier of such dates being the
"Distribution Date"), (x) the Rights will be evidenced by the certificates for
Common Shares registered in the names of the holders thereof and not by separate
Right Certificates and (y) the Rights, including the right to receive Right
Certificates, will be transferable only in connection with the transfer of
Common Shares. As soon as practicable after the Distribution Date, the Rights
Agent will send, by first-class, postage-prepaid mail, to each record holder of
Common Shares as of the Distribution Date, at the address of such holder shown
on the records of the Company, a Right Certificate evidencing the Rights to
which such holder is entitled. As of and after the Distribution Date, the Rights
will be evidenced solely by such Right Certificates.
(c) With respect to any certificate for Common Shares, until the
earliest of the Distribution Date, the Redemption Date or the Expiration Date,
the Rights associated with the Common Shares represented by any such certificate
shall be evidenced by such certificate alone, the registered holders of the
Common Shares shall also be the registered holders of the associated Rights and
the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
7
(d) Certificates issued for Common Shares after the Record Date
(including, without limitation, upon transfer or exchange of outstanding Common
Shares), but prior to the earliest of the Distribution Date, the Redemption Date
or the Expiration Date, may have printed on, written on or otherwise affixed to
them the following legend:
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement dated as of
October 2, 2001, as it may be amended from time to time (the
"Rights Agreement"), between AWARE, INC. (the "Company") and
EQUISERVE TRUST COMPANY, N.A., as Rights Agent (the "Rights
Agent"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal
executive offices of the Company. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced
by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after
receipt of a written request therefor. Rights beneficially owned
by Acquiring Persons or their Affiliates or Associates (as such
terms are defined in the Rights Agreement) and by any subsequent
holder of such Rights are null and void and nontransferable.
Notwithstanding this paragraph (d), the omission of a legend shall not affect
the enforceability of any part of this Rights Agreement or the rights of any
holder of Rights.
SECTION 4. FORM OF RIGHT CERTIFICATES. The Right Certificates (and the
form of election to purchase and form of assignment to be printed on the reverse
side thereof) shall be in substantially the form set forth as EXHIBIT B and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Rights Agreement, or as may be required
to comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may, from time to time be listed, or to conform to usage. Subject to the
provisions of Sections 7, 11 and 23, the Right Certificates, whenever issued,
shall be dated as of the Distribution Date, and on their face shall entitle the
holders thereof to purchase such number of Preferred Shares as shall be set
forth therein for the Exercise Price set forth therein, subject to adjustment
from time to time as herein provided.
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION.
(a) The Right Certificates shall be executed on behalf of the
Company by the Chief Executive Officer, the President, the Chief Financial
Officer, the Treasurer or a Vice President (whether preceded by any additional
title) of the Company, either manually or by facsimile signature, and have
affixed thereto the Company's seal or a facsimile thereof which shall be
attested by the Clerk, an Assistant Clerk or a Vice President (whether preceded
by any additional title, provided that such Vice President shall not have also
executed the Right Certificates) of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid or obligatory for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such an officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates may nevertheless be countersigned by the Rights Agent
and issued and delivered by
8
the Company with the same force and effect as though the person who signed such
Right Certificates had not ceased to be such an 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 execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
execution of this Rights Agreement any such person was not such an officer of
the Company.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office in Canton, Massachusetts, books for registration
and transfer of the Right Certificates issued hereunder. Such books shall show
the names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced by each of the Right Certificates, the certificate
number of each of the Right Certificates and the date of each of the Right
Certificates.
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATES;
UNCERTIFICATED RIGHTS.
(a) Subject to the provisions of Sections 7(e) and 15, at any time
after the Distribution Date, and at or prior to the Close of Business on the
earlier of the Redemption Date or the Expiration Date, any Right Certificate or
Right Certificates may be transferred, split-up, combined or exchanged for
another Right Certificate or Right Certificates representing, in the aggregate,
the same number of Rights as the Right Certificate or Right Certificates
surrendered then represented. Any registered holder desiring to transfer,
split-up, combine or exchange any Right Certificate shall make such request in
writing delivered to the Rights Agent and shall surrender the Right Certificate
or Right Certificates to be transferred, split-up, combined or exchanged at the
office of the Rights Agent; provided, however, that neither the Rights Agent nor
the Company shall be obligated to take any action whatsoever with respect to the
transfer of any Right Certificate surrendered for transfer until the registered
holder shall have completed and signed the certification contained in the form
of assignment on the reverse side of such Right Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Sections
7(e) and 15, countersign and deliver to the Person entitled thereto a Right
Certificate or Right Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split-up,
combination or exchange of Right Certificates.
(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 valid Right Certificate, and, in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and, at the Company's
request, reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Right Certificate if mutilated, the Company will make a new
Right Certificate of like tenor and deliver such new Right Certificate to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision hereof, the Company and
the Rights Agent may amend this Rights Agreement to provide for uncertificated
Rights in addition to or in place of Rights evidenced by Right Certificates.
9
SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) and except as otherwise provided
herein (including Section 11), each Right shall entitle the registered holder
thereof, upon exercise thereof as provided herein, to purchase for the Exercise
Price, at any time after the Distribution Date and at or prior to the earlier of
(i) the Close of Business on the 10th anniversary of the date of this Rights
Agreement (the Close of Business on such date being the "Expiration Date") or
(ii) the Redemption Date, one ten-thousandth (1/10,000th) of a Preferred Share,
subject to adjustment from time to time as provided in Sections 11 and 12.
(b) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein) in whole or
in part at any time after the Distribution Date, upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the office of the Rights Agent in Canton,
Massachusetts, together with payment of the Exercise Price for each
ten-thousandth (1/10,000th) of a Preferred Share as to which the Rights are
exercised, at or prior to the earlier of (i) the Expiration Date or (ii) the
Redemption Date.
(c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase duly executed, accompanied by
payment of the Exercise Price for the Preferred Shares to be purchased together
with an amount equal to any applicable transfer tax, in lawful money of the
United States of America, in cash or by certified check or money order payable
to the order of the Company, the Rights Agent shall thereupon (i) either (A)
promptly requisition from any transfer agent of the Preferred Shares (or make
available, if the Rights Agent is the transfer agent) certificates for the
number of Preferred Shares to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B) if the
Company shall have elected to deposit the Preferred Shares with a depositary
agent under a depositary arrangement, promptly requisition from the depositary
agent depositary receipts representing the number of ten-thousandths
(1/10,000ths)of a Preferred Share to be purchased (in which case certificates
for the Preferred Shares to be represented by such receipts shall be deposited
by the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with all such requests, (ii) when appropriate,
promptly requisition from the Company the amount of cash to be paid in lieu of
issuance of fractional shares in accordance with Section 15, (iii) promptly
after receipt of such certificates or depositary receipts, cause the same to be
delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt promptly deliver such cash to or
upon the order of the registered holder of such Right Certificate.
(d) In case the registered holder of any Right Certificate shall
exercise fewer than all the Rights evidenced thereby, a new Right Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to the registered holder of such Right
Certificate or to his duly authorized assigns, subject to the provisions of
Section 15.
(e) Notwithstanding anything in this Rights Agreement to the
contrary, any Rights that are at any time beneficially owned by an Acquiring
Person or any Affiliate or Associate of an Acquiring Person shall be null and
void and nontransferable, and any holder of any such Right (including any
purported transferee or subsequent holder) shall not have any right to exercise
or transfer any such Right.
10
(f) Notwithstanding anything in this Rights Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder of any Right
Certificates upon the occurrence of any purported exercise as set forth in this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Right Certificate surrendered for such exercise and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not
to exceed 90 calendar days after the Distribution Date, the exercisability of
the Rights in order to prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such registration statement
to become effective; PROVIDED, HOWEVER, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended and shall issue a further public announcement at such time
as the suspension is no longer in effect. Notwithstanding any provision herein
to the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification under the blue sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All
Right Certificates surrendered or presented for the purpose of exercise,
transfer, split-up, combination or exchange shall, and any Right Certificate
representing Rights that have become null and void and nontransferable pursuant
to Section 7(e) surrendered or presented for any purpose shall, if surrendered
or presented to the Company or to any of its agents, be delivered to the Rights
Agent for cancellation or in canceled form, or, if surrendered or presented to
the Rights Agent, shall be canceled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by this Rights Agreement.
The Company shall deliver to the Rights Agent for cancellation and retirement,
and the Rights Agent shall so cancel and retire, any Right Certificate purchased
or acquired by the Company. The Rights Agent shall deliver all canceled Right
Certificates to the Company, or shall, at the written request of the Company,
destroy such canceled Right Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued Preferred Shares
or any authorized and issued Preferred Shares held in its treasury, free from
preemptive rights or any right of first refusal, a number of Preferred Shares
sufficient to permit the exercise in full of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred
Shares issued but not outstanding or authorized but unissued to permit the
exercise or exchange of Rights in accordance with Section 11, the Company
covenants and agrees that it will take all such action as may be necessary to
authorize additional Preferred Shares for issuance upon the exercise or exchange
of Rights pursuant to Section 11; PROVIDED, HOWEVER, that if the Company is
unable to cause the authorization of additional Preferred Shares, then the
Company shall, or in lieu of seeking any such authorization, the Company may, to
the extent necessary and permitted by
11
applicable law and any agreements or instruments in effect prior to the
Distribution Date to which it is a party, (A) upon surrender of a Right, pay
cash equal to the Exercise Price in lieu of issuing Preferred Shares and
requiring payment therefor, (B) upon due exercise of a Right and payment of the
Exercise Price for each Preferred Share as to which such Right is exercised,
issue equity securities having a value equal to the value of the Preferred
Shares which otherwise would have been issuable pursuant to Section 11, which
value shall be determined by a nationally recognized investment banking firm
selected by the Board of Directors of the Company or (C) upon due exercise of a
Right and payment of the Exercise Price for each Preferred Share as to which
such Right is exercised, distribute a combination of Preferred Shares, cash
and/or other equity and/or debt securities having an aggregate value equal to
the value of the Preferred Shares which otherwise would have been issuable
pursuant to Section 11, which value shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors of the
Company. To the extent that any legal or contractual restrictions (pursuant to
agreements or instruments in effect prior to the Distribution Date to which it
is party) prevent the Company from paying the full amount payable in accordance
with the foregoing sentence, the Company shall 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 as such payments become permissible under such legal or
contractual restrictions until such payments have been paid in full.
(c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all Preferred Shares delivered upon
exercise or exchange of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Exercise
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights are to be listed on any national securities exchange, the
Company covenants and agrees to use its best efforts to cause, from and after
such time as the Rights become exercisable or exchangeable, all Preferred Shares
reserved for such issuance to be listed on such securities exchange upon
official notice of issuance upon such exercise or exchange.
(e) The Company further covenants and agrees that it will pay when
due and payable any and all Federal and state transfer taxes and charges which
may be payable in respect of the issuance or delivery of Right Certificates or
of any Preferred Shares or other securities upon the exercise or exchange of the
Rights. The Company shall not, however, be required to pay any transfer tax
which may be payable in respect of any transfer or delivery of Right
Certificates to a Person other than, or in respect of the issuance or delivery
of certificates for the Preferred Shares or other securities, as the case may
be, in a name other than that of, the registered holder of the Right Certificate
evidencing Rights surrendered for exercise or exchange or to issue or deliver
any certificates for Preferred Shares or other securities, as the case may be,
upon the exercise or exchange of any Rights until any such tax shall have been
paid (any such tax being payable by the holder of such Right Certificate at the
time of surrender) or until it has been established to the Company's
satisfaction that no such tax is due.
SECTION 10. PREFERRED SHARES RECORD DATE. Each Person in whose name any
certificate for Preferred Shares or other securities is issued upon the exercise
or exchange of Rights shall for all purposes be deemed to have become the holder
of record of the Preferred Shares or other securities, as the case may be,
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
any Exercise Price (and any applicable transfer taxes) was made; PROVIDED,
however, that, if the date of such surrender and payment is a date upon which
the transfer books
12
of the Company for the Preferred Shares or other securities, as the case may be,
are closed, such Person shall be deemed to have become the record holder of such
Preferred Shares or other securities, as the case may be, on, and such
certificate shall be dated, the next succeeding Business Day on which the
transfer books of the Company for the Preferred Shares or other securities, as
the case may be, are open.
SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON;
EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS.
(a) Upon a Person becoming an Acquiring Person, proper provision
shall be made so that each holder of a Right, except as provided in Section
7(e), shall thereafter have a right to receive, upon exercise thereof for the
Exercise Price in accordance with the terms of this Rights Agreement, such
number of ten-thousandths (1/10,000ths)of a Preferred Share as shall equal the
result obtained by multiplying the Exercise Price by a fraction, the numerator
of which is the number of ten-thousandths (1/10,000ths) of a Preferred Share for
which a Right is then exercisable and the denominator of which is 50% of the
Market Value of the Common Stock on the date on which a Person becomes an
Acquiring Person. As soon as practicable after a Person becomes an Acquiring
Person (provided the Company shall not have elected to make the exchange
permitted by Section 11(b)(I) for all outstanding Rights), the Company covenants
and agrees to use its best efforts to:
(I) prepare and file a registration statement
under the Securities Act, on an appropriate form,
with respect to the Preferred Shares purchasable upon
exercise of the Rights;
(II) cause such registration statement to
become effective as soon as practicable after such
filing;
(III) cause such registration statement to
remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until
the Expiration Date; and
(IV) qualify or register the Preferred Shares
purchasable upon exercise of the Rights under the
blue sky or securities laws of such jurisdictions as
may be necessary or appropriate.
(b) (I) The Board of Directors of the Company may, at its option,
at any time after a Person becomes an Acquiring Person, mandatorily exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that shall have become null and void and nontransferable pursuant to the
provisions of Section 7(e)) for consideration per Right consisting of one-half
of the securities that would be issuable at such time upon the exercise of one
Right in accordance with Section 11(a) or, if applicable, Section 9(b) (the
consideration issuable per Right pursuant to this Section 11(b)(I) being the
"Exchange Consideration"). The Board of Directors of the Company may, at its
option, issue, in substitution for Preferred Shares, shares of Common Stock in
an amount per Preferred Share equal to the Formula Number if there are
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued. If the Board of Directors of the Company elects to exchange all the
Rights for Exchange Consideration pursuant to this Section 11(b)(I) prior to the
physical distribution of the Rights Certificates, the Corporation may distribute
the Exchange Consideration in lieu of distributing Right Certificates, in which
case for purposes of this Rights
13
Agreement holders of Rights shall be deemed to have simultaneously received and
surrendered for exchange Right Certificates on the date of such distribution.
(II) Any action of the Board of Directors of the Company
ordering the exchange of any Rights pursuant to Section 11(b)(I) shall be
irrevocable and, immediately upon the taking of such action and without any
further action and without any notice, the right to exercise any such Right
pursuant to Section 11(a) shall terminate and the only right thereafter of a
holder of such Right shall be to receive the Exchange Consideration in exchange
for each such Right held by such holder or, if the Exchange Consideration shall
not have been paid or issued, to exercise any such Right pursuant to Section
11(c)(I). The Company shall promptly give public notice of any such exchange;
PROVIDED, HOWEVER, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Company promptly shall mail a
notice of any such exchange to all holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of exchange will state the
method by which the exchange of the Rights for the Exchange Consideration will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which shall have become null and void
and nontransferable pursuant to the provisions of Section 7(e)) held by each
holder of Rights.
(c) (I) In the event that, following a Distribution Date, directly
or indirectly, any transactions specified in the following clause (i), (ii) or
(iii) of this Section 11(c) (each such transaction being a "Business
Combination") shall be consummated:
(i) the Company shall consolidate with, or merge with and into,
any Acquiring Person or any Affiliate or Associate of an Acquiring
Person;
(ii) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into the Company and, in
connection with such merger, all or part of the Common Shares shall be
changed into or exchanged for capital stock or other securities of the
Company or of any Acquiring Person or Affiliate or Associate of an
Acquiring Person or cash or any other property; or
(iii) the Company shall sell, lease, exchange or otherwise
transfer or dispose of (or one or more of its Subsidiaries shall sell,
lease, exchange or otherwise transfer or dispose of), in one or more
transactions, the Major Part of the assets of the Company and its
Subsidiaries (taken as a whole) to any Acquiring Person or any
Affiliate or Associate of an Acquiring Person,
then, in each such case, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e), shall thereafter have the right to
receive, upon the exercise thereof for the Exercise Price in accordance with the
terms of this Rights Agreement, the securities specified below (or, at such
holder's option, the securities specified in Section 11(a)):
(A) If the Principal Party in such Business Combination has
Registered Common Shares outstanding, each Right shall
thereafter represent the right to receive, upon the exercise
thereof for the Exercise Price in accordance with the terms of
this
14
Rights Agreement, such number of Registered Common Shares
of such Principal Party, free and clear of all liens,
encumbrances or other adverse claims, as shall have an
aggregate Market Value equal to the result obtained by
multiplying the Exercise Price by two;
(B) If the Principal Party involved in such Business Combination
does not have Registered Common Shares outstanding, each Right
shall thereafter represent the right to receive, upon the
exercise thereof for the Exercise Price in accordance with the
terms of this Rights Agreement, at the election of the holder
of such Right at the time of the exercise thereof, any of:
(1) such number of Common Shares of the
Surviving Person in such Business Combination as shall
have an aggregate Book Value immediately after giving
effect to such Business Combination equal to the result
obtained by multiplying the Exercise Price by two;
(2) such number of Common Shares of the
Principal Party in such Business Combination (if the
Principal Party is not also the Surviving Person in such
Business Combination) as shall have an aggregate Book
Value immediately after giving effect to such Business
Combination equal to the result obtained by multiplying
the Exercise Price by two; or
(3) if the Principal Party in such Business
Combination is an Affiliate of one or more Persons which
has Registered Common Shares outstanding, such number of
Registered Common Shares of whichever of such Affiliates
of the Principal Party has Registered Common Shares with
the greatest aggregate Market Value on the date of
consummation of such Business Combination as shall have
an aggregate Market Value on the date of such Business
Combination equal to the result obtained by multiplying
the Exercise Price by two.
(II) The Company shall not consummate any Business Combination
unless each issuer of Common Shares for which Rights may be exercised, as set
forth in this Section 11(c), shall have sufficient authorized Common Shares that
have not been issued or reserved for issuance (and which shall, when issued upon
exercise thereof in accordance with this Rights Agreement, be validly issued,
fully paid and nonassessable and free of preemptive rights, rights of first
refusal or any other restrictions or limitations on the transfer or ownership
thereof) to permit the exercise in full of the Rights in accordance with this
Section 11(c) and unless prior thereto:
(i) a registration statement under the Securities Act on
an appropriate form, with respect to the Rights and the Common
Shares of such issuer purchasable upon exercise of the Rights,
shall be effective under the Securities Act; and
(ii) the Company and each such issuer shall have:
(A) executed and delivered to the Rights Agent a
supplemental agreement providing for the assumption by
such issuer of the obligations set forth in this Section
11(c) (including the obligation of such issuer to issue
Common Shares upon the exercise of Rights in accordance
with the
15
terms set forth in Sections 11(c)(I) and 11(c)(III)) and
further providing that such issuer, at its own expense,
will use its best efforts to:
(1) cause a registration statement
under the Securities Act on an appropriate form, with
respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, to
remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until
the Expiration Date;
(2) qualify or register the Rights and
the Common Shares of such issuer purchasable upon
exercise of the Rights under the blue sky or
securities laws of such jurisdictions as may be
necessary or appropriate; and
(3) list the Rights and the Common
Shares of such issuer purchasable upon exercise of
the Rights on each national securities exchange on
which the Common Shares were listed prior to the
consummation of the Business Combination or, if the
Common Shares were not listed on a national
securities exchange prior to the consummation of the
Business Combination, on a national securities
exchange;
(B) furnished to the Rights Agent a written
opinion of independent counsel stating that such
supplemental agreement is a valid, binding and
enforceable agreement of such issuer; and
(C) filed with the Rights Agent a certificate of
a nationally recognized firm of independent accountants
setting forth the number of Common Shares of such issuer
which may be purchased upon the exercise of each Right
after the consummation of such Business Combination.
(III) After consummation of any Business Combination and subject
to the provisions of Section 11(c)(II), (i) each issuer of Common Shares for
which Rights may be exercised as set forth in this Section 11(c) shall be liable
for, and shall assume, by virtue of such Business Combination, all the
obligations and duties of the Company pursuant to this Rights Agreement, (ii)
the term "Company" shall thereafter be deemed to refer to such issuer, (iii)
each such issuer shall take such steps in connection with such consummation as
may be necessary to assure that the provisions hereof (including the provisions
of Sections 11(a) and 11(c)) shall thereafter be applicable, as nearly as
reasonably may be, in relation to its Common Shares thereafter deliverable upon
the exercise of the Rights, and (iv) the number of Common Shares of each such
issuer thereafter receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Sections 11 and 12, and the provisions of
Section 7, 9 and 10 with respect to the Preferred Shares shall apply, as nearly
as reasonably may be, on like terms to any such Common Shares.
SECTION 12. CERTAIN ADJUSTMENTS.
(a) To preserve the actual or potential economic value of the
Rights, if at any time after the date of this Rights Agreement there shall be
any change in the Common Shares or the Preferred Shares, whether by reason of
stock dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of securities, split-ups, split-offs, spin-offs,
16
liquidations, other similar changes in capitalization, any distribution or
issuance of cash, assets, evidences of indebtedness or subscription rights,
options or warrants to holders of Common Shares or Preferred Shares, as the case
may be (other than distribution of the Rights or regular quarterly cash
dividends) or otherwise, then, in each such event the Board of Directors of the
Company shall make such appropriate adjustments in the number of Preferred
Shares (or the number and kind of other securities) issuable upon exercise of
each Right, the Exercise Price and Redemption Price in effect at such time and
the number of Rights outstanding at such time (including the number of Rights or
fractional Rights associated with each Common Share) such that following such
adjustment such event shall not have had the effect of reducing or limiting the
benefits the holders of the Rights would have had absent such event.
(b) If, as a result of an adjustment made pursuant to
Section 12(a), the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Preferred Shares, thereafter the
number of such securities so receivable upon exercise of any Right shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions of Sections 11 and 12, and the
provisions of Sections 7, 9 and 10 with respect to the Preferred Shares shall
apply, as nearly as reasonably may be, on like term, to any such other
securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities relating
to a Right shall evidence the right to purchase, for the Exercise Price, the
adjusted number and kind of securities purchasable from time to time hereunder
upon exercise of the Rights, all subject to further adjustment as provided
herein.
(d) Irrespective of any adjustment or change in the Exercise Price
or the number of Preferred Shares or number or kind of other securities issuable
upon the exercise of the Rights, the Right Certificates theretofore and
thereafter issued may continue to express the terms which were expressed in the
initial Right Certificates issued hereunder.
(e) In any case in which action taken pursuant to Section 12(a)
requires that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the Preferred Shares and/or other securities, if any, issuable upon such
exercise over and above the Preferred Shares and/or other securities, if any,
issuable before giving effect to such adjustment; PROVIDED, HOWEVER, that the
Company shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional securities upon the
occurrence of the event requiring such adjustment.
SECTION 13. CERTIFICATE OF ADJUSTMENT. Whenever an adjustment is made
as provided in Section 11 or 12, the Company shall (a) promptly prepare a
certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with the Rights Agent and with
each transfer agent for the Preferred Shares a copy of such certificate and (c)
mail a brief summary thereof to each holder of a Right Certificate (or, prior to
the Distribution Date, of the Common Shares) in accordance with Section 25. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
SECTION 14. ADDITIONAL COVENANTS.
17
(a) Notwithstanding any other provision of this Rights Agreement,
no adjustment to the number of Preferred Shares (or fractions of a share) or
other securities for which a Right is exercisable or the number of Rights
outstanding or associated with each Common Share or any similar or other
adjustment shall be made or be effective if such adjustment would have the
effect of reducing or limiting the benefits the holders of the Rights would have
had absent such adjustment, including, without limitation, the benefits under
Sections 11 and 12, unless the terms of this Rights Agreement are amended so as
to preserve such benefits.
(b) The Company covenants and agrees that, after the Distribution
Date, except as permitted by Section 26, it will not take (or permit any
Subsidiary of the Company to take) any action if at the time such action is
taken it is intended or reasonably foreseeable that such action will reduce or
otherwise limit the benefits the holders of the Rights would have had absent
such action, including, without limitation, the benefits under Sections 11 and
12. Any action taken by the Company during any period after any Person becomes
an Acquiring Person but prior to the Distribution Date shall be null and void
unless such action could be taken under this Section 14(b) from and after the
Distribution Date. The Company shall not consummate any Business Combination if
any issuer of Common Shares for which Rights may be exercised after such
Business Combination in accordance with Section 11(c) shall have taken any
action that reduces or otherwise limits the benefits the holders of the Rights
would have had absent such action, including, without limitation, the benefits
under Sections 11 and 12.
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company may, but shall not be required to, issue fractions
of Rights or distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, the Company may pay to the registered holders of
the Right Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 15(a), the
current market value of a whole Right shall be the closing price of the Rights
(as determined in a manner similar to that of Common Stock pursuant to the
second and third sentences of the definition of Market Value contained in
Section 1) for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue fractions
of Preferred Shares upon exercise of the Rights or distribute certificates which
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fraction of a Preferred
Share (other than one ten-thousandth (1/10,000th) of a Preferred Share or any
integral multiple thereof), pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Preferred Share, if any
are outstanding and publicly traded (or the Formula Number times the current
market value of one share of Common Stock if the Preferred Shares are not
outstanding and publicly traded). If, as a result of an adjustment made pursuant
to Section 12(a), the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Preferred Shares, the provisions
of this Section 15(b) shall apply, as nearly as reasonably may be, on like terms
to such other securities.
(c) The Company may, but shall not be required to, issue fractions
of shares of Common Stock upon exchange of Rights pursuant to Section 11(b), or
to distribute certificates which evidence fractional shares of Common Stock. In
lieu of such fractional shares of
18
Common Stock, the Company may pay to the registered holders of the Right
Certificates with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of the
current Market Value of one share of Common Stock as of the date on which a
Person became an Acquiring Person.
(d) The holder of Rights by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right except as provided in this Section 15.
SECTION 16. RIGHTS OF ACTION.
(a) All rights of action in respect of this Rights Agreement 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 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 Rights 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 Rights Agreement and shall be entitled to specific
performance of the obligations of any Person under, and injunctive relief
against actual or threatened violations of the obligations of any Person subject
to, this Rights Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement shall be entitled to recover the reasonable
costs and expenses, including attorneys' fees, incurred in such action.
SECTION 17. TRANSFER AND OWNERSHIP OF RIGHTS AND RIGHT CERTIFICATES.
(a) Prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Shares.
(b) After the Distribution Date, the Right Certificates will be
transferable, subject to Section 7(e), only on the registry books of the Rights
Agent if surrendered at the office of the Rights Agent, 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 a Right Certificate (or, prior to the Distribution Date, the
associated Common Shares certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on the Right Certificates or the associated certificate for
Common Shares made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
SECTION 18. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Right Certificate shall 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 on the
exercise of the Rights represented thereby, nor shall anything
19
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, including, without limitation, 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, or to receive
dividends or other distributions or subscription rights, or otherwise, until the
Right or Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 19. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Rights
Agreement and the exercise and performance of its duties hereunder.
(b) The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Rights Agreement in reliance upon any
Right Certificate or certificate for the Common Shares or for other securities
of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons. The Company shall indemnify the Rights Agent for any loss,
liability, or expenses incurred in connection with its performance under the
Agreement, unless caused by the Rights Agent's gross negligence, bad faith, or
willful misconduct.
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stock transfer or corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Rights Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto; PROVIDED that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 22. In case, at the time such successor Rights Agent shall succeed to
the agency created by this Rights 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, in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Right Certificates so countersigned; and, in
case at that time any of the Right Certificates shall not have been
countersigned, the Rights Agent may countersign such Right Certificates either
in its prior name
20
or in its changed name; and in all such cases such Right Certificates shall have
the full force provided in the Right Certificates and in this Rights Agreement.
SECTION 21. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Rights Agreement upon the following terms
and conditions, by all of which the Company and the holders of Right
Certificates (or, prior to the Distribution Date, of the Common Shares), by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the advice or opinion of such counsel shall
be full and complete authorization and protection to the Rights Agent as to any
action taken, suffered or omitted by it in good faith and in accordance with
such advice or opinion.
(b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person) be
proved or established by the Company prior to taking, refraining from taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, a Vice President
(whether preceded by any additional title) or the Clerk of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Rights Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Rights Agreement or in
the Right Certificates (except as to its countersignature thereof) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Section 11 or 12 or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice of any such adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Preferred Shares or Common Shares
to be issued pursuant to this Rights Agreement or any Right Certificate or as to
whether any Preferred Shares or Common Shares will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Rights Agreement.
21
(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 Chief Executive Officer, the President, the Chief Financial Officer,
the Treasurer, a Vice President (whether preceded by any additional title) or
the Clerk of the Company, in connection with its duties and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions of any such officer.
(h) The Rights Agent and any 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 the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct provided reasonable care was exercised in the selection
and continued employment thereof.
(j) The Company agrees to indemnify and to hold the Rights Agent
harmless against any loss, liability, damage or expense (including reasonable
fees and expenses of legal counsel) which the Rights Agent may incur resulting
from its actions as Rights Agent pursuant to this Rights Agreement; PROVIDED,
HOWEVER, that the Rights Agent shall not be indemnified or held harmless with
respect to any such loss, liability, damage or expense incurred by the Rights
Agent as a result of, or arising out of, its own gross negligence, bad faith or
willful misconduct. In no case shall the Company be liable with respect to any
action, proceeding, suit or claim against the Rights Agent unless the Rights
Agent shall have notified the Company, by letter or by facsimile confirmed by
letter, of the assertion of any action, proceeding, suit or claim against the
Rights Agent, promptly after the Rights Agent shall have notice of any such
assertion of an action, proceeding, suit or claim or have been served with the
summons or other first legal process giving information as to the nature and
basis of the action, proceeding, suit or claim. The Company shall be entitled to
participate at its own expense in the defense of any such action, proceeding,
suit or claim, and, if the Company so elects, the Company shall assume the
defense of any such action, proceeding, suit or claim. In the event that the
Company assumes such defense, the Company shall not thereafter be liable for the
fees and expenses of any additional counsel retained by the Rights Agent, so
long as the Company shall retain counsel satisfactory to the Rights Agent, in
the exercise of its reasonable judgment, to defend such action, proceeding, suit
or claim. The Rights Agent agrees not to settle any litigation in connection
with any action, proceeding, suit or claim with respect to which it may seek
indemnification from the Company without the prior written consent of the
Company.
SECTION 22. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Rights
Agreement upon 30 days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares and the Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates (or, prior to the
Distribution Date, of the Common Shares) by first-class mail, postage prepaid.
The Company may remove the Rights Agent or any successor Rights Agent upon 30
days' notice in writing, mailed to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent of the Common Shares and the
Preferred Shares by registered or certified mail,
22
and to the holders of the Right Certificates (or, prior to the Distribution
Date, of the Common Shares) by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such appointment within a period of 30 days after giving notice of such removal
or after it has been notified in writing of such resignation or incapacity by
the resigning or incapacitated Rights Agent or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) (who
shall, with such notice, submit his Right Certificate or, prior to the
Distribution Date, the certificate representing his Common Shares, for
inspection by the Company), then the registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Shares) may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of any state of the United States, in good standing, which is
authorized under such laws to exercise stock transfer or corporate trust 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 $50,000,000; PROVIDED that the principal transfer agent for
the Common Shares shall in any event be qualified to be the Rights Agent. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and the
Preferred Shares, and mail a notice thereof in writing to the registered holders
of the Right Certificates (or, prior to the Distribution Date, of the Common
Shares). Failure to give any notice provided for in this Section 22, however, or
any defect therein shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHT CERTIFICATES.
Notwithstanding any of the provisions of this Rights 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 made in accordance with the provisions of this
Rights Agreement. In addition, in connection with the issuance or sale of Common
Shares following the Distribution Date and prior to the earlier of the
Redemption Date and the Expiration Date, the Company (a) shall, with respect to
Common Shares so issued or sold pursuant to the exercise of stock options or
under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities, notes or debentures issued by the Company, and (b) may,
in any other case, if deemed necessary or appropriate by its Board of Directors,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale; PROVIDED, HOWEVER, that (i) no such Right
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Right Certificate would be issued, and (ii) no such Right Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
23
SECTION 24. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) such time as a Person becomes an Acquiring
Person and (ii) the Expiration Date, order the redemption of all, but not fewer
than all, the then outstanding Rights at the Redemption Price (the date of such
redemption being the "Redemption Date"), and the Company, at its option, may pay
the Redemption Price either in cash or Common Shares or other securities of the
Company deemed by the Board of Directors of the Company, in the exercise of its
sole discretion, to be at least equivalent in value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price. Within 10 Business Days after the action of the Board of
Directors of the Company ordering the redemption of the Rights, the Company
shall give notice of such redemption to the holders of the then outstanding
Rights by mailing such notice to all such holders at their last addresses as
they appear upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Shares. Each such notice of redemption will state the method by which payment of
the Redemption Price will be made. The notice, if mailed in the manner herein
provided, shall be conclusively presumed to have been duly given, whether or not
the holder of Rights receives such notice. In any case, failure to give such
notice by mail, or any defect in the notice, to any particular holder of Rights
shall not affect the sufficiency of the notice to other holders of Rights.
SECTION 25. NOTICES. Notices or demands authorized by this Rights
Agreement to be given or made by the Rights Agent or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
AWARE, INC.
40 Middlesex Turnpike
Bedford, MA 01730
Attention: Chief Executive Officer
Subject to the provisions of Section 22, any notice or demand authorized by this
Rights Agreement to be given or made by the Company or by the holder of a Right
Certificate (or, prior to the Distribution Date, of the Common Shares) to or on
the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Company) as follows:
EQUISERVE TRUST COMPANY, N.A.
C/O EQUISERVE, LP
150 Royall Street
Canton, MA 02021
Attention: Director of Client Administration
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Right Certificate (or, prior
to the Distribution Date, of the Common Shares) shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed to such holder at
the address of such holder as shown on the registry books of the
24
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares.
SECTION 26. SUPPLEMENTS AND AMENDMENTS. At any time prior to the
Distribution Date and subject to the last sentence of this Section 26, the
Company may, and the Rights Agent shall if the Company so directs, supplement or
amend any provision of this Rights Agreement (including, without limitation, the
date on which the Distribution Date shall occur, the time during which the
Rights may be redeemed pursuant to Section 24 or any provision of the
Certificate of Designation) without the approval of any holder of the Rights.
From and after the Distribution Date and subject to applicable law, the Company
may, and the Rights Agent shall if the Company so directs, amend this Rights
Agreement without the approval of any holders of Right Certificates (i) to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision of this Rights
Agreement or (ii) to make any other provisions in regard to matters or questions
arising hereunder which the Company may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person). Any supplement or amendment adopted during any period after any Person
has become an Acquiring Person but prior to the Distribution Date shall be null
and void unless such supplement or amendment could have been adopted under the
prior sentence from and after the Distribution Date. Any supplement or amendment
to this Rights Agreement duly approved by the Company that does not amend
Sections 19, 20, 21 or 22 in a manner adverse to the Rights Agent shall become
effective immediately upon execution by the Company, whether or not also
executed by the Rights Agent. In addition, notwithstanding anything to the
contrary contained in this Rights Agreement, no supplement or amendment to this
Rights Agreement shall be made which (a) reduces the Redemption Price (except as
required by Section 12(a)) or (b) provides for an earlier Expiration Date.
SECTION 27. SUCCESSORS. All the covenants and provisions of this
Rights Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 28. BENEFITS OF RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY
THE BOARD OF DIRECTORS, ETC.
(a) Nothing in this Rights Agreement shall 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, of the Common
Shares) any legal or equitable right, remedy or claim under this Rights
Agreement; but this Rights Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, of the Common Shares).
(b) Except as explicitly otherwise provided in this Rights Agreement,
the Board of Directors of the Company shall have the exclusive power and
authority to administer this Rights 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
Rights Agreement, including, without limitation, the right and power to (i)
interpret the provisions of this Rights Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Rights Agreement (including, without limitation, a determination to redeem or
not redeem the Rights or to amend this Rights Agreement and a determination of
whether there is an Acquiring Person).
25
(c) Nothing contained in this Rights Agreement shall be deemed to be
in derogation of the obligation of the Board of Directors of the Company to
exercise its fiduciary duty. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to reject any tender offer, or to recommend that holders of
Common Shares reject any tender offer, or to take any other action (including,
without limitation, the commencement, prosecution, defense or settlement of any
litigation and the submission of additional or alternative offers or other
proposals) with respect to any tender offer that the Board of Directors believes
is necessary or appropriate in the exercise of such fiduciary duty.
SECTION 29. SEVERABILITY. If any term, provision, covenant or
restriction of this Rights 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 Rights
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
SECTION 30. GOVERNING LAW. This Rights Agreement and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Commonwealth of Massachusetts and for all purposes shall be governed
by and construed in accordance with the law of such state applicable to
contracts to be made and performed entirely within such state.
SECTION 31. COUNTERPARTS; EFFECTIVENESS. This Rights Agreement may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. This Rights Agreement shall
be effective as of the Close of Business on the date hereof.
SECTION 32. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Rights Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions of
this Rights Agreement.
26
IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.
AWARE, INC.
By: /s/ Michael A. Tzannes
--------------------------
Name: Michael A. Tzannes
Title: Chief Executive Officer
EQUISERVE TRUST COMPANY, N.A., as Rights Agent
By: /s/ Carol Mulvey-Eori
-------------------------
Name: Carol Mulvey-Eori
Title: Managing Director
27
EXHIBIT A
TERMS OF SERIES A
PARTICIPATING CUMULATIVE PREFERRED STOCK
OF
AWARE, INC.
SECTION 1. DESIGNATION AND NUMBER OF SHARES. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), par value $1.00 per share. The number of shares
initially constituting the Series A Preferred Stock shall be 50,000; PROVIDED,
HOWEVER, that, if more than a total of 50,000 shares of Series A Preferred Stock
shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to
the Rights Agreement dated as of October 2, 2001, between the Corporation and
EquiServe Trust Company, N.A., a transfer agent, as Rights Agent (the "Rights
Agreement"), the Board of Directors of the Corporation, pursuant to Section 26
of Chapter 156B of the Massachusetts General Laws, shall direct by resolution or
resolutions that a certificate be properly executed, acknowledged, filed and
recorded, in accordance with the provisions of said Section 26 thereof,
providing for the total number of shares of Series A Preferred Stock authorized
to be issued to be increased (to the extent that the Articles of Organization
then permit) to the largest number of whole shares (rounded up to the nearest
whole number) issuable upon exercise of such Rights.
SECTION 2. DIVIDENDS OR DISTRIBUTIONS.
(a) Subject to the prior and superior rights of the holders of shares
of any other series of Preferred Stock or other class of capital stock of the
Corporation ranking prior and superior to the shares of Series A Preferred Stock
with respect to dividends, the holders of shares of the Series A Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of
Directors, out of the assets of the Corporation legally available therefor, (1)
quarterly dividends payable in cash on the last day of each fiscal quarter in
each year, or such other dates as the Board of Directors of the Corporation
shall approve (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or a fraction of a share of Series A Preferred
Stock, in the amount of $100.00 per whole share (rounded to the nearest cent)
less the amount of all cash dividends declared on the Series A Preferred Stock
pursuant to the following clause (2) since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock (the total of which shall not, in any event, be less than zero)
and (2) dividends payable in cash on the payment date for each cash dividend
declared on the Common Stock in an amount per whole share (rounded to the
nearest cent) equal to the Formula Number (as hereinafter defined) then in
effect times the cash dividends then to be paid on each share of Common Stock.
In addition, if the Corporation shall pay any dividend or make any distribution
on the Common Stock payable in assets, securities or other forms of noncash
consideration (other than dividends or distributions solely in shares of Common
Stock), then, in each such case, the Corporation shall simultaneously pay or
make on each outstanding whole share of Series A Preferred Stock a dividend or
distribution in like kind equal to the Formula Number then in effect times such
dividend or distribution on each share of the Common Stock. As used herein, the
"Formula Number" shall be 10,000; PROVIDED, HOWEVER, that if at any time after
October 2, 2001, the Corporation shall (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or make any distribution on the
Common Stock in shares of
A-1
Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding
shares of Common Stock into a larger number of shares of Common Stock or (iii)
combine (by a reverse stock split or otherwise) the outstanding shares of Common
Stock into a smaller number of shares of Common Stock, then in each such event
the Formula Number shall be adjusted to a number determined by multiplying the
Formula Number in effect immediately prior to such event by a fraction, the
numerator of which is the number of shares of Common Stock that are outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event (and
rounding the result to the nearest whole number); and PROVIDED FURTHER, that, if
at any time after October 2, 2001, the Corporation shall issue any shares of its
capital stock in a merger, reclassification, or change of the outstanding shares
of Common Stock, then in each such event the Formula Number shall be
appropriately adjusted to reflect such merger, reclassification or change so
that each share of Series A Preferred Stock continues to be the economic
equivalent of a Formula Number of shares of Common Stock prior to such merger,
reclassification or change.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in Section 2(a) immediately prior to or at
the same time it declares a dividend or distribution on the Common Stock(other
than a dividend or distribution solely in shares of Common Stock); PROVIDED,
HOWEVER, that, in the event no dividend or distribution (other than a dividend
or distribution in shares of Common Stock) shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $100.00 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a dividend or distribution declared thereon, which
record date shall be the same as the record date for any corresponding dividend
or distribution on the Common Stock.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of original issue of such shares of Series A
Preferred Stock; PROVIDED, HOWEVER, that dividends on such shares which are
originally issued after the record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive a quarterly dividend and
on or prior to the next succeeding Quarterly Dividend Payment Date shall begin
to accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series A Preferred Stock
which are originally issued prior to the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend on the first Quarterly Dividend Payment Date shall be calculated as if
cumulative from and after the last day of the fiscal quarter next preceding the
date of original issuance of such shares. Accrued but unpaid dividends shall not
bear interest. Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Series A Preferred Stock shall have been declared.
(e) The holders of the shares of Series A Preferred Stock shall not
be entitled to receive any dividends or other distributions except as provided
herein.
A-2
SECTION 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following rights:
(a) Each holder of Series A Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect, for each share of
Series A Preferred Stock held of record on each matter on which holders of the
Common Stock or stockholders generally are entitled to vote, multiplied by the
maximum number of votes per share which any holder of the Common Stock or
stockholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided herein or by applicable law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock shall vote together as one class for the election of directors of
the Corporation and on all other matters submitted to a vote of stockholders of
the Corporation.
(c) If, at the time of any annual meeting of stockholders for the
election of directors, the equivalent of six quarterly dividends (whether or not
consecutive) payable on any share or shares of Series A Preferred Stock are in
default, the number of directors constituting the Board of Directors of the
Corporation shall be increased by two. In addition to voting together with the
holders of Common Stock for the election of other directors of the Corporation,
the holders of record of the Series A Preferred Stock, voting separately as a
class to the exclusion of the holders of Common Stock, shall be entitled at said
meeting of stockholders (and at each subsequent annual meeting of stockholders),
unless all dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors of the
Corporation, the holders of any Series A Preferred Stock being entitled to cast
a number of votes per share of Series A Preferred Stock equal to the Formula
Number. Until the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who shall have
been so elected pursuant to the next preceding sentence may be removed at any
time, either with or without cause, only by the affirmative vote of the holders
of the shares of Series A Preferred Stock at the time entitled to cast a
majority of the votes entitled to be cast for the election of any such director
at a special meeting of such holders called for that purpose, and any vacancy
thereby created may be filled by the vote of such holders. If and when such
default shall cease to exist, the holders of the Series A Preferred Stock shall
be divested of the foregoing special voting rights, subject to revesting in the
event of each and every subsequent like default in payments of dividends. Upon
the termination of the foregoing special voting rights, the terms of office of
all persons who may have been elected directors pursuant to said special voting
rights shall forthwith terminate, and the number of directors constituting the
Board of Directors shall be reduced by two. The voting rights granted by this
Section 3(c) shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
(d) Except as provided herein, in Section 11 or by applicable law,
holders of Series A Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for authorizing or taking
any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
A-3
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock; PROVIDED that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such parity stock in exchange for
shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series
A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
SECTION 5. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, no distribution
shall be made (1) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount equal to the accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, plus an amount equal to the greater of (x) $100.00 per whole share
or (y) an aggregate amount per share equal to the Formula Number then in effect
times the aggregate amount to be distributed per share to holders of Common
Stock or (2) to the holders of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except distributions made ratably on the Series A Preferred Stock and all
other 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.
SECTION 6. CONSOLIDATION, MERGER, ETC.. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash or any other property, then in any such case the then
outstanding shares of Series A Preferred Stock shall at the same time be
A-4
similarly exchanged or changed into an amount per share equal to the Formula
Number then in effect times the aggregate amount of stock, securities, cash or
any other property (payable in kind), as the case may be, into which or for
which each share of Common Stock is exchanged or changed. In the event both this
Section 6 and Section 2 appear to apply to a transaction, this Section 6 will
control.
SECTION 7. NO REDEMPTION; NO SINKING FUND.
(a) The shares of Series A Preferred Stock shall not be subject to
redemption by the Corporation or at the option of any holder of Series A
Preferred Stock; PROVIDED, HOWEVER, that the Corporation may purchase or
otherwise acquire outstanding shares of Series A Preferred Stock in the open
market or by offer to any holder or holders of shares of Series A Preferred
Stock.
(b) The shares of Series A Preferred Stock shall not be subject to or
entitled to the operation of a retirement or sinking fund.
SECTION 8. RANKING. The Series A Preferred Stock shall rank junior to
all other series of Preferred Stock of the Corporation, unless the Board of
Directors shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special rights of
the shares of such series and the qualifications, limitations and restrictions
thereof.
SECTION 9. FRACTIONAL SHARES. The Series A Preferred Stock shall be
issuable upon exercise of the Rights issued pursuant to the Rights Agreement in
whole shares or in any fraction of a share that is one ten-thousandth
(1/10,000th) of a share or any integral multiple of such fraction which shall
entitle the holder, in proportion to such holder's fractional shares, to receive
dividends, exercise voting rights, participate in distributions and to have the
benefit of all other rights of holders of Series A Preferred Stock. In lieu of
fractional shares, the Corporation, prior to the first issuance of a share or a
fraction of a share of Series A Preferred Stock, may elect (1) to make a cash
payment as provided in the Rights Agreement for fractions of a share other than
one ten-thousandth (1/10,000th) of a share or any integral multiple thereof or
(2) to issue depository receipts evidencing such authorized fraction of a share
of Series A Preferred Stock pursuant to an appropriate agreement between the
Corporation and a depository selected by the Corporation; PROVIDED that such
agreement shall provide that the holders of such depository receipts shall have
all the rights, privileges and preferences to which they are entitled as holders
of the Series A Preferred Stock.
SECTION 10. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board of Directors
pursuant to the provisions of Article IV of the Restated Articles of
Organization, as amended.
SECTION 11. AMENDMENT. None of the powers, preferences and relative,
participating, optional and other special rights of the Series A Preferred Stock
as provided herein or in the Articles of Organization shall be amended in any
manner which would alter or change the powers, preferences, rights or privileges
of the holders of Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of at least 66-2/3% of the
outstanding shares of Series A Preferred Stock, voting as a separate class;
PROVIDED, HOWEVER, that no such amendment approved by the holders of at least
66-2/3% of the outstanding shares of Series A
A-5
Preferred Stock shall be deemed to apply to the powers, preferences, rights or
privileges of any holder of shares of Series A Preferred Stock originally issued
upon exercise of the Rights after the time of such approval without the approval
of such holder.
* * * * *
A-6
EXHIBIT B
[Form of Right Certificate]
Certificate No. [R]-
Rights
NOT EXERCISABLE AFTER OCTOBER 2, 2011, OR EARLIER IF REDEEMED
BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.001 PER RIGHT, ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND
BY ANY SUBSEQUENT HOLDER OF SUCH RIGHTS ARE NULL AND VOID AND
NONTRANSFERABLE.
Right Certificate
AWARE, 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 October 2, 2001 (the "Rights Agreement"), between
Aware, Inc., a Massachusetts corporation (the "Company"), and EquiServe Trust
Company, N.A., a transfer agent, as Rights Agent (the "Rights Agent"), unless
the Rights evidenced hereby shall have been previously redeemed by the Company,
to purchase from the Company at any time after the Distribution Date (as defined
in the Rights Agreement) and prior to 5:00 p.m., Boston time, on the 10th
anniversary of the date of the Rights Agreement (the "Expiration Date"), at the
office of the Rights Agent, or its successors as Rights Agent, in Canton,
Massachussetts, one ten-thousandth (1/10,000th) of a fully paid, nonassessable
share of Series A Participating Cumulative Preferred Stock, par value $1.00 per
share, of the Company (the "Preferred Shares"), at an exercise price per one
ten-thousandth (1/10,000th) of a share equal to $40 (the "Exercise Price")
payable in cash, upon presentation and surrender of this Right Certificate with
the Form of Election to Purchase duly executed.
The Exercise Price and the number and kind of shares which may be
purchased upon exercise of each Right evidenced by this Right Certificate, as
set forth above, are the Exercise Price and the number and kind of shares which
may be so purchased as of October 2, 2001. As provided in the Rights Agreement,
the Exercise Price and the number and kind of shares which may be purchased upon
the exercise of each Right evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.
If the Rights evidenced by this Right Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder
B-1
of any such Right (including any purported transferee or subsequent holder)
shall not have any right to exercise or transfer any such Right.
This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Right Certificates. Copies
of the Rights Agreement are on file at the above-mentioned office of the Rights
Agent and are also available from the Company upon written request.
This Right Certificate, with or without other Right Certificates, upon
surrender at the stock transfer or corporate trust office of the Rights Agent,
may be exchanged for another Right Certificate or Right Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number and kind of shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall entitle such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Right Certificate may be redeemed by the Company at its option at a
redemption price (in cash or shares of Common Stock or other securities of the
Company deemed by the Board of Directors to be at least equivalent in value) of
$.001 per Right (which amount shall be subject to adjustment as provided in the
Rights Agreement) at any time prior to the earlier of (i) such time as a Person
becomes an Acquiring Person and (ii) the Expiration Date.
The Company may, but shall not be required to, issue fractions of
Preferred Shares or distribute certificates which evidence fractions of
Preferred Shares upon the exercise of any Right or Rights evidenced hereby. In
lieu of issuing fractional shares, the Company may elect to make a cash payment
as provided in the Rights Agreement for fractions of a share other than one
ten-thousandth (1/10,000th) of a share or any integral multiple thereof or to
issue certificates or utilize a depository arrangement as provided in the terms
of the Rights Agreement and the Preferred Shares.
No holder of this Right Certificate shall 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 on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company, including, without limitation,
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or other distributions or subscription rights, or otherwise, until the
Right or Rights evidenced by this Right Certificate shall have been exercised as
provided in accordance with the provisions of the Rights Agreement.
B-2
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
Dated as of:
AWARE, INC.
By:
-------------------------
Name: Michael A. Tzannes
Title: Chief Executive Officer
Countersigned:
EQUISERVE TRUST COMPANY, N.A.
as Rights Agent
By:
--------------------------
Authorized Signatory
B-3
[On Reverse Side of Right Certificate]
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if
such holder desires to exercise the Rights
represented by this Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise
____________ Rights represented by this Right Certificate to purchase
the Preferred Shares (or other shares) issuable upon the exercise of
such Rights and requests that certificates for such shares be issued in
the name of:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced
by this Right Certificate, a new Right Certificate for the balance
remaining of such Rights shall be registered in the name of and
delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated:
---------------
Signature
Signature Guaranteed:
NOTICE
The signature on the foregoing Form of Election to Purchase
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.
B-4