RIGHTS AGREEMENT

 

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                                                                     EXHIBIT 4.1

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                              CancerVax Corporation

 

                                        and

 

                          Mellon Investor Services LLC

 

                                 as Rights Agent

 

                                Rights Agreement

 

                          Dated as of November 3, 2004

 

================================================================================

 

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                                RIGHTS AGREEMENT

 

      Rights Agreement, dated as of November 3, 2004, between CancerVax

Corporation, a Delaware corporation (the "COMPANY"), and Mellon Investor

Services LLC, a New Jersey limited liability company, as Rights Agent (the

"RIGHTS AGENT").

 

                                    RECITALS

 

      WHEREAS, on November 3, 2004, the Board of Directors of the Company

adopted this Agreement, and has authorized and declared a dividend of one

preferred share purchase right (a "RIGHT") for each Common Share (as defined in

Section 1.6) of the Company outstanding at the close of business on November 15,

2004 (the "RECORD DATE") and has authorized and directed the issuance of one

Right (subject to adjustment as provided herein) with respect to each Common

Share that shall become outstanding between the Record Date and the earliest of

the Distribution Date and the Expiration Date (as such terms are defined in

Sections 3.1 and 7.1), each Right initially representing the right to purchase

one one-thousandth (subject to adjustment) of a share of Series A Junior

Participating Preferred Stock, par value $0.00004 per share (the "PREFERRED

SHARES"), of the Company having the rights, powers and preferences set forth in

the form of Certificate of Designation attached hereto as Exhibit A, upon the

terms and subject to the conditions hereinafter set forth; PROVIDED, HOWEVER,

that Rights may be issued with respect to Common Shares that shall become

outstanding after the Distribution Date and prior to the Expiration Date in

accordance with Section 22.

 

      NOW, THEREFORE, in consideration of the premises and the mutual agreements

herein set forth, the parties hereby agree as follows:

 

      Section 1. Certain Definitions. For purposes of this Agreement, the

following terms have the meanings indicated:

 

      1.1. "ACQUIRING PERSON" shall mean any Person (as such term is hereinafter

defined) who or which, together with all Affiliates and Associates (as such

terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as

such term is hereinafter defined) of 15% or more of the Common Shares of the

Company then outstanding but shall not include (i) an Exempt Person or (ii) any

Existing Holder, unless and until such time as such Existing Holder shall become

the Beneficial Owner of (A) a percentage of the Common Shares of the Company

then outstanding that is more than the aggregate percentage of the outstanding

Common Shares that such Existing Holder beneficially owned as of November 3,

2004, plus 2% (the "EXEMPT OWNERSHIP PERCENTAGE") or (B) less than 15% of the

Common Shares of the Company then outstanding. "EXISTING HOLDER" shall mean

Donald L. Morton, M.D., together with all of his Affiliates and Associates.

Notwithstanding the foregoing, no Person shall become an "Acquiring Person" as

the result of an acquisition of Common Shares by the Company which, by reducing

the number of shares outstanding, increases the proportionate number of shares

beneficially owned by such Person to 15% (or, in the case of an Existing Holder,

the Exempt Ownership Percentage) or more of the Common Shares of the Company

then outstanding; PROVIDED, HOWEVER, that if a Person shall become the

Beneficial Owner of 15% (or, in the case of an Existing Holder, the Exempt

Ownership Percentage) or more of the Common Shares of the Company then

outstanding solely by reason of share purchases by the

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Company and shall, after such share purchases by the Company, become the

Beneficial Owner of one or more additional Common Shares of the Company (other

than pursuant to a dividend or distribution paid or made by the Company on the

outstanding Common Shares in Common Shares or pursuant to a split or subdivision

of the outstanding Common Shares), then such Person shall be deemed to be an

"Acquiring Person" unless upon becoming the Beneficial Owner of such additional

shares of Common Stock such Person does not beneficially own 15% (or, in the

case of an Existing Holder, the Exempt Ownership Percentage) or more of the

shares of Common Stock then outstanding. Notwithstanding the foregoing, if the

Board of Directors of the Company determines in good faith that a Person who

would otherwise be an "Acquiring Person," as defined pursuant to the foregoing

provisions of this Section 1.1, has become such inadvertently (including,

without limitation, because (A) such Person was unaware that it beneficially

owned a percentage of Common Stock that would otherwise cause such Person to be

an "Acquiring Person" or (B) such Person was aware of the extent of its

Beneficial Ownership of Common Stock but had no actual knowledge of the

consequences of such Beneficial Ownership under this Agreement), and without any

intention of changing or influencing control of the Company, and such Person

divests as promptly as practicable a sufficient number of Common Shares so that

such Person would no longer be an Acquiring Person, as defined pursuant to the

foregoing provisions of this Section 1.1, then such Person shall not be deemed

to be or have become an "Acquiring Person" at any time for any purposes of this

Agreement. For all purposes of this Agreement, any calculation of the number of

Common Shares outstanding at any particular time, including for purposes of

determining the particular percentage of such outstanding Common Shares of which

any Person is the Beneficial Owner, shall be made in accordance with the last

sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the

Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), as in effect

on the date of this Agreement.

 

            1.2. "AFFILIATE" and "ASSOCIATE" shall have the respective meanings

ascribed to such terms in Rule 12b-2 of the General Rules and Regulations, under

the Exchange Act, as in effect on the date of this Agreement.

 

            1.3. A Person shall be deemed the "BENEFICIAL OWNER" of and shall be

deemed to "BENEFICIALLY OWN" any securities:

 

                  (i) which such Person or any of such Person's Affiliates or

Associates beneficially owns, directly or indirectly (as determined pursuant to

Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in

effect on the date of this Agreement);

 

                  (ii) which such Person or any of such Person's Affiliates or

Associates, directly or indirectly, has (A) the right to acquire (whether such

right is exercisable immediately, or only after the passage of time, compliance

with regulatory requirements, fulfillment of a condition or otherwise) pursuant

to any agreement, arrangement or understanding, whether or not in writing (other

than customary agreements with and between underwriters and selling group

members with respect to a bona fide public offering of securities), or upon the

exercise of conversion rights, exchange rights, rights, warrants or options, or

otherwise; PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial

Owner of, or to beneficially own, (w) 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

 

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securities are accepted for purchase or exchange, (x) securities which such

Person has a right to acquire upon the exercise of Rights at any time prior to

the time that any Person becomes an Acquiring Person, (y) securities issuable

upon the exercise of Rights from and after the time that any Person becomes an

Acquiring Person if such Rights were acquired by such Person or any of such

Person's Affiliates or Associates prior to the Distribution Date or pursuant to

Section 3.1 or Section 22 ("ORIGINAL RIGHTS") or pursuant to Section 11.9 or

Section 11.15 with respect to an adjustment to Original Rights or (z) securities

which such Person or any of such Person's Affiliates or Associates may acquire,

does or do acquire or may be deemed to acquire or may be deemed to have the

right to acquire, pursuant to any merger or other acquisition agreement between

the Company and such Person (or one or more of such Person's Affiliates or

Associates) if prior to such Person becoming an Acquiring Person the Board of

Directors of the Company has approved such agreement and determined that such

Person shall not be or be deemed to be the beneficial owner of such securities

within the meaning of this Section 1.3; or (B) the right to vote pursuant to any

agreement, arrangement or understanding (whether or not in writing); PROVIDED,

HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or to

beneficially own, any security under this clause (B) if the agreement,

arrangement or understanding to vote such security (1) arises solely from a

revocable proxy or consent given to such Person in response to a public proxy or

consent solicitation made pursuant to, and in accordance with, the applicable

rules and regulations of the Exchange Act and (2) is not also then reportable on

Schedule 13D under the Exchange Act (or any comparable or successor report); or

 

                   (iii) which are beneficially owned, directly or indirectly, by

any other Person (or any Affiliate or Associate thereof) and with respect to

which such Person or any of such Person's Affiliates or Associates has any

agreement, arrangement or understanding (other than customary agreements with

and between underwriters and selling group members with respect to a bona fide

public offering of securities), whether or not in writing, for the purpose of

acquiring, holding, voting (except pursuant to a revocable proxy or consent as

described in the proviso to Section 1.3(ii)(B)) or disposing of any securities

of the Company;

 

PROVIDED, HOWEVER, that no Person who is an officer, director or employee of an

Exempt Person shall be deemed, solely by reason of such Person's status or

authority as such, to be the "Beneficial Owner" of, to have "Beneficial

Ownership" of or to "beneficially own" any securities that are "beneficially

owned" (as defined in this Section 1.3), including, without limitation, in a

fiduciary capacity, by an Exempt Person or by any other such officer, director

or employee of an Exempt Person.

 

            1.4. "BUSINESS DAY" shall mean any day other than a Saturday,

Sunday, or a day on which banking institutions in the States of California, New

York or New Jersey are authorized or obligated by law or executive order to

close.

 

            1.5. "CLOSE OF BUSINESS" on any given date shall mean 5:00 p.m.,

Pacific Coast time, on such date; PROVIDED, HOWEVER, that if such date is not a

Business Day it shall mean 5:00 p.m., Pacific Coast time, on the next succeeding

Business Day.

 

            1.6. "COMMON SHARES" when used with reference to the Company shall

mean the shares of common stock, par value $0.00004 per share, of the Company.

"Common Shares"

 

                                        3

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when used with reference to any Person other than the Company shall mean the

capital stock with the greatest voting power, or the equity securities or other

equity interest having power to control or direct the management, of such other

Person or, if such Person is a Subsidiary (as such term is hereinafter defined)

of another Person, the Person or Persons which ultimately control such

first-mentioned Person, and which has issued and outstanding such capital stock,

equity securities or equity interest.

 

            1.7. "EXEMPT PERSON" shall mean the Company, any Subsidiary of the

Company, in each case including, without limitation, its fiduciary capacity, or

any employee benefit plan of the Company or of any Subsidiary of the Company or

any entity or trustee holding shares of capital stock of the Company for or

pursuant to the terms of any such plan, or for the purpose of funding other

employee benefits for employees of the Company or any Subsidiary of the Company.

 

            1.8. "PERSON" shall mean any individual, partnership, joint venture,

limited liability company, firm, corporation, unincorporated association, trust

or other entity, and shall include any successor (by merger or otherwise) of

such entity.

 

            1.9. "SHARES ACQUISITION DATE" shall mean the first date of public

announcement (which, for purposes of this definition, shall include, without

limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act

or pursuant to a comparable successor statute) by the Company or an Acquiring

Person that an Acquiring Person has become such or that discloses information

which reveals the existence of an Acquiring Person or such earlier date as a

majority of the Board of Directors shall become aware of the existence of an

Acquiring Person.

 

            1.10. "SUBSIDIARY" of any Person shall mean any corporation or other

entity of which a majority of the voting power of the voting equity securities

or equity interests is owned, of record or beneficially, directly or indirectly,

by such Person.

 

            1.11. A "TRIGGER EVENT" shall be deemed to have occurred upon any

Person becoming an Acquiring Person.

 

            1.12. The following terms shall have the meanings defined for such

terms in the Sections set forth below:

 

<TABLE>

<CAPTION>

           Term                                               Section

           ----                                               -------

<S>                                                           <C>

Adjustment Shares                                              11.1.2

common stock equivalent                                        11.1.3

Company                                                        Recitals

current per share market price                                  11.4

Current Value                                                  11.1.3

Distribution Date                                              3.1

equivalent preferred stock                                     11.2

Exchange Act                                                    1.1

Exchange Consideration                                         27.1

Existing Holder                                                1.1

</TABLE>

 

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<TABLE>

<S>                                                             <C>

Expiration Date                                                7.1

Final Expiration Date                                          7.1

Nasdaq                                                         9

Original Rights                                                 1.3

Preferred Shares                                               Recitals

Principal Party                                                13.2

Purchase Price                                                 4

Record Date                                                    Recitals

Redemption Date                                                7.1

Redemption Price                                               23.1

Right                                                           Recitals

Right Certificate                                              3.1

Rights Agent                                                   Recitals

Security                                                       11.4

Spread                                                          11.1.3

Substitution Period                                            11.1.3

Summary of Rights                                              3.2

Trading Day                                                    11.4

</TABLE>

 

      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 such co-Rights Agents as it may deem

necessary or desirable. In the event the Company appoints one or more co-Rights

Agents, the respective duties of the Rights Agent and any co-Rights Agent shall

be as the Company shall determine. Contemporaneously with such appointment, if

any, the Company shall notify the Rights Agent thereof. Notwithstanding the

foregoing, 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.

 

      Section 3. Issuance of Right Certificates.

 

            3.1. Rights Evidenced by Share Certificates. Until the earlier of

the close of business on (i) the tenth day after the Shares Acquisition Date or

(ii) the tenth Business Day after the date of the commencement of, or first

public announcement of the intent of any Person (other than an Exempt Person) to

commence, a tender or exchange offer the consummation of which would result in

any Person (other than an Exempt Person) becoming the Beneficial Owner of Common

Shares aggregating 15% or more of the then outstanding Common Shares of the

Company (the earlier of (i) and (ii) being herein referred to as the

"DISTRIBUTION DATE"), (x) the Rights (unless earlier expired, redeemed or

terminated) will be evidenced (subject to the provisions of Section 3.2) by the

certificates for Common Shares registered in the names of the holders thereof

(which certificates for Common Shares shall also be deemed to be Right

Certificates) and not by separate certificates, and (y) the Rights (and the

right to receive certificates therefor) will be transferable only in connection

with the transfer of the underlying Common Shares. The preceding sentence

notwithstanding, prior to the occurrence of a Distribution Date specified as a

result of an event described in clause (ii) above (or such later Distribution

Date as the Board of Directors of the Company may select pursuant to this

sentence), the Board of Directors may postpone, one or more times, the

Distribution Date which

 

                                        5

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would occur as a result of an event described in clause (ii) beyond the date set

forth in such clause (ii). Nothing herein shall permit such a postponement of a

Distribution Date after a Person becomes an Acquiring Person. As soon as

practicable after the Distribution Date, the Company will prepare and execute,

the Rights Agent will countersign and the Company (or, if requested in writing

and provided with all necessary information, the Rights Agent) will send, by

first-class, postage-prepaid mail, to each record holder of Common Shares as of

the close of business on the Distribution Date (other than any Acquiring Person

or any Associate or Affiliate of an Acquiring Person), at the address of such

holder shown on the records of the Company, one or more certificates for Rights,

in substantially the form of Exhibit B hereto (a "RIGHT CERTIFICATE"),

evidencing one Right (subject to adjustment as provided herein) for each Common

Share so held. As of the Distribution Date, the Rights will be evidenced solely

by such Right Certificates.

 

      The Company shall promptly notify the Rights Agent in writing upon the

occurrence of the Distribution Date and, if such notice is given orally, the

Company shall confirm the same in writing. Until such notice is received by the

Rights Agent, the Rights Agent may presume conclusively for all purposes that

the Distribution Date has not occurred.

 

            3.2. Summary of Rights. On the Record Date or as soon as practicable

thereafter, the Company will send or cause to be sent a copy of a Summary of

Rights to Purchase Preferred Shares, in substantially the form attached hereto

as Exhibit C (the "SUMMARY OF RIGHTS"), by first-class, postage-prepaid mail, to

each record holder of Common Shares as of the close of business on the Record

Date at the address of such holder shown on the records of the Company. With

respect to certificates for Common Shares outstanding as of the close of

business on the Record Date, until the Distribution Date (or the earlier

Expiration Date), the Rights will be evidenced by such certificates for Common

Shares registered in the names of the holders thereof together with a copy of

the Summary of Rights and the registered holders of the Common Shares shall also

be registered holders of the associated Rights. Until the Distribution Date (or

the earlier Expiration Date), the surrender for transfer of any certificate for

Common Shares outstanding at the close of business on the Record Date, with or

without a copy of the Summary of Rights, shall also constitute the transfer of

the Rights associated with the Common Shares represented thereby.

 

            3.3. New Certificates After Record Date. Certificates for Common

Shares which become outstanding (whether upon issuance out of authorized but

unissued Common Shares, disposition out of treasury or transfer or exchange of

outstanding Common Shares) after the Record Date but prior to the earliest of

the Distribution Date or the Expiration Date, shall have impressed, printed,

stamped, written or otherwise affixed onto them the following legend:

 

      This certificate also evidences and entitles the holder hereof to certain

      rights (the "Rights") as set forth in an Agreement between CancerVax

      Corporation (the "Company") and Mellon Investor Services LLC, as Rights

      Agent, dated as of November 3, 2004, as the same may be amended from time

      to time (the "Agreement"), the terms of which are hereby incorporated

      herein by reference and a copy of which is on file at the principal

      executive offices of the Company. Under certain circumstances, as set

      forth in the Agreement, such Rights will be evidenced by separate

      certificates and will no longer be evidenced by this

 

                                        6

<PAGE>

 

      certificate. The Company will mail to the holder of this certificate a

      copy of the Agreement without charge after receipt of a written request

      therefor. AS DESCRIBED IN THE AGREEMENT, RIGHTS WHICH ARE OWNED BY,

      TRANSFERRED TO OR HAVE BEEN OWNED BY ACQUIRING PERSONS OR ASSOCIATES OR

      AFFILIATES THEREOF (AS DEFINED IN THE AGREEMENT) SHALL BECOME NULL AND

      VOID AND WILL NO LONGER BE TRANSFERABLE.

 

With respect to such certificates containing the foregoing legend, until the

Distribution Date (or the earlier Expiration Date), the Rights associated with

the Common Shares represented by such certificates shall be evidenced by such

certificates alone, and the surrender for transfer of any such certificates,

except as otherwise provided herein, shall also constitute the transfer of the

Rights associated with the Common Shares represented thereby. In the event that

the Company purchases or acquires any Common Shares after the Record Date but

prior to the Distribution Date, any Rights associated with such Common Shares

shall be deemed canceled and retired so that the Company shall not be entitled

to exercise any Rights associated with the Common Shares which are no longer

outstanding.

 

      Notwithstanding this Section 3.3, the omission of a legend shall not

affect the enforceability of any part of this Agreement or the rights of any

holder of the Rights.

 

      Section 4. Form of Right Certificates. The Right Certificates (and the

forms of election to purchase shares, certification and assignment to be printed

on the reverse thereof) shall be substantially the same as Exhibit B hereto and

may have such marks of identification or designation and such legends, summaries

or endorsements printed thereon as the Company may deem appropriate (but which

do not affect the rights, duties or responsibilities of the Rights Agent) and as

are not inconsistent with the provisions of this Agreement, or as may be

required to comply with any applicable law or with any rule or regulation made

pursuant thereto or with any rule or regulation of any stock exchange or trading

system on which the Rights may from time to time be listed or quoted, or to

conform to usage. Subject to the terms and conditions hereof, the Right

Certificates, whenever issued, shall be dated as of the Record Date, and shall

show the date of countersignature by the Rights Agent, and on their face shall

entitle the holders thereof to purchase such number of one one-thousandths of a

Preferred Share as shall be set forth therein at the price per one

one-thousandth of a Preferred Share set forth therein (the "PURCHASE PRICE"),

but the number of such one one-thousandths of a Preferred Share and the Purchase

Price shall be subject to adjustment as provided herein.

 

      Section 5. Countersignature and Registration. The Right Certificates shall

be executed on behalf of the Company by its Chairman of the Board of Directors,

the Chief Executive Officer, President or any Vice President, either manually or

by facsimile signature, and shall have affixed thereto the Company's seal or a

facsimile thereof which shall be attested by the Secretary or any Assistant

Secretary of the Company, either manually or by facsimile signature. The Right

Certificates shall be countersigned, either manually or by facsimile signature,

by an authorized signatory of the Rights Agent, but it shall not be necessary

for the same signatory to countersign all of the Right Certificates hereunder.

No Right Certificate shall be valid for any purpose unless so countersigned. In

case any officer of the Company who shall have signed any of the Right

Certificates shall cease to be such officer of the Company before

countersignature by the Rights Agent and issuance and delivery by the Company,

such Right Certificates, nevertheless, may be

 

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<PAGE>

 

countersigned by the Rights Agent, and issued and delivered by the Company with

the same force and effect as though the person who signed such Right

Certificates had not ceased to be such officer of the Company; and any Right

Certificate may be signed on behalf of the Company by any person who, at the

actual date of the execution of such Right Certificate, shall be a proper

officer of the Company to sign such Right Certificate, although at the date of

the execution of this Agreement any such person was not such an officer.

 

      Following the Distribution Date, receipt by the Rights Agent of notice to

that effect and all other relevant information referred to in Section 3.1, the

Rights Agent will keep or cause to be kept, at its office designated for such

purpose, books for registration and transfer of the Right Certificates issued

hereunder. Such books shall show the names and addresses of the respective

holders of the Right Certificates, the number of Rights evidenced on its face by

each of the Right Certificates, 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. Subject

to the provisions of Section 11.1.2 and Section 14, at any time after the close

of business on the Distribution Date, and at or prior to the close of business

on the Expiration Date, any Right Certificate or Right Certificates (other than

Right Certificates representing Rights that have become null and void pursuant

to Section 11.1.2 or that have been exchanged pursuant to Section 27) may be

transferred, split up or combined or exchanged for another Right Certificate or

Right Certificates, entitling the registered holder to purchase a like number of

one one-thousandths of a Preferred Share as the Right Certificate or Right

Certificates surrendered then entitled such holder to purchase. Any registered

holder desiring to transfer, split up or combine or exchange any Right

Certificate shall make such request in writing delivered to the Rights Agent,

and shall surrender, together with any required form of assignment and

certificate duly completed, the Right Certificate or Right Certificates to be

transferred, split up or combined or exchanged at the office of the Rights Agent

designated for such purpose. Neither the Rights Agent nor the Company shall be

obligated to take any action whatsoever with respect to the transfer of any such

surrendered Right Certificate or Right Certificates until the registered holder

shall have properly completed and signed the certificate contained in the form

of assignment on the reverse side of such Right Certificate or Right

Certificates and shall have provided such additional evidence of the identity of

the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates

thereof as the Company or the Rights Agent shall reasonably request. Thereupon

the Rights Agent shall countersign and deliver to the person entitled thereto a

Right Certificate or Right Certificates, as the case may be, as so requested.

The Company may require payment from the holders of Right Certificates of a sum

sufficient to cover any tax or governmental charge that may be imposed in

connection with any transfer, split up or combination or exchange of such Right

Certificates.

 

      Subject to the provisions of Section 11.1.2, at any time after the

Distribution Date and prior to the Expiration Date, upon receipt by the Company

and the Rights Agent of evidence reasonably satisfactory to them of the loss,

theft, destruction or mutilation of a Right Certificate, and, in case of loss,

theft or destruction, of indemnity or security reasonably satisfactory to them,

and, at the Company's or the Rights Agent'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 and deliver

 

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<PAGE>

 

a new Right Certificate of like tenor to the Rights Agent for countersignature

and delivery to the registered owner in lieu of the Right Certificate so lost,

stolen, destroyed or mutilated.

 

      Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.

 

            7.1. Exercise of Rights. Subject to Section 11.1.2 and except as

otherwise provided herein, the registered holder of any Right Certificate may

exercise the Rights evidenced thereby in whole or in part at any time after the

Distribution Date upon surrender of the Right Certificate, with the form of

election to purchase and certification on the reverse side thereof duly

executed, to the Rights Agent at the office of the Rights Agent designated for

such purpose, together with payment of the aggregate Purchase Price for the

total number of one one-thousandths of a Preferred Share (or other securities,

cash or other assets) as to which the Rights are exercised, at or prior to the

time (the "EXPIRATION DATE") that is the earliest of (i) the close of business

on November 15, 2014 (the "FINAL EXPIRATION DATE"), (ii) the time at which the

Rights are redeemed as provided in Section 23 (the "REDEMPTION DATE"), (iii) the

closing of any merger or other acquisition transaction involving the Company

pursuant to an agreement of the type described in Section 13.3 at which time the

Rights are deemed terminated, or (iv) the time at which the Rights are exchanged

as provided in Section 27.

 

            7.2. Purchase. The Purchase Price for each one one-thousandth of a

Preferred Share pursuant to the exercise of a Right shall be initially $95.00,

shall be subject to adjustment from time to time as provided in Sections 11, 13

and 26 and shall be payable in lawful money of the United States of America in

accordance with Section 7.3.

 

            7.3. Payment Procedures. Upon receipt of a Right Certificate

representing exercisable Rights, with the form of election to purchase and

certification duly executed, accompanied by payment of the aggregate Purchase

Price for the total number of one one-thousandths of a Preferred Share to be

purchased and an amount equal to any applicable transfer tax or governmental

charge required to be paid by the holder of such Right Certificate in accordance

with Section 9, in cash or by certified or cashier's check or money order

payable to the order of the Company, the Rights Agent shall thereupon promptly

(i)(A) 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 total number of Preferred Shares

issuable upon exercise of the Rights hereunder with a depository agent,

requisition from the depository agent depository receipts representing interests

in such number of one one-thousandths of a Preferred Share as are to be

purchased (in which case certificates for the Preferred Shares represented by

such receipts shall be deposited by the transfer agent with the depository

agent) and the Company hereby directs the depository agent to comply with all

such requests, (ii) when appropriate, requisition from the Company the amount of

cash to be paid in lieu of the issuance of fractional shares in accordance with

Section 14 or otherwise in accordance with Section 11.1.3, (iii) promptly after

receipt of such certificates or depository 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. In the

event that the Company is obligated to issue other securities of the Company,

 

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<PAGE>

 

pay cash and/or distribute other property pursuant to Section 11.1.3, the

Company will make all arrangements necessary so that such other securities, cash

and/or other property are available for distribution by the Rights Agent, if and

when necessary to comply with this Agreement.

 

            7.4. Partial Exercise. In case the registered holder of any Right

Certificate shall exercise less than all the Rights evidenced thereby, a new

Right Certificate evidencing Rights equivalent to the Rights remaining

unexercised shall be issued by the Rights Agent and delivered to the registered

holder of such Right Certificate or to his duly authorized assigns, subject to

the provisions of Section 14.

 

            7.5. Full Information Concerning Ownership. Notwithstanding anything

in this Agreement to the contrary, neither the Rights Agent nor the Company

shall be obligated to undertake any action with respect to a registered holder

of Rights upon the occurrence of any purported exercise as set forth in this

Section 7 unless the certificate contained in the form of election to purchase

set forth on the reverse side of the Right Certificate surrendered for such

exercise shall have been duly and properly completed and signed by the

registered holder thereof and the Company shall have been provided with such

additional evidence of the identity of the Beneficial Owner (or former

Beneficial Owner) or Affiliates or Associates thereof as the Company or the

Rights Agent shall reasonably request.

 

      Section 8. Cancellation and Destruction of Right Certificates. All Right

Certificates surrendered for the purpose of exercise, transfer, split up,

combination or exchange shall, if surrendered to the Company or to any of its

agents, be delivered to the Rights Agent for cancellation or in canceled form,

or, if surrendered to the Rights Agent, shall be canceled by it, and no Right

Certificates shall be issued in lieu thereof except as expressly permitted by

any of the provisions of this Agreement. The Company shall deliver to the Rights

Agent for cancellation and retirement, and the Rights Agent shall so cancel and

retire, any other Right Certificate purchased or acquired by the Company

otherwise than upon the exercise thereof. The Rights Agent shall deliver all

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 Capital Stock. The Company

covenants and agrees that from and after the Distribution Date it will cause to

be reserved and kept available out of its authorized and unissued Preferred

Shares (and, following the occurrence of a Trigger Event, out of its authorized

and unissued Common Shares or other securities or out of its shares held in its

treasury) the number of Preferred Shares (and, following the occurrence of a

Trigger Event, Common Shares and/or other securities) that will be sufficient to

permit the exercise in full of all outstanding Rights.

 

      So long as the Preferred Shares (and, following the occurrence of a

Trigger Event, Common Shares and/or other securities) issuable upon the exercise

of Rights may be listed on any national securities exchange or traded in the

over-the-counter market and quoted on the National Association of Securities

Dealers, Inc. Automated Quotation System ("NASDAQ") (including the National

Market or Small Cap Market), the Company shall use its best efforts to cause,

from and after such time as the Rights become exercisable, all shares reserved

for such

 

                                       10

<PAGE>

 

issuance to be listed or admitted to trading on such exchange or quoted on

Nasdaq upon official notice of issuance upon such exercise.

 

      The Company covenants and agrees that it will take all such action as may

be necessary to ensure that all Preferred Shares (and, following the occurrence

of a Trigger Event, Common Shares and/or other securities) delivered upon

exercise of Rights shall, at the time of delivery of the certificates for such

shares (subject to payment of the Purchase Price), be duly and validly

authorized and issued and fully paid and nonassessable shares.

 

      From and after such time as the Rights become exercisable, the Company

shall use its best efforts, if then necessary to permit the issuance of

Preferred Shares upon the exercise of Rights, to register and qualify such

Preferred Shares under the Securities Act and any applicable state securities or

"Blue Sky" laws (to the extent exemptions therefrom are not available), cause

such registration statement and qualifications to become effective as soon as

possible after such filing and keep such registration and qualifications

effective until the earlier of the date as of which the Rights are no longer

exercisable for such securities and the Expiration Date. The Company may

temporarily suspend, for a period of time not to exceed 90 days, the

exercisability of the Rights in order to prepare and file a registration

statement under the Securities Act and permit it to become effective. Upon any

such suspension, the Company shall issue a public announcement stating that the

exercisability of the Rights has been temporarily suspended, as well as a public

announcement at such time as the suspension is no longer in effect. The Company

shall notify the Rights Agent whenever it makes a public announcement pursuant

to this Section 9 and give the Rights Agent a copy of such announcement.

Notwithstanding any provision of this Agreement to the contrary, the Rights

shall not be exercisable in any jurisdiction unless the requisite qualification

in such jurisdiction shall have been obtained and until a registration statement

under the Securities Act (if required) shall have been declared effective.

 

      The Company further covenants and agrees that it will pay when due and

payable any and all Federal and state transfer taxes and governmental charges

which may be payable in respect of the issuance or delivery of the Right

Certificates or of any Preferred Shares (or Common Shares and/or other

securities, as the case may be) upon the exercise of Rights. The Company shall

not, however, be required to pay any transfer tax or governmental charge which

may be payable in respect of any transfer or delivery of Right Certificates to a

person other than, or the issuance or delivery of certificates for the Preferred

Shares (or Common Shares and/or other securities, as the case may be) in a name

other than that of, the registered holder of the Right Certificate evidencing

Rights surrendered for exercise or to issue or deliver any certificates for

Preferred Shares (or Common Shares and/or other securities, as the case may be)

in a name other than that of the registered holder upon the exercise of any

Rights until any such transfer tax or governmental charge shall have been paid

(any such transfer tax or governmental charge being payable by the holder of

such Right Certificate at the time of surrender) or until it has been

established to the Company's satisfaction that no such transfer tax or

governmental charge is due.

 

      Section 10. Preferred Shares Record Date. Each Person in whose name any

certificate for Preferred Shares (or Common Shares and/or other securities, as

the case may be) is issued upon the exercise of Rights shall for all purposes be

deemed to have become the holder of record

 

                                       11

<PAGE>

 

of the Preferred Shares (or Common Shares and/or other securities, as the case

may be) represented thereby on, and such certificate shall be dated, the date

upon which the Right Certificate evidencing such Rights was duly surrendered and

payment of the Purchase Price (and any applicable transfer taxes and

governmental charges) was made; PROVIDED, HOWEVER, that if the date of such

surrender and payment is a date upon which the Preferred Shares (or Common

Shares and/or other securities, as the case may be) transfer books of the

Company are closed, such Person shall be deemed to have become the record holder

of such shares (fractional or otherwise) on, and such certificate shall be

dated, the next succeeding Business Day on which the Preferred Shares (or Common

Shares and/or other securities, as the case may be) transfer books of the

Company are open. Prior to the exercise of the Rights evidenced thereby, the

holder of a Right Certificate shall not be entitled to any rights of a holder of

Preferred Shares for which the Rights shall be exercisable, including, without

limitation, the right to vote or to receive dividends or other distributions,

and shall not be entitled to receive any notice of any proceedings of the

Company, except as provided herein.

 

      Section 11. Adjustment of Purchase Price, Number of Shares or Number of

Rights. The Purchase Price, the number of Preferred Shares or other securities

or property purchasable upon exercise of each Right and the number of Rights

outstanding are subject to adjustment from time to time as provided in this

Section 11.

 

            11.1. Post-Execution Events.

 

                  11.1.1. Corporate Dividends, Reclassifications, Etc. In the

event the Company shall at any time after the date of this Agreement (A) declare

and pay a dividend on the Preferred Shares payable in Preferred Shares, (B)

subdivide the outstanding Preferred Shares, (C) combine the outstanding

Preferred Shares into a smaller number of Preferred Shares or (D) issue any

shares of its capital stock in a reclassification of the Preferred Shares

(including any such reclassification in connection with a consolidation or

merger in which the Company is the continuing or surviving corporation), except

as otherwise provided in this Section 11.1, the Purchase Price in effect at the

time of the record date for such dividend or of the effective date of such

subdivision, combination or reclassification, and the number and kind of shares

of capital stock issuable on such date, shall be proportionately adjusted so

that the holder of any Right exercised after such time shall be entitled to

receive the aggregate number and kind of shares of capital stock which, if such

Right had been exercised immediately prior to such date and at a time when the

Preferred Shares transfer books of the Company were open, he would have owned

upon such exercise and been entitled to receive by virtue of such dividend,

subdivision, combination or reclassification; PROVIDED, HOWEVER, that in no

event shall the consideration to be paid upon the exercise of one Right be less

than the aggregate par value of the shares of capital stock of the Company

issuable upon exercise of one Right. If an event occurs which would require an

adjustment under both Section 11.1.1 and Section 11.1.2, the adjustment provided

for in this Section 11.1.1 shall be in addition to, and shall be made prior to,

the adjustment required pursuant to, Section 11.1.2.

 

                  11.1.2. Acquiring Person Events; Triggering Events. Subject to

Sections 23.1 and 27, in the event that a Trigger Event occurs, then, from and

after the first occurrence of such event, each holder of a Right, except as

provided below, shall thereafter have a right to receive, upon exercise thereof

at a price per Right equal to the then current Purchase

 

                                       12

<PAGE>

 

Price multiplied by the number of one one-thousandths of a Preferred Share for

which a Right is then exercisable (without giving effect to this Section

11.1.2), in accordance with the terms of this Agreement and in lieu of Preferred

Shares, such number of Common Shares as shall equal the result obtained by (x)

multiplying the then current Purchase Price by the then number of one

one-thousandths of a Preferred Share for which a Right is then exercisable

(without giving effect to this Section 11.1.2) and (y) dividing that product by

50% of the current per share market price of the Common Shares (determined

pursuant to Section 11.4) on the first of the date of the occurrence of, or the

date of the first public announcement of, a Trigger Event (the "ADJUSTMENT

SHARES"); PROVIDED that the Purchase Price and the number of Adjustment Shares

shall thereafter be subject to further adjustment as appropriate in accordance

with Section 11.6. Notwithstanding the foregoing, upon the occurrence of a

Trigger Event, any Rights that are or were acquired or beneficially owned by (1)

any Acquiring Person or any Associate or Affiliate thereof, (2) a transferee of

any Acquiring Person (or of any such Associate or Affiliate) who becomes a

transferee after the Acquiring Person becomes such, or (3) a transferee of any

Acquiring Person (or of any such Associate or Affiliate) who becomes a

transferee prior to or concurrently with the Acquiring Person becoming such and

receives such Rights pursuant to either (A) a transfer (whether or not for

consideration) from the Acquiring Person to holders of equity interests in such

Acquiring Person or to any Person with whom the Acquiring Person has any

continuing agreement, arrangement or understanding regarding the transferred

Rights or (B) a transfer which the Board of Directors of the Company has

determined is part of a plan, arrangement or understanding which has as a

primary purpose or effect avoidance of this Section 11.1.2, and subsequent

transferees, shall become null and void without any further action, and any

holder (whether or not such holder is an Acquiring Person or an Associate or

Affiliate of an Acquiring Person) of such Rights shall thereafter have no right

to exercise such Rights under any provision of this Agreement or otherwise. From

and after the Trigger Event, no Right Certificate shall be issued pursuant to

Section 3 or Section 6 that represents Rights that are or have become null and

void pursuant to the provisions of this paragraph, and any Right Certificate

delivered to the Rights Agent that represents Rights that are or have become

null and void pursuant to the provisions of this paragraph shall be canceled.

The Company shall give the Rights Agent written notice of the identity of any

such Acquiring Person, Associate or Affiliate, and the Rights Agent may rely on

such notice in carrying out its duties under the Agreement and shall be deemed

not to have any knowledge of the identity of any such Acquiring Person,

Associate or Affiliate unless and until it shall have received such notice.

 

      The Company shall use all reasonable efforts to ensure that the provisions

of this Section 11.1.2 are complied with, but shall have no liability to any

holder of Right Certificates or other Person as a result of the Company's

failure to make any determinations with respect to any Acquiring Person or its

Affiliates, Associates or transferees hereunder.

 

      From and after the occurrence of an event specified in Section 13.1, any

Rights that theretofore have not been exercised pursuant to this Section 11.1.2

shall thereafter be exercisable only in accordance with Section 13 and not

pursuant to this Section 11.1.2.

 

                  11.1.3. Insufficient Shares. The Company may at its option

substitute for a Common Share issuable upon the exercise of Rights in accordance

with the foregoing Section 11.1.2 a number of Preferred Shares or fraction

thereof such that the current per share market price of one Preferred Share

multiplied by such number or fraction is equal to the current

 

                                       13

<PAGE>

 

per share market price of one Common Share. In the event that upon the

occurrence of a Trigger Event there shall not be sufficient Common Shares

authorized but unissued, or held by the Company as treasury shares, to permit

the exercise in full of the Rights in accordance with the foregoing Section

11.1.2, the Company shall take all such action as may be necessary to authorize

additional Common Shares for issuance upon exercise of the Rights, PROVIDED,

HOWEVER, that if the Company determines that it is unable to cause the

authorization of a sufficient number of additional Common Shares, then, in the

event the Rights become exercisable, the Company, with respect to each Right and

to the extent necessary and permitted by applicable law and any agreements or

instruments in effect on the date hereof to which it is a party, shall: (A)

determine the excess of (1) the value of the Adjustment Shares issuable upon the

exercise of a Right (the "CURRENT VALUE"), over (2) the Purchase Price (such

excess, the "SPREAD") and (B) with respect to each Right (other than Rights

which have become null and void pursuant to Section 11.1.2), make adequate

provision to substitute for the Adjustment Shares, upon payment of the

applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price, (3)

Preferred Shares or other equity securities of the Company (including, without

limitation, shares, or fractions of shares, of preferred stock which, by virtue

of having dividend and liquidation rights substantially comparable to those of

the Common Shares, the Board of Directors of the Company has deemed in good

faith to have substantially the same value as Common Shares) (each such share of

preferred stock or fractions of shares of preferred stock constituting a "COMMON

STOCK EQUIVALENT"), (4) debt securities of the Company, (5) other assets or (6)

any combination of the foregoing having an aggregate value equal to the Current

Value, where such aggregate value has been determined by the Board of Directors

of the Company based upon the advice of a nationally recognized investment

banking firm selected in good faith by the Board of Directors of the Company;

PROVIDED, HOWEVER, that if the Company shall not have made adequate provision to

deliver value pursuant to clause (B) above within thirty (30) days following the

occurrence of a Trigger Event, then the Company shall be obligated to deliver,

to the extent necessary and permitted by applicable law and any agreements or

instruments in effect on the date hereof to which it is a party, upon the

surrender for exercise of a Right and without requiring payment of the Purchase

Price, Common Shares (to the extent available) and then, if necessary, such

number or fractions of Preferred Shares (to the extent available) and then, if

necessary, cash, which shares and/or cash have an aggregate value equal to the

Spread. If the Board of Directors of the Company shall determine in good faith

that it is unlikely that sufficient additional Common Shares could be authorized

for issuance upon exercise in full of the Rights, the thirty (30) day period set

forth above may be extended and re-extended to the extent necessary, but not

more than ninety (90) days following the occurrence of a Trigger Event, in order

that the Company may seek stockholder approval for the authorization of such

additional shares (such period as may be extended, the "SUBSTITUTION PERIOD").

To the extent that the Company determines that some action need be taken

pursuant to the second and/or third sentences of this Section 11.1.3, the

Company (x) shall provide that such action shall apply uniformly to all

outstanding Rights, and (y) may suspend the exercisability of the Rights until

the expiration of the Substitution Period in order to seek any authorization of

additional shares and/or to decide the appropriate form of distribution to be

made pursuant to such first sentence and to determine the value thereof. In the

event of any such suspension, the Company shall issue a public announcement

stating that the exercisability of the Rights has been temporarily suspended as

well as a public announcement at such time as the suspension is no longer in

effect (with prompt written notice to the Rights Agent of either announcement

with a

 

                                       14

<PAGE>

 

copy of such announcement). For purposes of this Section 11.1.3, the value of a

Common Share shall be the current per share market price (as determined pursuant

to Section 11.4) on the date of the occurrence of a Trigger Event and the value

of any "common stock equivalent" shall be deemed to have the same value as the

Common Shares on such date. The Board of Directors of the Company may, but shall

not be required to, establish procedures to allocate the right to receive Common

Shares upon the exercise of the Rights among holders of Rights pursuant to this

Section 11.1.3.

 

            11.2. Dilutive Rights Offering. In case the Company shall fix a

record date for the issuance of rights, options or warrants to all holders of

Preferred Shares entitling them (for a period expiring within 45 calendar days

after such record date) to subscribe for or purchase Preferred Shares (or

securities having the same rights, privileges and preferences as the Preferred

Shares ("EQUIVALENT PREFERRED STOCK")) or securities convertible into Preferred

Shares or equivalent preferred stock at a price per Preferred Share or per share

of equivalent preferred stock (or having a conversion or exercise price per

share, if a security convertible into or exercisable for Preferred Shares or

equivalent preferred stock) less than the current per share market price of the

Preferred Shares (as determined pursuant to Section 11.4) on such record date,

the Purchase Price to be in effect after such record date shall be determined by

multiplying the Purchase Price in effect immediately prior to such record date

by a fraction, the numerator of which shall be the number of Preferred Shares

and shares of equivalent preferred stock outstanding on such record date plus

the number of Preferred Shares and shares of equivalent preferred stock which

the aggregate offering price of the total number of Preferred Shares and/or

shares of equivalent preferred stock to be offered (and/or the aggregate initial

conversion price of the convertible securities so to be offered) would purchase

at such current per share market price and the denominator of which shall be the

number of Preferred Shares and shares of equivalent preferred stock outstanding

on such record date plus the number of additional Preferred Shares and/or shares

of equivalent preferred stock to be offered for subscription or purchase (or

into which the convertible securities so to be offered are initially

convertible); PROVIDED, HOWEVER, that in no event shall the consideration to be

paid upon the exercise of one Right be less than the aggregate par value of the

shares of capital stock of the Company issuable upon exercise of one Right. In

case such subscription price may be paid in a consideration part or all of which

shall be in a form other than cash, the value of such consideration shall be 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 and the holders of the Rights. Preferred

Shares and shares of equivalent preferred stock owned by or held for the account

of the Company or any Subsidiary of the Company shall not be deemed outstanding

for the purpose of any such computation. Such adjustments shall be made

successively whenever such a record date is fixed; and in the event that such

rights or warrants are not so issued, the Purchase Price shall be adjusted to be

the Purchase Price which would then be in effect if such record date had not

been fixed.

 

            11.3. Distributions. In case the Company shall fix a record date for

the making of a distribution to all holders of the Preferred Shares (including

any such distribution made in connection with a consolidation or merger in which

the Company is the continuing or surviving corporation) of evidences of

indebtedness, cash, securities or assets (other than a regular periodic cash

dividend at a rate not in excess of 125% of the rate of the last regular

periodic cash dividend theretofore paid or, in case regular periodic cash

dividends have not theretofore

 

                                       15

<PAGE>

 

been paid, at a rate not in excess of 50% of the average net income per share of

the Company for the four quarters ended immediately prior to the payment of such

dividend, or a dividend payable in Preferred Shares (which dividend, for

purposes of this Agreement, shall be subject to the provisions of Section

11.1.1(A))) or convertible securities, or subscription rights or warrants

(excluding those referred to in Section 11.2), the Purchase Price to be in

effect after such record date shall be determined by multiplying the Purchase

Price in effect immediately prior to such record date by a fraction, the

numerator of which shall be the current per share market price of the Preferred

Shares (as determined pursuant to Section 11.4) on such record date, less the

fair market value (as determined in good faith by the Board of Directors of the

Company, whose determination shall be described in a statement filed with the

Rights Agent) of the portion of the cash, assets, securities or evidences of

indebtedness so to be distributed or of such subscription rights or warrants

applicable to one Preferred Share and the denominator of which shall be such

current per share market price of the Preferred Shares (as determined pursuant

to Section 11.4); PROVIDED, HOWEVER, that in no event shall the consideration to

be paid upon the exercise of one Right be less than the aggregate par value of

the shares of capital stock of the Company to be issued upon exercise of one

Right. Such adjustments shall be made successively whenever such a record date

is fixed; and in the event that such distribution is not so made, the Purchase

Price shall again be adjusted to be the Purchase Price which would then be in

effect if such record date had not been fixed.

 

            11.4. Current Per Share Market Value.

 

                  11.4.1. General. For the purpose of any computation hereunder,

the "CURRENT PER SHARE MARKET PRICE" of any security (a "SECURITY" for the

purpose of this Section 11.4.1) on any date shall be deemed to be the average of

the daily closing prices per share of such Security for the thirty (30)

consecutive Trading Days (as such term is hereinafter defined) immediately prior

to but not including such date; PROVIDED, HOWEVER, that in the event that the

current per share market price of the Security is determined during any period

following the announcement by the issuer of such Security of (i) a dividend or

distribution on such Security payable in shares of such Security or securities

convertible into such shares or (ii) any subdivision, combination or

reclassification of such Security, and prior to the expiration of thirty (30)

Trading Days after but not including the ex-dividend date for such dividend or

distribution, or the record date for such subdivision, combination or

reclassification, then, and in each such case, the "current per share market

price" shall be appropriately adjusted to reflect the current market price per

share equivalent of such Security. The closing price for each day shall be the

last sale price, regular way, or, in case no such sale takes place on such day,

the average of the closing bid and asked prices, regular way, in either case as

reported in the principal consolidated transaction reporting system with respect

to securities listed or admitted to trading on the New York Stock Exchange or,

if the Security is not listed or admitted to trading on the New York Stock

Exchange, as reported in the principal consolidated transaction reporting system

with respect to securities listed on the principal national securities exchange

on which the Security is listed or admitted to trading or, if the Security is

not listed or admitted to trading on any national securities exchange, the last

quoted price or, if not so quoted, the average of the high bid and low asked

prices in the over-the-counter market, as reported by Nasdaq or such other

system then in use, or, if on any such date the Security is not quoted by any

such organization, the average of the closing bid and asked prices as furnished

by a professional market maker making a market in the Security selected by the

Board of Directors of the Company. If on any such date no such

 

                                       16

<PAGE>

 

market maker is making a market in the Security, the fair value of the Security

on such date as determined in good faith by the Board of Directors of the

Company shall be used. The term "TRADING DAY" shall mean a day on which the

principal national securities exchange on which the Security is listed or

admitted to trading is open for the transaction of business or, if the Security

is not listed or admitted to trading on any national securities exchange, a

Business Day. If the Security is not publicly held or not so listed or traded,

or if on any such date the Security is not so quoted and no such market maker is

making a market in the Security, "current per share market price" shall mean the

fair value per share as determined in good faith by the Board of Directors of

the Company or, if at the time of such determination there is an Acquiring

Person, by a nationally recognized investment banking firm selected by the Board

of Directors, which shall have the duty to make such determination in a

reasonable and objective manner, whose determination shall be described in a

statement filed with the Rights Agent and shall be conclusive for all purposes.

 

                  11.4.2. Preferred Shares. Notwithstanding Section 11.4.1, for

the purpose of any computation hereunder, the "current per share market price"

of the Preferred Shares shall be determined in the same manner as set forth

above in Section 11.4.1 (other than the last sentence thereof). If the current

per share market price of the Preferred Shares cannot be determined in the

manner described in Section 11.4.1, the "current per share market price" of the

Preferred Shares shall be conclusively deemed to be an amount equal to 1,000 (as

such number may be appropriately adjusted for such events as stock splits, stock

dividends and recapitalizations with respect to the Common Shares occurring

after the date of this Agreement) multiplied by the current per share market

price of the Common Shares (as determined pursuant to Section 11.4.1). If

neither the Common Shares nor the Preferred Shares are publicly held or so

listed or traded, or if on any such date neither the Common Shares nor the

Preferred Shares are so quoted and no such market maker is making a market in

either the Common Shares or the Preferred Shares, "current per share market

price" of the Preferred Shares shall mean the fair value per share as determined

in good faith by the Board of Directors of the Company, or, if at the time of

such determination there is an Acquiring Person, by a nationally recognized

investment banking firm selected by the Board of Directors of the Company, which

shall have the duty to make such determination in a reasonable and objective

manner, which determination shall be described in a statement filed with the

Rights Agent and shall be conclusive for all purposes. For purposes of this

Agreement, the "current per share market price" of one one-thousandth of a

Preferred Share shall be equal to the "current per share market price" of one

Preferred Share divided by 1,000.

 

            11.5. Insignificant Changes. No adjustment in the Purchase Price

shall be required unless such adjustment would require an increase or decrease

of at least 1% in the Purchase Price. Any adjustments which by reason of this

Section 11.5 are not required to be made shall be carried forward and taken into

account in any subsequent adjustment. All calculations under this Section 11

shall be made to the nearest cent or to the nearest one-thousandth of a

Preferred Share or the nearest one-thousandth of a Common Share or other share

or security, as the case may be.

 

            11.6. Shares Other Than Preferred Shares. If as a result of an

adjustment made pursuant to Section 11.1, the holder of any Right thereafter

exercised shall become entitled to receive any shares of capital stock of the

Company other than Preferred Shares, thereafter the

 

                                       17

<PAGE>

 

number of such other shares so receivable upon exercise of any Right shall be

subject to adjustment from time to time in a manner and on terms as nearly

equivalent as practicable to the provisions with respect to the Preferred Shares

contained in Sections 11.1, 11.2, 11.3, 11.5, 11.8, 11.9 and 11.13, and the

provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares

shall apply on like terms to any such other shares.

 

            11.7. Rights Issued Prior to Adjustment. All Rights originally

issued by the Company subsequent to any adjustment made to the Purchase Price

hereunder shall evidence the right to purchase, at the adjusted Purchase Price,

the number of one one-thousandths of a Preferred Share purchasable from time to

time hereunder upon exercise of the Rights, all subject to further adjustment as

provided herein.

 

            11.8. Effect of Adjustments. Unless the Company shall have exercised

its election as provided in Section 11.9, upon each adjustment of the Purchase

Price as a result of the calculations made in Sections 11.2 and 11.3, each Right

outstanding immediately prior to the making of such adjustment shall thereafter

evidence the right to purchase, at the adjusted Purchase Price, that number of

one one-thousandths of a Preferred Share (calculated to the nearest one-hundred

thousandth of a Preferred Share) obtained by (i) multiplying (x) the number of

one one-thousandths of a Preferred Share covered by a Right immediately prior to

this adjustment by (y) the Purchase Price in effect immediately prior to such

adjustment of the Purchase Price and (ii) dividing the product so obtained by

the Purchase Price in effect immediately after such adjustment of the Purchase

Price.

 

            11.9. Adjustment in Number of Rights. The Company may elect on or

after the date of any adjustment of the Purchase Price to adjust the number of

Rights, in substitution for any adjustment in the number of one one-thousandths

of a Preferred Share issuable upon the exercise of a Right. Each of the Rights

outstanding after such adjustment of the number of Rights shall be exercisable

for the number of one one-thousandths of a Preferred Share for which a Right was

exercisable immediately prior to such adjustment. Each Right held of record

prior to such adjustment of the number of Rights shall become that number of

Rights (calculated to the nearest one-thousandth) obtained by dividing the

Purchase Price in effect immediately prior to adjustment of the Purchase Price

by the Purchase Price in effect immediately after adjustment of the Purchase

Price. The Company shall make a public announcement (with prompt written notice

to the Rights Agent) of its election to adjust the number of Rights, indicating

the record date for the adjustment, and, if known at the time, the amount of the

adjustment to be made. This record date may be the date on which the Purchase

Price is adjusted or any day thereafter, but, if the Right Certificates have

been issued, shall be at least ten (10) days later than the date of the public

announcement. If Right Certificates have been issued, upon each adjustment of

the number of Rights pursuant to this Section 11.9, the Company may, as promptly

as practicable, cause to be distributed to holders of record of Right

Certificates on such record date Right Certificates evidencing, subject to

Section 14, the additional Rights to which such holders shall be entitled as a

result of such adjustment, or, at the option of the Company, shall cause to be

distributed to such holders of record in substitution and replacement for the

Right Certificates held by such holders prior to the date of adjustment, and

upon surrender thereof, if required by the Company, new Right Certificates

evidencing all the Rights to which such holders shall be entitled after such

adjustment. Right Certificates so to be distributed shall be issued and executed

by the Company and countersigned and delivered by

 

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the Rights Agent in the manner provided for herein (and may bear, at the option

of the Company, the adjusted Purchase Price) and shall be registered in the

names of the holders of record of Right Certificates on the record date

specified in the public announcement.

 

            11.10. Right Certificates Unchanged. Irrespective of any adjustment

or change in the Purchase Price or the number of one one-thousandths of a

Preferred Share issuable upon the exercise of the Rights, the Right Certificates

theretofore and thereafter issued may continue to express the Purchase Price per

share and the number of one one-thousandths of a Preferred Share which were

expressed in the initial Right Certificates issued hereunder.

 

            11.11. Par Value Limitations. Before taking any action that would

cause an adjustment reducing the Purchase Price below one one-thousandth of the

then par value, if any, of the Preferred Shares or other shares of capital stock

issuable upon exercise of the Rights, the Company shall take any corporate

action which may, in the opinion of its counsel, be necessary in order that the

Company may validly and legally issue fully paid and nonassessable Preferred

Shares or other such shares at such adjusted Purchase Price.

 

            11.12. Deferred Issuance. In any case in which this Section 11 shall

require that an adjustment in the Purchase Price be made effective as of a

record date for a specified event, the Company may elect to defer (with prompt

written notice to the Rights Agent) until the occurrence of such event the

issuance to the holder of any Right exercised after