(h) “Common
Shares” when used with reference to the Company shall mean the shares of common
stock, par value $0.01 per share, of the Company. “Common Shares” when used
with reference to any Person other than the Company shall mean the capital
stock (or equity interest) with the greatest voting power of such other Person
or, if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(i) “Distribution
Date” shall have the meaning set forth in Section 3(a) hereof.
(j) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.
(k) “Exchange Ratio” shall have the meaning
set forth in Section 24(a) hereof.
(l) “Final
Expiration Date” shall mean the Close of Business on June 6, 2018.
(m) “NASDAQ”
shall mean The NASDAQ Stock Market LLC.
(n) “Person”
shall mean any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization or other entity, and
shall include any successor (by merger or otherwise) of such entity, as well as
any group under Rule 13d-5(b)(1) of the Exchange Act.
(o) “Preferred
Shares” shall mean shares of Series A Junior Participating Preferred Stock, par
value $0.01 per share, of the Company having the rights and preferences set
forth in the Form of Designation of Series A Junior Participating Preferred
Stock attached to this Agreement as Exhibit A.
(p) “Purchase
Price” shall have the meaning set forth in Section 4 hereof.
(q) “Record
Date” shall have the meaning set forth in the second paragraph hereof.
(r) “Redemption Date” shall have the meaning set
forth in Section 7(a) hereof.
(s) “Redemption
Price” shall have the meaning set forth in Section 23(a) hereof.
(t) “Right”
shall have the meaning set forth in the second paragraph hereof.
(u) “Rights
Certificate” shall have the meaning set forth in Section 3(a) hereof.
(v) “Shares
Acquisition Date” shall mean the first date of public announcement by the
Company or an Acquiring Person that an Acquiring Person has become such.
(w) “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 interest is owned,
directly or indirectly, by such Person.
(x) “Summary
of Rights” shall have the meaning set forth in Section 3(b) hereof.
(y) “Trading
Day” shall have the meaning set forth in Section 11(d) hereof.
- 4 -
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, upon ten
(10) days’ prior written notice to the Rights Agent. The Rights Agent shall
have no duty to supervise, and shall in no event be liable for the acts or
omissions of, any such co-Rights Agent.
Section
3.
Issue of
Rights Certificates
. (a) Until the tenth (10th) day after the Shares
Acquisition Date (including any such date which is after the date of this
Agreement and before the issuance of the Rights; the “Distribution Date”), (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares of the Company registered in the names of
the holders thereof (which certificates shall also be deemed to be Rights
Certificates) and not by separate Rights Certificates, and (y) the right to
receive Rights Certificates will be transferable only in connection with the
transfer of Common Shares of the Company. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured, postage-prepaid mail,
to each record holder of Common Shares of the Company as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate, in substantially the form of
Exhibit B hereto (a “Rights Certificate”), evidencing one Right for each Common
Share of the Company so held, subject to adjustment as provided herein. As of
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) On
the Record Date, or as soon as practicable thereafter, the Company will send or
cause to be sent (and the Rights Agent will, if requested, send) a copy of a
Summary of Rights to Purchase Preferred Shares, in substantially the form of
Exhibit C hereto (the “Summary of Rights”), by first-class, postage-prepaid
mail, to each record holder of Common Shares of the Company 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 of the Company
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates registered in the names of the holders
thereof together with a copy of the Summary of Rights attached thereto. Until
the Distribution Date (or the earlier of the Redemption Date or the Final
Expiration Date), the surrender for transfer of any certificate for Common
Shares of the Company outstanding on the Record Date, with or without a copy of
the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the Common Shares of the Company represented
thereby.
(c) Certificates
for Common Shares which become outstanding (including, without limitation,
reacquired Common Shares referred to in the last sentence of this paragraph
(c)) after the Record Date but before the earliest of the Distribution Date,
the Redemption Date or the Final Expiration Date shall have impressed on,
printed on, written on or otherwise affixed to them the following legend:
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This
certificate also evidences and entitles the holder hereof to certain rights
as set forth in an Agreement between Image Sensing Systems, Inc. and
Continental Stock Transfer & Trust Company dated as of June 6, 2013, as it
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 Image Sensing Systems, Inc. Under certain
circumstances, as set forth in the Agreement, such Rights (as defined in the
Agreement) will be evidenced by separate certificates and will no longer be
evidenced by this certificate. Image Sensing Systems, Inc. will mail to the
holder of this certificate a copy of the Agreement without charge after
receipt of a written request therefor. As set forth in the Agreement, Rights
Beneficially Owned by any Person (as defined in the Agreement) who becomes an
Acquiring Person (as defined in the Agreement) become null and void.
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- 5 -
With respect
to such certificates containing the foregoing legend, until the Distribution
Date, the Rights associated with the Common Shares of the Company represented
by such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares of the Company
represented thereby. If the Company purchases or acquires any Common Shares of
the Company after the Record Date but before the Distribution Date, any Rights
associated with such Common Shares of the Company shall be deemed cancelled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Shares of the Company which are no longer
outstanding. Notwithstanding this Section 3(c), the omission of a legend shall
not affect the enforceability of any part of this Rights Agreement or the
rights of any holder of the Rights.
Section
4.
Form of Rights
Certificates
. The Rights Certificates (and the forms of election to purchase
Preferred Shares and of the assignment to be printed on the reverse thereof)
shall be substantially the same as Exhibit B hereto, and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any applicable rule or regulation made pursuant thereto
or with any applicable rule or regulation of any stock exchange or the
Financial Industry Regulatory Authority, or to conform to usage. Subject to the
provisions of Section 22 of this Agreement, the Rights Certificates 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 Rights Certificates shall be executed on behalf of
the Company by its Chairman of the Board, its President and Chief Executive
Officer, or its Chief Financial Officer, either manually or by facsimile
signature, shall bear no seal, and shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be countersigned, either manually or by facsimile
signature, by the Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent and issued and delivered by the Company with the same force and effect as
though the individual who signed such Rights Certificates had not ceased to be
such officer of the Company; and any Rights Certificate may be signed on behalf
of the Company by any individual who, at the actual date of the execution of
such Rights Certificate, shall be a proper officer of the Company to sign such
Rights Certificate, although at the date of the execution of this Agreement any
such individual was not such an officer.
- 6 -
Following
the Distribution Date, the Rights Agent will keep or cause to be kept, at its
principal office, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the names and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates and the date of each
of the Rights Certificates.
Section
6.
Transfer,
Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates
. Subject to the provisions of
Section 14 hereof, at any time after the Close of Business on the Distribution
Date, and at or before the Close of Business on the earlier of the Redemption
Date or the Final Expiration Date, any Rights Certificate or Rights
Certificates (other than Rights Certificates representing Rights that have become
void pursuant to Section 11(a)(ii) hereof or that have been exchanged pursuant
to Section 24 hereof) may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates entitling the registered
holder to purchase a like number of one one-thousandths of a Preferred Share as
the Rights Certificate or Rights Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Rights Certificate or Rights Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Rights Certificates to be transferred, split up, combined
or exchanged at the principal office of the Rights Agent. The Rights Agent then
shall countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Rights Certificates.
Upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Rights Certificate,
and, in case of the loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and, at the Company’s request, reimbursement
to the Company and the Rights Agent of all reasonable expenses incidental
thereto, and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will make and deliver a new Rights
Certificate of like tenor to the Rights Agent for delivery to the registered
holder in lieu of the Rights Certificate so lost, stolen, destroyed or
mutilated.
Notwithstanding
any other provisions 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 Rights Certificates.
- 7 -
Section
7.
Exercise of
Rights; Purchase Price; Expiration Date of Rights
. (a) The registered
holder of any Rights 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 Rights Certificate, with the form
of election to purchase on the reverse side thereof duly executed, to the
Rights Agent at the principal office of the Rights Agent, together with payment
of the Purchase Price for each one one-thousandth of a Preferred Share as to
which the Rights are exercised, at or before the earliest of (i) the Final
Expiration Date, (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the “Redemption Date”), or (iii) the time at which such
Rights are exchanged as provided in Section 24 hereof.
(b) The
Purchase Price for each one one-thousandth of a Preferred Share purchasable
pursuant to the exercise of a Right shall initially be $25.00 and shall be
subject to adjustment from time to time as provided in Section 11 or Section 13
hereof, and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.
(c) Upon
receipt of a Rights Certificate representing exercisable Rights, with the form
of election to purchase duly executed, accompanied by payment of the Purchase
Price for the shares to be purchased and an amount equal to any applicable
transfer tax required to be paid by the holder of such Rights Certificate in
accordance with Section 9 hereof by certified check or cashier’s check payable to the order of the Rights Agent, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Shares certificates for the number of Preferred Shares to be purchased, and the
Company hereby irrevocably authorizes any such transfer agent to comply with
all such requests, or (B) requisition from the depositary agent depositary
receipts representing 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 of the
Preferred Shares with such depositary agent), and the Company hereby directs
such depositary agent to comply with such request; (ii) when appropriate,
requisition from the Company the amount of cash to be paid in lieu of issuance
of fractional shares in accordance with Section 14 hereof; (iii) after receipt
of such certificates or depositary receipts, cause the same to be delivered to
or upon the order of the registered holder of such Rights Certificate,
registered in such name or names as may be designated by such holder; and (iv)
when appropriate, after receipt, deliver such cash to or upon the order of the
registered holder of such Rights Certificate.
(d) If
the registered holder of any Rights Certificate shall exercise fewer than all
the Rights evidenced thereby, a new Rights Certificate evidencing Rights
equivalent to the Rights remaining unexercised shall be issued by the Rights
Agent to the registered holder of such Rights Certificate or to such holder’s
duly authorized assigns, subject to the provisions of Section 14 hereof.
Section
8.
Cancellation
and Destruction of Rights Certificates
. All Rights Certificates surrendered
for the purpose of exercise, transfer, split up, combination or exchange shall,
if surrendered to the Company or to any of its agents, be delivered to the
Rights Agent for cancellation or in cancelled form or, if surrendered to the
Rights Agent, shall be cancelled by it, and no Rights 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 Rights Certificate purchased or acquired by the Company otherwise
than upon the exercise thereof. The Rights Agent shall deliver all cancelled
Rights Certificates to the Company or shall, at the written request of the
Company, destroy such cancelled Rights Certificates, and, in such case, shall
deliver a certificate of destruction thereof to the Company.
- 8 -
Section
9.
Availability of Preferred Shares
. 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 Preferred
Shares held in its treasury the number of Preferred Shares that will be
sufficient to permit the exercise in full of all outstanding Rights in
accordance with Section 7 hereof. 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 of Rights shall, at the time of delivery of the
certificates for such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable shares.
The
Company further covenants and agrees that it will pay when due and payable any
and all federal and state transfer taxes and charges which may be payable in
respect of the issuance or delivery of the Rights Certificates or of any
Preferred Shares upon the exercise of Rights. The Company shall not, however,
be required to pay any transfer tax which may be payable in respect of any
transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of certificates or depositary receipts for the Preferred
Shares in a name other than that of, the registered holder of the Rights
Certificate evidencing Rights surrendered for exercise or to issue or to
deliver any certificates or depositary receipts for Preferred Shares upon the
exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company’s reasonable
satisfaction that no such tax is due.
Section
10.
Preferred Shares Record Date
. Each
Person in whose name any certificate for Preferred Shares is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of the Preferred Shares represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered and payment of the Purchase Price (and any
applicable transfer taxes) was made; provided, however, that, if the date of such
surrender and payment is a date upon which the Preferred Shares transfer books
of the Company are closed, such Person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares transfer books of the
Company are open. Before the exercise of the Rights evidenced thereby, the
holder of a Rights 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, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.
Section
11.
Adjustment of Purchase Price,
Number of Shares or Number of Rights
. The Purchase Price, the number of Preferred Shares covered by each
Right and the number of Rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i)
If the Company shall at any time after the date of this Agreement (A) declare 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 share exchange, consolidation or merger
in which the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and 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 before such date and at a time when the
Preferred Shares transfer books of the Company were open, such holder 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.
- 9 -
(ii) Subject
to Section 24 hereof, if any Person becomes an Acquiring Person, each holder of
a Right shall thereafter have a right to receive, upon exercise thereof at a
price equal to the then current Purchase Price multiplied by the number of one
one-thousandths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of the Company as shall equal
the result obtained by (A) multiplying the then current Purchase Price by the
number of one one-thousandths of a Preferred Share for which a Right is
then exercisable and dividing that product by (B) 50% of the then current per
share market price of the Common Shares of the Company (determined pursuant to
Section 11(d) hereof) on the date of the occurrence of such event. If any
Person shall become an Acquiring Person and the Rights shall then be
outstanding, the Company shall not take any action which would eliminate or
diminish the benefits intended to be afforded by the Rights.
From
and after the occurrence of such event, any Rights that are or were acquired or
Beneficially Owned by any Acquiring Person (or any Associate or Affiliate of such
Acquiring Person) shall be null and void without any further action, and any
holder of such Rights shall thereafter have no right to exercise such Rights
under any provision of this Agreement or otherwise. Neither the Company nor the
Rights Agent shall have liability to any holder of Rights Certificates or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder. No
Rights Certificate shall be issued pursuant to Section 3 hereof that represents
Rights Beneficially Owned by an Acquiring Person whose Rights would be void
pursuant to the preceding sentence or any Associate or Affiliate thereof; no
Rights Certificate shall be issued at any time upon the transfer of any Rights
to an Acquiring Person whose Rights would be void pursuant to the preceding
sentence or any Associate or Affiliate thereof or to any nominee of such
Acquiring Person, Associate or Affiliate or with respect to any Common Shares
otherwise deemed to be Beneficially Owned by any of the foregoing; and any
Rights Certificate delivered to the Rights Agent for transfer to an Acquiring
Person or other Person whose Rights would be void pursuant to the preceding
sentence shall be cancelled.
(iii) If
there are not a sufficient number of Common Shares issued but not outstanding
or authorized but unissued to permit the exercise in full of the Rights in
accordance with subparagraph (ii) above, the Company shall take all such action
as may be necessary to authorize additional Common Shares for issuance upon
exercise of the Rights. If the Company shall, after a good faith effort, be
unable to take all such action as may be necessary to authorize such number of
additional Common Shares, the Company shall substitute, for each Common Share
that would otherwise be issuable upon exercise of a Right, 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 per share market price of one Common Share as of the date of
issuance of such Preferred Shares or fraction thereof.
- 10 -
(b) If
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 shares having the same rights, privileges and preferences as the
Preferred Shares (“equivalent preferred shares”)) or securities convertible
into Preferred Shares or equivalent preferred shares at a price per Preferred
Share or equivalent preferred share (or having a conversion price per share, if
a security convertible into Preferred Shares or equivalent preferred shares)
less than the then current per share market price of the Preferred Shares (as
defined in Section 11(d)) on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately before such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or equivalent preferred
shares so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current market
price and the denominator of which shall be the number of Preferred Shares
outstanding on such record date plus the number of additional Preferred Shares
and/or equivalent preferred shares to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible); provided, however, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock 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, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on
the Rights Agent and holders of the Rights. Preferred Shares 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 adjustment
shall be made successively whenever such a record date is fixed; and, if such
rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) If
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 share exchange, consolidation or merger in which the Company
is the continuing or surviving corporation) of evidences of indebtedness or
assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Shares) or subscription rights or warrants (excluding those referred
to in Section 11(b) hereof), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately before such record date by a fraction, the numerator of which shall
be the then-current per share market price of the Preferred Shares on
such record date, less the fair market value (as determined in good faith by
the Board, whose determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and holders of the
Rights) of the portion of the assets 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 then-current
per share market price of the Preferred Shares on such record date; 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 -
(d) (i)
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(d)(i))
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 immediately
before such date; provided, however, that, if the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or Securities convertible into such
shares, or (B) any subdivision, combination or reclassification of such
Security and before the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
current per share market price 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, reported at or before
4:00 P.M. Eastern time or, in case no such sale takes place on such day, the
average of the bid and asked prices, regular way, reported as of 4:00 P.M.
Eastern time, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NASDAQ or, if the Security is not listed or admitted to trading
on the NASDAQ, 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 reported at or before 4:00 P.M. Eastern time
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported as of 4:00 P.M. Eastern time
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. 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.
(ii) For
the purpose of any computation hereunder, the “current per share market price”
of the Preferred Shares shall be determined in accordance with the method set
forth in Section 11(d)(i). If the Preferred Shares are not publicly traded, the
“current per share market price” of the Preferred Shares shall be conclusively
deemed to be the current per share market price of the Common Shares of the
Company as determined pursuant to Section 11(d)(i) hereof (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one thousand. If neither the
Company’s Common Shares nor the Preferred Shares are publicly held or so listed
or traded, “current per share market price” shall mean the fair value per share
as determined in good faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent.
- 12 -
(e) 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; provided,
however, that any adjustments which by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11 shall be made to
the nearest cent or to the nearest one ten-millionth of a Preferred Share
or one ten-thousandth of any other share or Security as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three years from the date of the transaction which requires such adjustment or
(ii) the date of the expiration of the right to exercise any Rights.
(f) If,
as a result of an adjustment made pursuant to Section 11(a) hereof, 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
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 Section 11(a) through (c) hereof, inclusive, and the
provisions of Sections 7, 9, 10 and 13 hereof with respect to the Preferred Shares
shall apply on like terms to any such other shares.
(g) All
Rights originally issued by the Company subsequent to any adjustment made to
the Purchase Price hereunder shall evidence the right to purchase, at the
adjusted Purchase Price, the number of one one-thousandths of a Preferred
Share purchasable from time to time hereunder upon exercise of the Rights, all
subject to further adjustment as provided herein.
(h) Unless
the Company shall have exercised its election as provided in Section 11(i)
hereof, upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c) hereof, each Right outstanding
immediately before 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 ten-millionth of a
Preferred Share) obtained by (A) multiplying (x) the number of one one-thousandths
of a share covered by a Right immediately before this adjustment by (y) the
Purchase Price in effect immediately before such adjustment of the Purchase
Price and (B) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The
Company may elect, on or after the date of any adjustment of the Purchase
Price, to adjust the number of Rights in substitution for any adjustment in the
number of one one-thousandths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of
the number of Rights shall be exercisable for the number of one one-thousandths
of a Preferred Share for which a Right was exercisable immediately before such
adjustment. Each Right held of record before such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest one ten-thousandth)
obtained by dividing the Purchase Price in effect immediately before adjustment
of the Purchase Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall make a public announcement
of its election to adjust the number of Rights, indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Rights Certificates have been issued, shall
be at least ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Rights Certificates on such
record date Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of such
adjustment, or, at the option of the Company, shall cause to be distributed to
such holders of record in substitution and replacement for the Rights
Certificates held by such holders before the date of adjustment, and upon
surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such adjustment.
Rights Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein, and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
- 13 -
(j) Irrespective
of any adjustment or change in the Purchase Price or in the number of one one-thousandths
of a Preferred Share issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price and the number of one one-thousandths of a Preferred Share
which were expressed in the initial Rights Certificates issued hereunder.
(k) Before
taking any action that would cause an adjustment reducing the Purchase Price
below one one-thousandth of the then par value, if any, of the Preferred
Shares 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 at such adjusted Purchase Price.
(l) In
any case in which this Section 11 shall require that an adjustment in the
Purchase Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event the issuing to
the holder of any Right exercised after such record date of the Preferred
Shares and other capital stock or securities of the Company, if any, issuable
upon such exercise over and above the Preferred Shares and other capital stock
or securities of the Company, if any, issuable upon such exercise on the basis
of the Purchase Price in effect before such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder’s right to receive such additional shares
upon the occurrence of the event requiring such adjustment.
(m) Anything
in this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent that
it, in its sole discretion, shall determine to be advisable in order that any
consolidation or subdivision of the Preferred Shares, issuance wholly for cash
of any Preferred Shares at less than the current market price, issuance wholly
for cash of Preferred Shares or securities which by their terms are convertible
into or exchangeable for Preferred Shares, dividends on Preferred Shares
payable in Preferred Shares or issuance of rights, options or warrants referred
to in Section 11(b) hereof, hereafter made by the Company to holders of the
Preferred Shares shall not be taxable to such shareholders.
(n) If,
at any time after the date of this Agreement and before the Distribution Date,
the Company shall (i) declare or pay any dividend on the Common Shares payable
in Common Shares, or (ii) effect a subdivision, combination or consolidation of
the Common Shares (by reclassification or otherwise than by payment of
dividends in Common Shares) into a greater or lesser number of Common Shares,
then, in any such case, (A) the number of one one-thousandths of a
Preferred Share purchasable after such event upon proper exercise of each Right
shall be determined by multiplying the number of one one-thousandths of a
Preferred Share so purchasable immediately before such event by a fraction, the
numerator of which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number of Common Shares
outstanding immediately after such event, and (B) each Common Share outstanding
immediately after such event shall have issued with respect to it that number
of Rights which each Common Share outstanding immediately before such event had
issued with respect to it. The adjustments provided for in this Section 11(n)
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is affected.
- 14 -
Section
12.
Certificate of Adjusted
Purchase Price or Number of Shares
. Whenever an adjustment is made as
provided in Section 11 or 13 hereof, the Company shall promptly (a) prepare a
certificate setting forth such adjustment or describing such event and a brief
statement of the facts accounting for such adjustment or describing such event,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares or the Preferred Shares a copy of such certificate and (c) if such
adjustment occurs at any time after the Distribution Date, mail a brief summary
thereof to each holder of a Rights Certificate in accordance with Section 25
hereof.
Section
13.
Consolidation, Merger or Sale
or Transfer of Assets or Earning Power
. If, directly or indirectly, at any
time after a Person has become an Acquiring Person, (a) the Company shall
effect a share exchange, consolidate with, or merge with and into, any other
Person, (b) any Person shall effect a share exchange, consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such share exchange or merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other Person (or the
Company) or cash or any other property, or (c) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person other than the Company or one or more of
its wholly-owned Subsidiaries, then, and in each such case, proper
provision shall be made so that (i) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price multiplied by the
number of one one-thousandths of a Preferred Share for which a Right is
then exercisable, in accordance with the terms of this Agreement and in lieu of
Preferred Shares, such number of Common Shares of such other Person (including
the Company as successor thereto or as the surviving corporation) as shall
equal the result obtained by (A) multiplying the then current Purchase Price by
the number of one one-thousandths of a Preferred Share for which a Right
is then exercisable and dividing that product by (B) 50% of the then current
per share market price of the Common Shares of such other Person (determined
pursuant to Section 11(d) hereof) on the date of consummation of such
consolidation, merger, sale or transfer; (ii) the issuer of such Common Shares
shall thereafter be liable for, and shall assume, by virtue of such
consolidation, merger, sale or transfer, all the obligations and duties of the
Company pursuant to this Agreement; (iii) the term “Company” shall thereafter
be deemed to refer to such issuer; and (iv) such issuer shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
Common Shares in accordance with Section 9 hereof) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
Common Shares of the Company thereafter deliverable upon the exercise of the
Rights. The Company shall not consummate any such consolidation, merger, sale
or transfer unless, prior thereto, the Company and such issuer shall have
executed and delivered to the Rights Agent a supplemental agreement so
providing. The Company shall not enter into any transaction of the kind
referred to in this Section 13 if at the time of such transaction there are any
rights, warrants, instruments or securities outstanding or any agreements or
arrangements which, as a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to be afforded by the
Rights. The provisions of this Section 13 shall similarly apply to successive
mergers, share exchanges, or consolidations or sales or other transfers.
- 15 -
Section 14.
Fractional
Rights and Fractional Shares
. (a) The Company shall not be required to
issue fractions of Rights or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be paid to
the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately before the date on
which such fractional Rights would have been otherwise issuable. The closing
price for any day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices, regular way, in either case, as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the NASDAQ or, if the Rights are not listed or admitted to trading
on the NASDAQ, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading or, if the
Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported
by NASDAQ or such other system then in use or, if on any such date the Rights
are not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Rights selected by the Board. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by the Board shall be used.
(b) The
Company shall not be required to issue fractions of Preferred Shares (other
than fractions which are integral multiples of one one-thousandth of a
Preferred Share) upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than fractions which are integral
multiples of one one-thousandth of a Preferred Share). Fractions of Preferred
Shares in integral multiples of one one-thousandth of a Preferred Share may, at
the election of the Company, be evidenced by depositary receipts pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as Beneficial Owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-thousandth of a Preferred Share, the Company
shall pay to the registered holders of Rights Certificates at the time such
Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one Preferred Share. For the purposes
of this Section 14(b), the current market value of a Preferred Share shall be
the closing price of a Preferred Share (as determined pursuant to the second
sentence of Section 11(d)(i) hereof) for the Trading Day immediately before the
date of such exercise.
- 16 -
(c) The
holder of a Right, by the acceptance of the Right, expressly waives such
holder’s right to receive any fractional Rights or any fractional shares upon
exercise of a Right (except as provided above).
Section
15.
Rights of Action
. All rights of action
in respect of this Agreement, excepting the rights of action given to the
Rights Agent under Section 18 hereof, are vested in the respective registered
holders of the Rights Certificates (and, before the Distribution Date, the
registered holders of the Common Shares); and any registered holder of any Rights
Certificate (or, before the Distribution Date, of the Common Shares), without
the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, before the Distribution Date, of the Common Shares), may, in
such holder’s own behalf and for such holder’s own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, such holder’s right to exercise the
Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any breach
of this Agreement, and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section
16.
Agreement of Right Holders
. Every
holder of a Right, by accepting the same, consents and agrees with the Company
and the Rights Agent and with every other holder of a Right that:
(a) before
the Distribution Date, the Rights will be transferable only in connection with
the transfer of the Common Shares of the Company;
(b) after
the Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office of the
Rights Agent, duly endorsed or accompanied by a proper instrument of transfer;
and
(c) the
Company and the Rights Agent may deem and treat the Person in whose name the
Rights Certificate (or, before 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
Rights Certificate or the associated Common Shares certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent shall be affected by any notice to the
contrary.
- 17 -
Section
17.
Rights Certificate Holder Not Deemed a
Shareholder
. No holder, as such, of any Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the Preferred Shares or any other securities of the Company which may at any
time be issuable on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting shareholders (except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.
Section
18.
Concerning the Rights Agent
. The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder, and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder. The Company also agrees to indemnify
the Rights Agent for, and to hold it harmless against, any loss, liability, or
expense incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent
in connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability in the
premises.
The
Rights Agent shall be protected and shall incur no liability for, or in respect
of any action taken, suffered or omitted by it in connection with, its administration
of this Agreement in reliance upon any Rights Certificate or certificate for
the Preferred Shares or 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, or
otherwise upon the advice of counsel as set forth in Section 20 hereof.
Notwithstanding
anything in this Agreement to the contrary, in no event will the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights
Agent has been advised of the likelihood of such loss or damage and regardless
of the form of action.
Section
19.
Merger or Consolidation or Change of Name
of Rights Agent
. Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may effect a share
exchange, be consolidated, or any Person resulting from any merger, share
exchange, or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the stock transfer or
corporate trust powers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Agreement without the execution
or filing of any paper or document or any further act on the part of any of the
parties hereto; provided that such Person would be eligible for appointment as
a successor Rights Agent under the provisions of Section 21 hereof. In case at
the time such successor Rights Agent shall succeed to the agency created by
this Agreement, any of the Rights Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and, in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and, in all such
cases, such Rights Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
- 18 -
If
at any time the name of the Rights Agent shall be changed and at such time any
of the Rights Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name and deliver
Rights Certificates so countersigned; and, in case at that time any of the
Rights Certificates shall not have been countersigned, the Rights Agent may
countersign such Rights Certificates either in its prior name or in its changed
name; and, in all such cases, such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
Section
20.
Duties of Rights Agent
. The Rights
Agent undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, by all of which the Company and the holders of
Rights Certificates, by their acceptance thereof, shall be bound:
(a) The
Rights Agent may consult with legal counsel (who may be legal counsel for the
Company), and the opinion of such counsel shall be full and complete authorization
and protection to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion.
(b) Whenever
in the performance of its duties under this Agreement the Rights Agent shall
deem it necessary or desirable that any fact or matter be proved or established
by the Company before taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by any one of the Chairman of the Board, the President and
Chief Executive Officer, the Chief Financial Officer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The
Rights Agent shall be liable hereunder to the Company and any other Person only
for its own gross negligence, bad faith or willful misconduct.
(d) The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates (except
its countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the
Company only.
- 19 -
(e) The
Rights Agent shall not be under any responsibility in respect of the validity
of this Agreement or the execution and delivery hereof (except the due
execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall
it be responsible for any change in the exercisability of the Rights (including
the Rights becoming void pursuant to Section 11(a)(ii) hereof) or any
adjustment in the terms of the Rights (including the manner, method or amount
thereof) provided for in Sections 3, 11, 13, 23 or 24 hereof, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Rights
Certificates after receipt of a certificate pursuant to Section 12 describing
such change or 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 to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any Preferred Shares will, when issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The
Company agrees that it will perform, execute, acknowledge and deliver or cause
to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(g) The
Rights Agent is hereby authorized and directed to accept instructions with
respect to the performance of its duties hereunder from any one of the Chairman
of the Board, the President and Chief Executive Officer, the Chief Financial
Officer, the Secretary or any Assistant Secretary of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer or for any delay in acting
while waiting for those instructions.
(h) The
Rights Agent and any shareholder, director, officer or employee of the
Rights Agent may buy, sell or deal in any of the Rights or other securities of
the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other Person.
(i) The
Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself 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 that reasonable care was exercised in the
selection and continued employment thereof.
- 20 -
Section
21.
Change of Rights Agent
. The Rights
Agent or any successor Rights Agent may resign and be discharged from its
duties under this Agreement upon thirty (30) days’ notice in writing mailed to
the Company and, if the Rights Agent or one of its Affiliates is not also the
transfer agent for the Company, to each transfer agent of the Common Shares or
Preferred Shares by registered or certified mail. If the transfer agency
relationship in effect between the Company and the Rights Agent terminates, the
Rights Agent will be deemed to have resigned automatically and be discharged
from its duties under this Agreement as of the effective date of such
termination, and the Company shall be responsible for sending any required
notice. The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) upon thirty (30) days’ notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of thirty
(30) days after giving notice of such removal or after it has been notified in
writing of such resignation or incapacity by the resigning or incapacitated
Rights Agent or by the holder of a Rights Certificate (which holder shall, with
such notice, submit such holder’s Rights Certificate for inspection by the
Company), then the registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be either (a) a Person organized and doing business under the laws of the
United States or of the State of New York (or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in such state), in good standing which is authorized under such
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million or (b) an affiliate or direct or indirect wholly-owned
Subsidiary of such Person or its wholly-owning parent. 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 or Preferred Shares and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
Section
22.
Issuance of New Rights Certificates
.
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Company may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Rights
Certificates made in accordance with the provisions of this Agreement.
Section
23.
Redemption
. (a) The Board may, at its
option, at any time before such time as any Person becomes an Acquiring Person,
redeem all but not less than all the then outstanding Rights at a redemption
price of $0.001 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the “Redemption Price”). The
redemption of the Rights by the Board may be made effective at such time, on
such basis and with such conditions as the Board, in its sole discretion, may
establish.
- 21 -
(b) Immediately
upon the action of the Board ordering the redemption of the Rights pursuant to
paragraph (a) of this Section 23, and without any further action and without
any notice, the right to exercise the Rights will terminate, and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price.
The Company shall promptly give public notice of any such redemption; provided,
however, that the failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within ten (10) days after such action
of the Board ordering the redemption of the Rights, the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
before the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made. Neither the Company nor any of its Affiliates or
Associates may redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the purchase of Common
Shares before the Distribution Date.
Section
24.
Exchange
. (a) The Board may, at its
option, at any time after any Person becomes an Acquiring Person, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii)
hereof) for Common Shares at an exchange ratio of one Common Share per Right,
appropriately adjusted to reflect any adjustment in the number of Rights
pursuant to Section 11(i) (such exchange ratio being hereinafter referred to as
the “Exchange Ratio”). Notwithstanding the foregoing, the Board shall not be
empowered to effect such exchange at any time after any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan of the
Company or any such Subsidiary, or any entity holding Common Shares for or
pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of 50% or more of the
Common Shares of the Company then outstanding.
(b) Immediately
upon the action of the Board ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24, and without any further action and without
any notice, the right to exercise such Rights shall terminate, and the only
right thereafter of a holder of such Rights shall be to receive that number of
Common Shares of the Company equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books
of the Rights Agent. Any notice which is mailed in the manner herein provided
shall be deemed given, whether or not the holder receives the notice. Each such
notice of exchange will state the method by which the exchange of the Common
Shares for Rights will be effected, and, in the event of any partial exchange,
the number of Rights which will be exchanged. Any partial exchange shall be
effected
pro rata
based on the
number of Rights (other than Rights which have become void pursuant to the
provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
- 22 -
(c) If
there shall not be sufficient Common Shares issued but not outstanding or
authorized but unissued to permit any exchange of Rights as contemplated in
accordance with this Section 24, the Company shall take all such action as may
be necessary to authorize additional Common Shares for issuance upon exchange
of the Rights. If the Company shall, after good faith effort, be unable to take
all such action as may be necessary to authorize such additional Common Shares,
the Company shall substitute, for each Common Share that would otherwise be
issuable upon exchange of a Right, 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 per share market price of
one Common Share as of the date of issuance of such Preferred Shares or
fraction thereof.
(d) The
Company shall not be required to issue fractions of Common Shares or to
distribute certificates which evidence fractional Common Shares. In lieu of
such fractional Common Shares, the Company shall pay to the registered holders
of the Rights Certificates with regard to which such fractional Common Shares
would otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common Share shall be the
closing price of a Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately before the date of
exchange pursuant to this Section 24.
Section
25.
Notice of Certain Events
. (a) If the
Company shall, at any time after the Distribution Date, propose to (i) pay any
dividend payable in stock of any class to the holders of the Preferred Shares
or to make any other distribution to the holders of the Preferred Shares (other
than a regular quarterly cash dividend), (ii) offer to the holders of the
Preferred Shares rights or warrants to subscribe for or to purchase any
additional Preferred Shares or shares of stock of any class or any other
securities, rights or options, (iii) effect any reclassification of the
Preferred Shares (other than a reclassification involving only the subdivision
of outstanding Preferred Shares), (iv) effect any share exchange, consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one
or more transactions, of 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person, (v)
effect the liquidation, dissolution or winding up of the Company, or (vi)
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares),
then, in each such case, the Company shall give to each holder of a Rights
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
share exchange, reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice shall be so given in
the case of any action covered by clause (i) or (ii) above at least ten (10)
days before the record date for determining holders of the Preferred Shares for
purposes of such action, and, in the case of any such other action, at least
ten (10) days before the date of the taking of such proposed action or the date
of participation therein by the holders of the Common Shares and/or Preferred
Shares, whichever shall be the earlier.
- 23 -
(b) If
the event set forth in Section 11(a)(ii) hereof shall occur, then the Company
shall, as soon as practicable thereafter, give to each holder of a Rights
Certificate, in accordance with Section 26 hereof, a notice of the occurrence
of such event, which notice shall describe such event and the consequences of
such event to holders of Rights under Section 11(a)(ii) hereof.
Section
26.
Notices
. Notices or demands authorized
by this Agreement to be given or made by the Rights Agent or by the holder of
any Rights Certificate to or on the Company shall be sufficiently given or made
if sent by overnight delivery service or first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:
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Image
Sensing Systems, Inc.
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500 Spruce
Tree Centre
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1600
University Avenue West
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St. Paul, MN
55104
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Attention:
Corporate Secretary
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Subject to the
provisions of Section 21 hereof, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by overnight delivery service or first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Company) as
follows:
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Continental
Stock Transfer & Trust Company
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17 Battery
Place, 8th Floor
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New York,
New York 10004
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Attention:
Compliance Department
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Notices or
demands authorized by this Agreement to be given or made by the Company or the
Rights Agent to the holder of any Rights Certificate shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed to such holder
at the address of such holder as shown on the registry books of the Company.
Section
27.
Supplements and Amendments
. The
Company may and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates in order to (a) cure any ambiguity; (b) correct or supplement any
provision contained herein which may be defective or inconsistent with any
other provisions herein; or (c) change or supplement the provisions of this
Agreement in any manner which the Company may deem necessary or desirable, any
such supplement or amendment to be evidenced by a writing signed by the Company
and the Rights Agent; provided, however, that from and after such time as any
Person becomes an Acquiring Person, this Agreement shall not be amended in any
manner which would adversely affect the interests of the holders of Rights.
Notwithstanding the foregoing, the Rights Agent shall not be required to
execute any such supplement or amendment which adversely affects its rights,
duties, or obligations under this Agreement.
- 24 -
Section
28.
Successors
. All the covenants and
provisions of this Agreement by or for the benefit of the Company or the Rights
Agent shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section
29.
Benefits of this Agreement
. Nothing in
this Agreement shall be construed to give to any Person other than the Company,
the Rights Agent and the registered holders of the Rights Certificates (and,
before the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, before the Distribution Date, the
Common Shares).
Section
30.
Severability
. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section
31.
Governing Law
. This Agreement and each
Rights Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York (other than its conflicts of law provisions)
and shall be governed by and construed in accordance with the laws of such
state applicable to contracts to be made and performed entirely within such
state.
Section
32.
Counterparts
. This Agreement may be
executed in any number of counterparts, and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument. A signature to this
Agreement transmitted electronically or via facsimile shall have the same
authority, effect, and enforceability as an original signature.
Section
33.
Descriptive Headings
. Descriptive
headings of the several Sections of this Agreement are inserted for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
Section
34.
Force Majeure
. Notwithstanding anything
to the contrary contained herein, the Rights Agent shall not be liable for any
delays or failures in performance resulting from acts beyond its reasonable
control including, without limitation, acts of God, terrorist acts, shortage of
supply, breakdowns or malfunctions, interruptions or malfunctions of computer
facilities, or loss of data due to power failures or mechanical difficulties
with information storage or retrieval systems, labor difficulties, war, or
civil unrest.
[Signature page follows.]
- 25 -
[Signature Page to Rights Agreement
Dated as of June 6, 2013
by and between Image Sensing Systems, Inc. and
Continental Stock Transfer & Trust Company]
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the day and year first above written.
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Attest:
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Image
Sensing Systems, Inc.
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By
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/s/ Richard
A. Ehrich
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By
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/s/ Gregory
R. L. Smith
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Name:
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Richard A.
Ehrich
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Name:
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Gregory R.
L. Smith
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Title:
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Controller
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Title:
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Chief
Financial Officer
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Attest:
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Continental
Stock Transfer & Trust Company
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By
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/s/ Monty
Harry
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By
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/s/ Margaret
Villani
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Name:
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Monty Harry
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Name:
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Margaret
Villani
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Title:
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Vice
President
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Title:
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Vice
President
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Senior
Accounts Manager
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Senior
Accounts Manager
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- 26 -
Exhibit A
Form
of
Designation
of
Series A Junior Participating Preferred Stock
of Image Sensing Systems, Inc.
A-1
Designation
of
Series A Junior Participating Preferred Stock
of
Image Sensing Systems, Inc.
Section
1.
Designation
and Amount
. Of the 5,000,000 shares of preferred stock, par value $0.01 per
share, which the Company is authorized to issue under its Articles of
Incorporation, 50,000 of such shares shall be designated as “Series A Junior
Participating Preferred Stock” (the “Series A Preferred Stock”). Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding
plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Company convertible into Series A
Preferred Stock.
Section
2.
Dividends and
Distributions
.
(a) Subject
to the rights of the holders of any shares of any series of Preferred Stock (or
any similar stock) ranking prior and superior to the Series A Preferred Stock
with respect to dividends, the holders of shares of Series A Preferred Stock,
in preference to the holders of Common Stock, par value $0.01 per share (the “Common
Stock”), of the Company, and of any other junior stock, shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds
legally available for the purpose, quarterly dividends payable in cash on the
last day of March, June, September and December in each year (each such date
being referred to herein as a “Quarterly Dividend Payment Date”), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject
to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions, other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock 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. If the Company shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock,
then, in each such case, the amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under clause (b)
of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
A-2
(b) The
Company shall declare a dividend or distribution on the Series A Preferred
Stock as provided in paragraph (a) of this Section immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, if no dividend or distribution
shall have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $1.00 per share on the Series A Preferred Stock
shall nevertheless be payable on such subsequent Quarterly Dividend Payment
Date.
(c) Dividends
shall begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is
a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. 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. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall be not
more than 60 days prior to the date fixed for the payment thereof.
Section
3.
Voting Rights
.
The holders of shares of Series A Preferred Stock shall have the following
voting rights:
(a) Subject
to the provision for adjustment hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the shareholders of the Company. If the Company shall at
any time declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the number of votes
per share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
(b) Except
as otherwise provided herein, in any other Certificate of Designation creating
a series of the Company’s preferred stock or any similar stock, or by law, the
holders of shares of Series A Preferred Stock and the holders of shares of
Common Stock and any other capital stock of the Company having general voting
rights shall vote together as one class on all matters submitted to a vote of
shareholders of the Company.
A-3
(c) Except
as set forth herein, or as otherwise provided by 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 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 Company shall not:
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(i) declare
or pay dividends, or make any other distributions, on any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock;
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(ii) declare
or pay dividends, or make any other distributions, on any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the 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;
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(iii) redeem
or purchase or otherwise acquire for consideration shares of any stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, provided that the Company may at
any time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Company ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series A Preferred Stock; or
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(iv) redeem
or 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.
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(b) The
Company shall not permit any subsidiary of the Company to purchase or otherwise
acquire for consideration any shares of stock of the Company unless the Company
could, under paragraph (a) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section
5.
Reacquired
Shares
. Any shares of Series A Preferred Stock purchased or otherwise
acquired by the Company in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of preferred stock and may
be reissued as part of a new series of preferred stock subject to the
conditions and restrictions on issuance set forth herein, in the Company’s
Articles of Incorporation, or in any other Certificate of Designation creating
a series of preferred stock of the Company or any similar stock or as otherwise
required by law.
A-4
Section
6.
Liquidation,
Dissolution or Winding Up
. Upon any liquidation, dissolution or winding up
of the Company, 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 $1,000 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment, provided that
the holders of shares of Series A Preferred Stock shall be entitled to receive
an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock, or (2) to the
holders of 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 distributions made ratably on the Series A Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up. In
the event the Company shall at any time declare or pay any dividend on the
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to
such event.
Section
7.
Consolidation,
Merger, etc
. In case the Company shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock
are exchanged for or changed into other stock or securities, cash and/or any
other property, then in any such case each share of Series A Preferred Stock
shall at the same time be similarly exchanged or changed into an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged. If the Company shall at any time
declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares
of Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
A-5
Section
8.
No Redemption
.
The shares of Series A Preferred Stock shall not be redeemable.
Section
9.
Rank
. The Series
A Preferred Stock shall rank, with respect to the payment of dividends and the
distribution of assets, junior to all series of any other class of the Company’s
preferred stock.
Section
10.
Amendment
.
The Articles of Incorporation of the Company shall not be amended in any manner
which would materially alter or change the powers, preferences or special
rights of the Series A Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, voting together as a single class.
A-6
Exhibit B
Form
of Rights Certificate
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Certificate No. R-
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___ Rights
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NOT
EXERCISABLE AFTER THE FINAL EXPIRATION DATE (AS DEFINED IN
THE AGREEMENT) OR EARLIER IF REDEMPTION OR EXCHANGE OCCURS.
THE RIGHTS ARE SUBJECT TO REDEMPTION AT $0.001 PER RIGHT
AND TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT.
Rights
Certificate
Image
Sensing Systems, Inc.
This
certifies that ________________, or his, her or its registered assigns, is the
registered owner of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Agreement, dated as of June 6, 2013 (the “
Agreement
”), by and
between Image Sensing Systems, Inc., a Minnesota corporation (the “Company”),
and Continental Stock Transfer & Trust Company (the “Rights Agent”), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Agreement) and before 5:00 P.M., Eastern time, on the Final
Expiration Date (as such term is defined in the Agreement) at the principal
office of the Rights Agent, or at the office of its successor as Rights Agent,
one one-thousandth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $0.01 per share, of the Company (the “Preferred
Shares”), at a purchase price of $25.00 per one one-thousandth of a Preferred
Share (the “Purchase Price”), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of one one-thousandths
of a Preferred Share which may be purchased upon exercise hereof) set forth above,
and the Purchase Price set forth above, are the number and Purchase Price as of
June 17, 2013, based on the Preferred Shares as constituted at such date.
As provided in the Agreement, the Purchase Price and the number of one one-thousandths
of a Preferred Share which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
This
Rights Certificate is subject to all of the terms, provisions and conditions of
the Agreement, which terms, provisions and conditions are hereby incorporated
herein by reference and made a part hereof and to which Agreement reference is
hereby made for a full description of the rights, limitations of rights, obligations,
duties and immunities hereunder of the Rights Agent, the Company and the
holders of the Rights Certificates. Copies of the Agreement are on file at the
principal executive offices of the Company and the offices of the Rights Agent.
This
Rights Certificate, with or without other Rights Certificates, upon surrender
at the principal office of the Rights Agent, may be exchanged for another
Rights Certificate or Rights Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate number of Preferred
Shares as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised.
B-1
Subject
to the provisions of the Agreement, the Rights evidenced by this Rights
Certificate (i) may be redeemed by the Company at a redemption price of $0.001
per Right or (ii) may be exchanged in whole or in part for Preferred Shares or
shares of the Company’s Common Stock, par value $0.01 per share.
No
fractional Preferred Shares will be issued upon the exercise of any Right or
Rights evidenced hereby (other than fractions which are integral multiples of
one one-thousandth of a Preferred Share, which may, at the election of the
Company, be evidenced by depositary receipts), but, in lieu thereof, a cash
payment will be made, as provided in the Agreement.
No
holder of this Rights 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 Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting shareholders (except as provided in the Agreement),
or to receive dividends or subscription rights, or otherwise, until the Right
or Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Agreement.
This
Rights 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. Dated as of _____________,
____.
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Image Sensing Systems, Inc.
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Continental Stock Transfer & Trust Company
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By
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By
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Name:
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Name:
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Title:
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Title:
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B-2
Form
of Reverse Side of Rights Certificate
FORM
OF ASSIGNMENT
(To
be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR
VALUE RECEIVED __________________ hereby sells, assigns and transfers unto
__________________ (Please print name and address of transferee) this Rights
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ Attorney, to
transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Signature Guaranteed:
Signatures
must be guaranteed by a member or participant in the Securities Transfer Agent
Medallion Program, the New York Stock Exchange Medallion Signature Program, or
the Stock Exchange Medallion Program.
The
undersigned hereby certifies that the Rights evidenced by this Rights Certificate
are not Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Agreement).
Form of Reverse
Side of Rights Certificate – continued
B-3
FORM
OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Rights Certificate.)
To: Image Sensing Systems, Inc.
The
undersigned hereby irrevocably elects to exercise _____________________ Rights
represented by this Rights Certificate to purchase the Preferred Shares
issuable upon the exercise of such Rights and requests that certificates for
such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
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(Please print name and
address)’
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If such number of Rights shall not be all the Rights
evidenced by this Rights Certificate, a new Rights 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
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(Please print name and
address)’
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Signature Guaranteed:
Signatures
must be guaranteed by a member or participant in the Securities Transfer Agent
Medallion Program, the New York Stock Exchange Medallion Signature Program, or
the Stock Exchange Medallion Program.
The
undersigned hereby certifies that the Rights evidenced by this Rights
Certificate are not Beneficially Owned by an Acquiring Person or an Affiliate
or Associate thereof (as defined in the Agreement).
B-4
NOTICE
The
signature in the Form of Assignment or Form of Election to Purchase, as the
case may be, must conform to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any
change whatsoever.
If
the certification set forth above in the Form of Assignment or the Form of
Election to Purchase, as the case may be, is not completed, the Company and the
Rights Agent will deem the Beneficial Owner of the Rights evidenced by this
Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Agreement) and such Assignment or Election to
Purchase will not be honored.
B-5
Exhibit C
SUMMARY
OF RIGHTS TO PURCHASE
PREFERRED SHARES
Introduction
Effective
June 6, 2013, the Board of Directors of our Company, Image Sensing
Systems, Inc., a Minnesota corporation, declared a dividend of one preferred
share purchase right (a “Right”) for each outstanding share of the Company’s
common stock, par value $0.01 per share. The dividend is payable on June 17,
2013 to the shareholders of record on such date.
Our
Board has adopted this Rights Agreement to protect shareholders from coercive
or otherwise unfair takeover tactics. In general terms, it works by imposing a
significant penalty upon any person or group which acquires 20% or more of our
outstanding common stock without the approval of our Board. The Rights
Agreement should not interfere with any merger or other business combination
approved by our Board.
For
those interested in the specific terms of the Rights Agreement as made between
our Company and Continental Stock Transfer & Trust Company, as the Rights
Agent, effective as of June 6, 2013, we are providing the following
summary description. Please note, however, that this description is only a
summary, and it is not complete, and it should be read together with the entire
Rights Agreement, which has been filed with the Securities and Exchange
Commission as an exhibit to a Current Report on Form 8-K dated June 6,
2013 filed by our Company with the Securities and Exchange Commission. A copy
of the agreement is available free of charge from our Company.
The
Rights.
Effective June 6, 2013, our Board authorized the
issuance of a Right with respect to each outstanding share of common stock,
which Rights will be issued on June 17, 2013, which is the record date for the
determination of holders of common stock entitled to the Rights. The Rights
will initially trade with, and will be inseparable from, the common stock. The
Rights are evidenced only by certificates that represent shares of common
stock. New Rights will accompany any new shares of common stock we issue after
June 17, 2013 until the Distribution Date described below.
Exercise
Price.
Each Right will allow its holder to purchase from our
Company one one-thousandth of a share of Series A Junior Participating
Preferred Stock (“Preferred Shares”) for $25.00, once the Rights become
exercisable. This portion of a Preferred Share will give the shareholder
approximately the same dividend, voting and liquidation rights as would one
share of common stock. Before exercise, the Right does not give its holder any
dividend, voting or liquidation rights.
Exercisability.
The Rights will not be exercisable until 10 days after the public announcement
that a person or group has become an “Acquiring Person” by obtaining beneficial
ownership of 20% or more of our outstanding common stock. Certain synthetic
interests in securities created by derivative positions — whether or not such
interests are considered to be ownership of the underlying common stock or are
reportable for purposes of Rule 13d-1 under the Securities Exchange Act of 1934
— are treated as beneficial ownership of the number of shares of the Company’s
common stock equivalent to the economic exposure created by the derivative
position, to the extent actual shares of the Company’s common stock are directly
or indirectly held by counterparties to the derivatives contracts. Swaps
dealers unassociated with any control intent or intent to evade the purposes of
the Rights Plan are excepted from such imputed beneficial ownership.
C-1
We
refer to the date when the Rights become exercisable as the “Distribution Date.”
Until that date, the common stock certificates will also evidence the Rights,
and any transfer of shares of common stock will constitute a transfer of
Rights. After that date, the Rights will separate from the common stock and be
evidenced by book-entry credits or by Rights certificates that we will mail to
all eligible holders of common stock. Any Rights held by an Acquiring Person
are void and may not be exercised.
Consequences
of a Person or Group Becoming an Acquiring Person.
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Flip In.
If a
person or group becomes an Acquiring Person, all holders of Rights except the
Acquiring Person may, for $25.00, purchase shares of our common stock with a
market value of $50.00, based on the market price of the common stock before
such acquisition.
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Flip Over.
If
our Company is later acquired in a merger or similar transaction after the
Rights Distribution Date, all holders of Rights except the Acquiring Person
may, for $25.00, purchase shares of the acquiring corporation with a market
value of $50.00 based on the market price of the acquiring corporation’s
stock before such merger.
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Notional Shares.
Shares held by Affiliates and Associates of an Acquiring Person, and Notional
Shares held by counterparties to a Derivatives Contract with an Acquiring
Person, will be deemed to be beneficially owned by the Acquiring Person.
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Expiration.
The Rights will expire on the Close of Business on June 6, 2018 unless
earlier exchanged or redeemed by the Company.
Redemption.
Our Board may redeem the Rights for $0.001 per Right at any time before any
person or group becomes an Acquiring Person. If our Board redeems any Rights,
it must redeem all of the Rights. Once the Rights are redeemed, the only right
of the holders of Rights will be to receive the redemption price of $0.001 per
Right. The redemption price will be adjusted if we have a stock split or stock
dividends of our common stock.
Exchange.
After a person or group becomes an Acquiring Person, but before an Acquiring
Person owns 50% or more of our outstanding common stock, our Board may
extinguish the Rights by exchanging one share of common stock or an equivalent
security for each Right, other than Rights held by the Acquiring Person.
Anti-Dilution
Provisions.
Our Board may adjust the purchase price of the
Preferred Shares, the number of Preferred Shares issuable and the number of
outstanding Rights to prevent dilution that may occur from a stock dividend, a
stock split, a reclassification of the Preferred Shares or common stock. No
adjustments to the Exercise Price of less than 1% will be made.
C-2
Amendments.
The terms of the Rights Agreement may be amended by our Board without the
consent of the holders of the Rights. After a person or group becomes an
Acquiring Person, our Board may not amend the agreement in a way that adversely
affects holders of the Rights.
Preferred
Share Provisions.
Each one one-thousandth of a Preferred
Share, if issued:
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will not be redeemable;
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will entitle holders to quarterly dividend payments
of $0.001 per share, or an amount equal to the dividend paid on one share of
common stock, whichever is greater;
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will entitle holders upon liquidation either to
receive $1.00 per share or an amount equal to the payment made on one share
of common stock, whichever is greater;
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will have the same voting power as one share of
common stock; and
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if shares of our common stock are exchanged via
merger, consolidation, or a similar transaction, will entitle holders to a
per share payment equal to the payment made on one share of common stock.
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The value of one one-thousandth interest in a
Preferred Share should approximate the value of one share of the Company’s
common stock.
C-3
