Document:

Exhibit
10.1

 

EMPLOYMENT
AGREEMENT

 

THIS
EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is made and entered into as of the  17th day of
September, 2014 (“Agreement Date”), by and between OXYSURE SYSTEMS, INC., a corporation duly organized and
existing pursuant to the laws of the state of Delaware, (the hereinafter referred to as "OSI" or the
“Company”), and Clark Hood (hereinafter referred to as the "Executive"). The Agreement shall go into
effect on October 1, 2014 (“Effective Date”).

 

W
I T N E S S E T H:

 

WHEREAS,
the Company desires to have the benefit of the Executive's efforts and services;

 

WHEREAS,
the Company recognizes that circumstances may arise which may cause uncertainty of continued employment of the Executive without
regard to the Executive's competence or past contributions;

 

WHEREAS,
such uncertainties may result in the loss of valuable services of the Executive to the detriment of the Company and its shareholders;

 

WHEREAS,
the Executive will be in a better position to consider the best interests of the Company if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of employment which may result from situations now unknown,
and

 

NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:

 

	1.	DEFINITIONS.
    Whenever used in this Agreement, the following terms shall have the meanings set forth below:

 

(a)
"Accrued Benefits" shall mean the amount payable not later than fifteen (15) days following an applicable Termination
Date and which shall be equal to the sum of the following amounts:

 

(i)
All salary earned or accrued through the Termination Date;

 

(ii)
Reimbursement for any and all moneys advanced in connection with the Executive's employment for pre-approved, reasonable and necessary
expenses incurred by the Executive through the Termination Date;

 

(iii)
Any and all other cash benefits previously earned through the Termination Date and deferred at the election of the Executive or
pursuant to any deferred compensation plans then in effect;

 

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(iv)
The full amount of any stated bonus payable to the Executive with respect to the year in which termination occurs provided that
the events necessary to have earned said bonus have been achieved; and

 

(v)
All other payments and benefits to which the Executive may be entitled under the terms of any benefit plan of the Company.

 

(b)
"Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.

 

(c)
"Affiliate" shall have the same meaning as given to that term in Rule 12b-2 of Regulation 12B promulgated under the
Act.

 

(d)
"Base Period Income" shall be an amount equal to the Executive's annualized compensation calculated pursuant to section
6 herein for the initial term of this agreement.

 

(e)
"Board" shall mean the Board of Directors of the Company.

 

(f)
"Cause" shall mean any of the following:

 

(i)
The engaging by the Executive in fraudulent conduct, whether civil, criminal, administrative or investigative, which the Board
determines, in its sole discretion, has a significant adverse impact on the Company in the conduct of the Company's business;

 

(ii)
Conviction of a felony, as evidenced by a court of competent jurisdiction, which the Board determines, in its sole discretion,
has a significant adverse impact on the Company in the conduct of the Company's business;

 

(iii)
Neglect or refusal by the Executive to perform the Executive's duties or responsibilities; or

 

(iv)
A violation by the Executive of any Company Policies.

 

Notwithstanding
the foregoing, Cause shall not exist under Sections 1(f) (iii) and (iv) herein unless the Company furnishes written notice to
the Executive of the specific offending conduct and the Executive fails to correct such offending conduct within the fifteen (15)
day period commencing on the receipt of such notice.

 

(g)
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

 

(h)
“Company Policies” means any written policy or procedure provided by the Company to Executive that applies generally
to employees or representatives of the Company or to a group of similarly situated employees or representatives of the Company,
including, but not limited to, any policy contained in the Company’s employee handbook and any policies or procedures attached
hereto as an exhibit, in each as such written policy or procedure may be amended, superseded or replaced from time to time. 

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(i)
“Consolidated Group” means and includes the Company, all of OSI’s current or future subsidiaries and any other
corporations or divisions thereof, which are hereafter acquired by or consolidated with the OSI and which collectively carry on
the business of OSI, the Company or any part thereof.

 

(j)
"Notice of Termination" shall mean the notice described in Section 10 herein.

 

(k)
"Person" shall mean any individual, partnership, joint venture, association, trust, corporation or other entity, other
than an employee benefit plan of the Company or an entity organized, appointed or established pursuant to the terms of any such
benefit plan.

 

(l)
"Termination Date" shall mean, except as otherwise provided in Section 10 herein,

 

(i)
The Executive's date of death;

 

(ii)
Sixty (60) days after the delivery of the Notice of Termination if the Executive's employment is terminated by the Executive voluntarily;

 

(iii)
Fourteen (14) days after the delivery of the Notice of Termination if the Executive's employment is terminated by the Company
for any reason other than Cause; and

 

(iv)
Immediately upon the delivery of the Notice of Termination if the Executive’s employment is terminated by the Company pursuant
to clause (i) or (ii) of the definition of “Cause;” and

 

(v)
Immediately upon delivery of the Notice of Termination if the Executive’s employment is terminated by the Company pursuant
to clause (iii) or (iv) of the definition of “Cause” unless Executive remedies such conduct or breach to the satisfaction
of the Board of Directors within such 15-day period.

 

	2.	EMPLOYMENT.

 

The
Company hereby agrees to employ the Executive and the Executive hereby agrees to serve the Company, on the terms and conditions
set forth herein.

 

	3.	TERM.

 

The
employment of the Executive by the Company pursuant to the provisions of this Agreement shall commence on the date of this Agreement
(the “Effective Date”) and end on September 30, 2019, unless sooner terminated as hereinafter provided.

 

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	4.	POSITIONS
    AND DUTIES.

 

The
Executive shall hold the position of Vice President of Sales, Resuscitation of the Company and shall perform such duties
as outlined in the attached Exhibit B hereto, as amended from time to time. The Executive shall perform such other duties
as CEO or the Board shall direct and shall serve in such additional capacities as set forth in Section 7 herein. The Executive
shall devote substantially all of the Executive's working time and efforts to the business and affairs of the Company. The Executive
will abide by all Company Policies applicable to the Executive, as in effect from time to time and as provided to Executive, including,
but not limited to, the Company Policies set forth in Exhibit C hereto, and will faithfully and to the best of Executive’s
ability, experience and talents perform all of the duties that may be required of and from Executive pursuant to the terms hereof,
consistent with Executive’s position and consistent with the Company Policies. The Executive hereby acknowledges and agrees
that (i) the Company may amend, modify, waive, supersede or replace any Company Policy which shall be effective as to the Executive
upon delivery in written form to the Executive and (ii) the Executive’s failure to abide by any Company Policy or his breach
of any Company Policy shall constitute a breach of this Agreement and may result in termination of the Executive for Cause.

 

	5.	PLACE
    OF PERFORMANCE.

 

In
connection with the Executive's employment by the Company, the Executive shall be based at the Company’s principal place
of business in North Dallas, Texas, except for where travel is required, or where otherwise required by the operations of the
Company.

 

	6.	COMPENSATION
    AND RELATED MATTERS.

 

(a)
Commencing on the Effective Date hereof, and during the term of this Agreement, the Company shall compensate the Executive in
accordance with Exhibit A hereto. The Company will also issue to the Executive options as to the Common Stock of the Company
as outlined in Exhibit A hereto. In addition, the Executive shall be entitled to participate in any annual bonus programs
established by the Company for senior executives, to the extent specified in Exhibit A.

 

(b)
During the term of the Executive's employment hereunder, the Executive shall be entitled to receive prompt reimbursement for all
pre-approved, reasonable expenses incurred by the Executive in performing services hereunder, including all business travel and
living expenses while away from home on business or at the request of and in the service of the Company, provided that such expenses
are incurred and accounted for in accordance with the policies and procedures presently established by the Company and OSI or
as may be changed from time to time.

 

(c)
The Executive shall also be entitled to all other benefits provided by the Company to its general employees.

 

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	7.	OFFICES.

 

The
Executive agrees to serve without additional compensation, if elected or appointed thereto, as a member of the Board of Directors
of the Company, or any subsidiary; provided, however, that the Executive is indemnified for serving in any and all such capacities
on a basis no less favorable than is currently provided in the Company's bylaws, or otherwise.

 

	8.	TERMINATION
    FOR CAUSE.

 

If
the Executive's employment with the Company is terminated by the Company for Cause, subject to the procedures set forth in Section
10 herein, the Executive shall be entitled to receive the Executive's Accrued Benefits as of the Termination Date. The Executive
shall not be entitled to the receipt of any Termination Payment. Executive hereby acknowledges and agrees that upon Termination
of his employment, for any reason, whether with or without Cause, either by Executive or by the Company, Executive will forfeit
all unvested stock options, without any claims against the Company.

 

	9.	VOLUNTARY
    TERMINATION BY EXECUTIVE.

 

Provided
that the Executive furnishes sixty (60) days prior written notice to the Company, the Executive shall have the right to voluntarily
terminate this Agreement at any time. The Executive shall receive the Executive's Accrued Benefits as of the Termination Date
and shall not be entitled to any Termination Payment.

 

	10.	TERMINATION
    NOTICE AND PROCEDURE.

 

(a)
Any termination by the Company or the Executive of the Executive's employment during the Employment Period shall be communicated
by written Notice of Termination to the Executive, if such Notice of Termination is delivered by the Company, and to the Company,
of such Notice of Termination is delivered by the Executive, all in accordance with the following procedures:

 

The
Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances alleged to provide a basis for termination.

 

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	11.	NONDISCLOSURE
    OF PROPRIETARY INFORMATION.

 

(a)For
the purposes of this Paragraph 11, including all subparagraphs, “the Company” shall mean the Company and all other
Persons included in the Consolidated Group. Recognizing that the Company is presently engaged, and may hereafter continue to be
engaged, in the research and development of processes, the obtainment and sale of products or performance of services, which involve
experimental and inventive work and that the success of its business depends upon the protection of the processes, products and
services by patent, copyright or by secrecy and that the Executive has had, or during the course of his engagement may have, access
to Proprietary Information, as hereinafter defined, of the Company or other information and data of a secret or proprietary nature
of the Company which the Company wishes to keep confidential and the Executive has furnished, or during the course of his engagement
may furnish, such information to the Company, the Executive agrees that (a) "Proprietary Information" shall mean any
and all methods, inventions, improvements or discoveries, whether or not patentable or copyrightable, and any other information
of a similar nature related to the business of the Company disclosed to the Executive or otherwise made known to him as a consequence
of or through his engagement by the Company (including information originated by the Executive) in any technological area previously
developed by the Company or developed, engaged in, or researched, by the Company during the term of the Executive's engagement,
including, but not limited to, trade secrets, processes, products, formulae, apparatus, techniques, know-how, marketing plans,
data, improvements, strategies, forecasts, customer lists, and technical requirements of customers, unless such information is
in the public domain to such an extent as to be readily available to competitors.

 

(b)The
Executive acknowledges that the Company has exclusive property rights to all Proprietary Information and the Executive hereby
assigns all rights he might otherwise possess in any Proprietary Information to the Company. Except as required in the performance
of his duties to the Company or otherwise as required by law, the Executive will not at any time during or after the term of his
engagement, which term shall include any time in which the Executive may be retained by the Company as a consultant, directly
or indirectly use, communicate, disclose or disseminate any Proprietary Information or any other information of a secret, proprietary,
confidential or generally undisclosed nature relating to the Company, its products, customers, processes and services, including
information relating to testing, research, development, manufacturing, marketing and selling.

 

(c)All
documents, records, notebooks, notes, memoranda and similar repositories of, or containing, Proprietary Information or any other
information of a secret, proprietary, confidential or generally undisclosed nature relating to the Company or its operations and
activities made or compiled by the Executive at any time or made available to him prior to or during the term of his engagement
by the Company, including any and all copies thereof, shall be the property of the Company, shall be held by him in trust solely
for the benefit of the Company, and shall be delivered to the Company by him on the termination of his engagement or at any other
time on the request of the Company.

 

(d)The
Executive will not assert any rights under any inventions, copyrights, discoveries, concepts or ideas, or improvements thereof,
or know-how related thereto, as having been made or acquired by him prior to his being engaged by the Company or during the term
of his engagement if based on or otherwise related to Proprietary Information.

 

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	12.	ASSIGNMENT
    OF INVENTIONS.

 

(a)For
purposes of this Paragraph 12, the term "Inventions" shall mean discoveries, concepts, and ideas, whether patentable
or copyrightable or not, including but not limited to improvements, know-how, data, processes, methods, formulae, and techniques,
as well as improvements thereof or know-how related thereto, concerning any past, present or prospective activities of the Company
which the Executive makes, discovers or conceives (whether or not during the hours of his engagement or with the use of the Company's
facilities, materials or personnel), either solely or jointly with others during his engagement by the Company or any affiliate
and, if based on or related to Proprietary Information, at any time after termination of such engagement. All inventions shall
be the sole property of the Company, and Executive agrees to perform the provisions of this paragraph 12 with respect thereto
without the payment by the Company of any royalty or any consideration therefor other than the regular compensation paid to the
Executive in the capacity of an employee or consultants;

 

(b)The
Executive shall maintain written notebooks in which he shall set forth, on a current basis, information as to all Inventions,
describing in detail the procedures employed and the results achieved as well as information as to any studies or research projects
undertaken on the Company's behalf. The written notebooks shall at all times be the property of the Company and shall be surrendered
to the Company upon termination of his engagement or, upon request of the Company, at any time prior thereto.

 

(c)The
Executive shall apply, at the Company's request and expense, for United States and foreign letters patent or copyrights either
in the Executive's name or otherwise as the Company shall desire.

 

(d)The
Executive hereby assigns to the Company all of his rights to such Inventions, and to applications for United States and/or foreign
letters patent or copyrights and to United States and/or foreign letters patent or copyrights granted upon such Inventions.

 

(e)The
Executive shall acknowledge and deliver promptly to the Company, without charge to the Company, but at its expense, such written
instruments (including applications and assignments) and do such other acts, such as giving testimony in support of the Executive's
inventorship, as may be necessary in the opinion of the Company to obtain, maintain, extend, reissue and enforce United States
and/or foreign letters patent and copyrights relating to the Inventions and to vest the entire right and title thereto in the
Company or its nominee. The Executive acknowledges and agrees that any copyright developed or conceived of by the Executive during
the term of Executive's employment which is related to the business of the Company shall be a "work for hire" under
the copyright law of the United States and other applicable jurisdictions.

 

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(f)The
Executive represents that his performance of all the terms of this Agreement and as an employee of or consultant to the Company
does not and will not breach any trust prior to his employment by the Company. The Executive agrees not to enter into any agreement
either written or oral in conflict herewith and represents and agrees that he has not brought and will not bring with him to the
Company or use in the performance of his responsibilities at the Company any materials or documents of a former employer which
are not generally available to the public, unless he has obtained written authorization from the former employer for their possession
and use, a copy of which has been provided to the Company.

 

(g)No
provisions of this Paragraph shall be deemed to limit the restrictions applicable to the Executive under Paragraph 11.

 

	13.	SHOP
    RIGHTS.

 

The
Company shall also have the royalty-free right to use in its business, and to make, use and sell products, processes and/or services
derived from any inventions, discoveries, concepts and ideas, whether or not patentable, including but not limited to processes,
methods, formulas and techniques, as well as improvements thereof or know how related thereto, which are not within the scope
of Inventions as defined in Paragraph 12 but which are conceived or made by the Executive during the period he is engaged by the
Company or with the use or assistance of the Company's facilities, materials or personnel.

 

	14.	NON-COMPETE
    AND NON-SOLICITATION.

 

The
Executive hereby agrees that during the term of this Agreement and for twelve months (12) months following a termination for any
reason, unless otherwise specified in this agreement, Executive shall not:

 

(a)Within
any jurisdiction or marketing area in the United States in which the Company or any subsidiary thereof is doing business, own,
control, manage, invest in, loan money to, operate, provide service to or represent any business that (i) is in competition with
the Company or any subsidiary thereof, (ii) competes with the Company for client accounts or customer accounts that Executive
solicited or serviced while employed by the Company or became aware of while employed by the Company or (iii) produces, promotes,
markets, sells or develops products, services or processes (including products, services and processes sold by the Company, under
research or expressly contemplated by OSI’s business plan) similar to those offered by the Company while Executive was employed
by the Company; or

 

(b)Within
any jurisdiction or marketing area in the United States in which the Consolidated Group or any member thereof is doing business
or has done business within the prior one year period, directly or indirectly, act as or become employed as, an officer, director,
employee, consultant or agent of any Competitive Business; or

 

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(c)Contact,
call upon or solicit the business of any customer or client of the Consolidated Group or any Person that was a customer or client
of the Consolidated Group within two years prior to the date of termination; or

 

(d)
Contact, call upon or solicit any prospective client or prospective customer of the Consolidated Group (other than on behalf
of the Consolidated Group) of whom Executive became aware or was introduced to in the course of his duties for OSI, or otherwise
divert or take away from the Consolidated Group the business of any prospective client or prospective customer of the Consolidated
Group whose business is a corporate opportunity of the Consolidated Group; or

 

(e)Solicit,
induce, hire, engage, or attempt to hire or engage any employee or contractor of the Consolidated Group, or in any other way interfere
with the Consolidated Group’s contractual or employment relations with any of its employees or contractors, nor will Executive
hire or engage or attempt to hire or engage any individual who was an employee or contractor of the Consolidated Group at any
time during the one year period immediately prior to the termination of Executive’s employment with the Company.

 

Any
Person or business that satisfies any of the criteria set forth in any of clauses (i) through (iii) of Section 14(a) above shall
herein be referred to as a “Competitive Business” for purposes of this Agreement. For purposes of this Section 14,
ownership by the Executive of securities not in excess of five percent (5%) of any class of securities of a public company shall
not be considered to be competition with OSI, or any other Person that is a part of the Consolidated Group.

 

Restrictions
Reasonable. Executive represents and agrees that the provisions hereof are reasonable in order to protect the business and
proprietary interests of the Consolidated Group both as to the duration of time and any geographic limitation therein provided,
based on the present business, plans and prospects of the Consolidated Group and the confidential and proprietary information
to which the Executive has had and will have access, and that compliance with the provisions hereof will not be
unduly burdensome on him. The Executive represents that prior to executing and delivering this Agreement, that he has reviewed
the provisions of this Agreement and been afforded any opportunity to consult with legal counsel of his choosing.

 

	15.	REMEDIES
    AND INJUNCTIVE RELIEF

 

The
Executive hereby acknowledges and agrees that a breach or threatened breach by him or the non-performance of certain of the covenants
or promises contained herein by him may cause serious and irreparable harm to the Consolidated Group and that any remedy at law,
including any award of money damages, may be inadequate. Accordingly, Executive agrees and accepts that a threatened breach, a
breach or a violation of the provisions of this agreement by him shall entitle the Company, as a matter of right, to an injunction
issued by any court of competent jurisdiction, restraining any further or continued breach or violation of the provisions of this
agreement. Such right to an injunction shall be cumulative and in addition to, and not in lieu of, any other remedies to which
the Company may be entitled. The Executive specifically acknowledges that the requirement of the Consolidated Group or any member
thereof to post a bond for the issuance of a temporary restraining order or temporary injunction should be waived.

 

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	16.	ATTORNEY’S
    FEES.

 

In
the event that either party hereunder institutes any legal proceedings in connection with its rights or obligations under this
Agreement, the prevailing party in such proceeding shall be entitled to recover from the other party, all costs incurred in connection
with such proceeding, including reasonable attorneys' fees, together with interest thereon from the date of demand at the rate
of twelve percent (12%) per annum.

 

	17.	SUCCESSORS.

 

This
Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, estates, executors, administrators, heirs and beneficiaries. In the event of the Executive's death, all amounts
payable to the Executive under this Agreement shall be paid to the Executive's surviving spouse, or the Executive's estate if
the Executive dies without a surviving spouse. This Agreement shall inure to the benefit of, be binding upon and be enforceable
by, any successor, surviving or resulting corporation or other entity to which all or substantially all of the business and assets
of the Company shall be transferred whether by merger, consolidation, transfer or sale.

 

	18.	ENFORCEMENT.

 

The
provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid
or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or
parts hereof and the applicability thereof shall not be affected thereby.

 

	19.	AMENDMENT.

 

This
Agreement may be amended, superseded, renewed or extended, and the terms hereof may be waived, only by written instrument signed
by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof. Nor shall any waiver on the part of any party of any such
right, power or privilege, nor any single or partial exercise of any such right, power or privilege, preclude any further exercise
thereof or the exercise of any other such right, power or privilege.

 

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	20.	SEVERABILITY.

 

The
provisions of paragraphs 11, 12, 13 and 14 shall survive termination of this Agreement.

 

	21.	ENTIRE
    AGREEMENT.

 

This
Agreement, together with the Exhibits hereto, sets forth the entire agreement between the Executive and the Company with respect
to the subject matter hereof, and supersedes all prior oral or written agreements, negotiations, commitments and understandings
with respect thereto. Each party to this Agreement acknowledges that no representations, inducements, or agreements, oral or otherwise,
have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and no other agreement, statement
or promise not contained in this Agreement shall be valid or binding. Executive acknowledges and understands the terms and conditions
set forth in this Agreement and has had adequate time to consider whether to agree to them and to consult a lawyer, if Executive
wishes to do so.

 

	22.	GOVERNING
    LAW AND CONSENT TO JURISDICTION.

 

This
Agreement and the Executive's and Company's respective rights and obligations hereunder shall be governed by, construed and enforced
in accordance with the laws of the State of Texas (excluding any conflict of laws, rule or principle of Texas law that might refer
the governance, construction, or interpretation of this Agreement to the laws of another state). The Company and Executive (i)
hereby irrevocably submit to the exclusive jurisdiction of the courts of the State of Texas located in Collin County and the United
States District Court for the Northern District of Texas, for the purposes of any suit, action or other proceeding arising out
of this Agreement or the subject matter hereof or any of the transactions contemplated hereby brought by Executive or the Company
or our respective, heirs, estates, successors or assigns, (ii) hereby irrevocably agree that all claims in respect of such suits,
actions or proceedings may be heard and determined in such Texas State court or, to the fullest extent permitted by law, in the
United States District Court for the Northern District of Texas and (iii) to the extent permitted by applicable law, hereby irrevocably
waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding any claim
that it is not personally subject to the jurisdiction of the above-named courts, that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter
thereof may not be enforced in or by such court. A final judgment obtained in respect of any action, suit or proceeding referred
to in this Section 22 shall be conclusive and may be enforced in other jurisdictions by suit or judgment or in any manner as provided
by applicable law. IN ANY LITIGATION RELATING TO THIS AGREEMENT OR EXECUTIVE’S EMPLOYMENT WITH THE COMPANY, EXECUTIVE HEREBY
WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY. 

 

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	23.	NOTICE.

 

Any
notice or other communication required or permitted hereunder shall be deemed given if in writing and delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or express mail, postage prepaid. Any such notice shall
be deemed given when so delivered personally or sent by overnight air courier or facsimile transmission or, if mailed, two days
after the date of deposit in the United States mails, as follows:

 

For
OSI

 

Mr.
Julian Ross

Oxysure
Systems, Inc.

10880
John W. Elliott Drive

Suite
600

Frisco,
TX 75033

 

For
Executive

 

Clark
Hood

1551
Stillhouse Hollow Dr.

Prosper,
TX 75078

 

Any
party may be given notice in accordance with this Section to the other parties designate another address or person for receipt
of notices by such party hereunder.

 

	23.	Binding
    Effect: No Assignment.

 

This
Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and legal representatives.
This Agreement and any rights hereunder are not assignable except by operation of law or by OSI to any of its subsidiaries or
affiliates. Any other purported assignment shall be null and void.

 

	24.	Variations
    in Pronouns.

 

Wherever
the context shall so require, all words herein in the male gender shall be deemed to include the female or neuter gender and vice
versa, all singular words shall include the plural, and all plural words shall include the singular. All
pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

 

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	25.	OPPORTUNITY
    TO CONSULT WITH Counsel.

 

Each
party acknowledges that it has had the opportunity to be represented by separate independent counsel in the negotiation of this
Agreement, that any such respective attorneys were of its own choosing, that each authorized representative has read this Agreement
and that he understands its meaning and legal consequences to each party. The Parties warrant and represent that they have had
sufficient time to consider whether to enter into this Agreement and that they are relying solely on their own judgment and the
advice of their own counsel in deciding to execute this Agreement. The Parties warrant and represent that they have read this
Agreement in its entirety. If any or all Parties have chosen not to seek alternative counsel, said party or parties hereby acknowledge
that he or they refrained from seeking alternative counsel entirely of his or their own volition and with full knowledge of the
consequences of such a decision.

 

	26.	Presumption
    Against Scrivener.

 

Each
party waives the presumption that this Agreement is presumed to be in favor of the party which did not prepare it, in case of
a dispute as to interpretation.

 

	27.	Capacity.
     

 

Each
party represents and warrants that he has the authority to enter into this Agreement either on his own behalf or in an official
capacity on behalf of a corporate party.

 

	28.	Other
    Instruments.

 

The
Parties hereto covenant and agree that they will execute such other and further instruments and documents as are or may become
necessary or convenient to effectuate and carry out the business obligations and duties created by this Agreement.

 

	29.	NO
    WAIVER.

 

No
waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the
same time or any prior or subsequent time.

 

	30.	HEADINGS.

 

The
headings used in this Agreement are for administrative
purposes only and do not constitute substantive matter to be considered in construing the terms and shall not affect the
interpretation of this Agreement.

 

	31.	COUNTERPARTS.

 

This
Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of
a number of copies hereof each signed by less than all, but together signed by all of the parties hereto.

 

[SIGNATURE
PAGE FOLLOWS]

 

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IN
WITNESS WHEREOF, the Company, has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed
this Agreement, on the date and year first above written.

 

	OXYSURE
    SYSTEMS, INC.	 
	 

                                                                                /s/ Julian T. Ross
	 
	By:	Mr.
    Julian Ross	 
	Its:	Chairman
    & CEO	 

 

	EXECUTIVE	
	 

                                                                                /s/ Clark Hood
	 
	Clark
    Hood	 

 

    	Employment Contract - Page 14

    	 

    

 

 

Exhibit A

 

To
the Employment Agreement by and between OxySure Systems, Inc. and

Clark
Hood

Dated
September 17, 2014

 

		(1)	Base cash salary: $200,000 per annum, paid twice monthly (NonDiscretionary)

		(2)	Base Stock Options (NonDiscretionary): Five issuances; the first issuance upon Effective Date;
the next four issuances at the beginning of each successive anniversary subsequent to Effective Date

		a.	Year1 Issuance: Options as to 50,000 shares of common stock; exercise price will be 20% above the
average of the three closing prices in the 3 trading days prior to the Effective Date
		b.	Year2 Issuance: Options as to 50,000 shares of common stock; exercise price will be 20% above the
average of the three closing prices in the 3 trading days prior to the date that is 12 months subsequent to the Effective Date
		c.	Year3 Issuance: Options as to 50,000 shares of common stock; exercise price will be 20% above the
average of the three closing prices in the 3 trading days prior to the to the date that is 24 months subsequent to the Effective
Date
		d.	Year4 Issuance: Options as to 50,000 shares of common stock; exercise price will be 20% above the
average of the three closing prices in the 3 trading days prior to the to the date that is 36 months subsequent to the Effective
Date
		e.	Year5 Issuance: Options as to 50,000 shares of common stock; exercise price will be 20% above the
average of the three closing prices in the 3 trading days prior to the to the date that is 48 months subsequent to the Effective
Date

 

All unvested Base Stock
Options shall be accelerated upon a change of control event. For the purpose of this provision a dilution via a financing or an
acquisition by the Company causing a dilution such that a change of control occurs, does not qualify.

 

		(3)	Cash Override Commission, paid quarterly in arrears (NonDiscretionary):

		a.	During the First 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash override commission on all sales through the Resuscitation Division (“Resuscitation
Sales”), of up to 1.5% of Resuscitation Sales, calculated on a weighted* basis as follows: Sales Dollars 50%; Gross Margin
25%; Quarterly Sales Growth 25%
		b.	During the Second 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash override commission on all sales through the Resuscitation Division (“Resuscitation
Sales”), of up to 1.0% of Resuscitation Sales, calculated on a weighted* basis as follows: Sales Dollars 50%; Gross Margin
25%; Quarterly Sales Growth 25%
		c.	During the Third 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash override commission on all sales through the Resuscitation Division (“Resuscitation
Sales”), of up to 0.7% of Resuscitation Sales, calculated on a weighted* basis as follows: Sales Dollars 50%; Gross Margin
25%; Quarterly Sales Growth 25%

 

    	Employment Contract - Page 15

    	 

    

 

		d.	During the Fourth 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash override commission on all sales through the Resuscitation Division (“Resuscitation
Sales”), of up to 0.5% of Resuscitation Sales, calculated on a weighted* basis as follows: Sales Dollars 50%; Gross Margin
25%; Quarterly Sales Growth 25%
		e.	During the Fifth 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash override commission on all sales through the Resuscitation Division (“Resuscitation
Sales”), of up to 0.35% of Resuscitation Sales, calculated on a weighted* basis as follows: Sales Dollars 50%; Gross Margin
25%; Quarterly Sales Growth 25%

 

*Weighting can be changed at the
Board’s sole discretion, to align with corporate objectives from time to time. All accounting based on GAAP accounting.

 

		(4)	Cash Bonus, paid quarterly (Discretionary):

		a.	During the First 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash bonus of up to 1.5% of Resuscitation Sales, calculated on a weighted*
basis as follows: Sales Dollars 50%; Gross Margin 25%; Quarterly Sales Growth 25%
		b.	During the Second 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash bonus of up to 1.0% of Resuscitation Sales, calculated on a weighted*
basis as follows: Sales Dollars 50%; Gross Margin 25%; Quarterly Sales Growth 25%
		c.	During the Third 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash bonus of up to 0.7% of Resuscitation Sales, calculated on a weighted*
basis as follows: Sales Dollars 50%; Gross Margin 25%; Quarterly Sales Growth 25%
		d.	During the Fourth 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash bonus of up to 0.5% of Resuscitation Sales, calculated on a weighted*
basis as follows: Sales Dollars 50%; Gross Margin 25%; Quarterly Sales Growth 25%
		e.	During the Fifth 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a cash bonus of up to 0.35% of Resuscitation Sales, calculated on a weighted*
basis as follows: Sales Dollars 50%; Gross Margin 25%; Quarterly Sales Growth 25%

 

*Weighting can be changed at the Board’s
sole discretion, to align with corporate objectives from time to time. All accounting based on GAAP accounting

 

    	Employment Contract - Page 16

    	 

    

 

		(5)	Stock option performance bonus (Discretionary):

		a.	During the First 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a one-time performance bonus in stock options as to 50,000 shares of common stock;
exercise price will be 20% above the average of the three closing prices in the 3 trading days prior to the date that is 12 months
subsequent to the Effective Date.
		b.	During the Second 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a one-time performance bonus in stock options as to 50,000 shares of common stock;
exercise price will be 20% above the average of the three closing prices in the 3 trading days prior to the date that is 24 months
subsequent to the Effective Date.
		c.	During the Third 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a one-time performance bonus in stock options as to 50,000 shares of common stock;
exercise price will be 20% above the average of the three closing prices in the 3 trading days prior to the date that is 36 months
subsequent to the Effective Date.
		d.	During the Fourth 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a one-time performance bonus in stock options as to 50,000 shares of common stock;
exercise price will be 20% above the average of the three closing prices in the 3 trading days prior to the date that is 48 months
subsequent to the Effective Date.
		e.	During the Fifth 12 Months: Subject to the attainment of the stated Performance Targets (Sales,
Gross Margin, Growth Rate, on a quarterly basis), a one-time performance bonus in stock options as to 50,000 shares of common stock;
exercise price will be 20% above the average of the three closing prices in the 3 trading days prior to the date that is 60 months
subsequent to the Effective Date.

 

    	Employment Contract - Page 17

    	 

    

 

Performance
    Targets, Organic Only

  

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Weighting	 	 	 	 	 	Non-

    Discretionary	 	 	Discretionary	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Sales	 	 	 	Gross

                                         Margin%	 	Gross

    Profit	 	 	 	Sales

                                         Growth%	 	Dollars*

    50%	 	 	Margin

    25%	 	 	Growth

    (QOQ)

    25%	 	 	Quarterly

    Total

    Override

    Commission	 	 	Annual

    Total

    Override

    Commission	 	 	

    Annual

    Total

    Override

    Bonus	 	Override
 Percentage
	 		 	 	 	1	Q	 			 	 	$	750,000	 	 	 	55	%	 	$	412,500	 	 	 	na	 	 	$	8,438	 	 	$	2,813	 	 	$	—  	 	 	$	11,250	 	 	 		 	 	 		 	 	 	1.50	%
	 	1st
                                         12 	 	 	 	2	Q	 	 	 	 	 	$	1,000,000	 	 	 	55	%	 	$	550,000	 	 	 	na	 	 	$	11,250	 	 	$	3,750	 	 	$	—  	 	 	$	15,000	 	 	 	 	 	 	 	 	 	 	 	1.50	%
	 	 Months	 	 	 	3	Q	 	$ 	6,050,000	 	 	$	2,000,000	 	 	 	55	%	 	$	1,100,000	 	 	 	na	 	 	$	22,500	 	 	$	7,500	 	 	$	—  	 	 	$	30,000	 	 	 	 	 	 	 	 	 	 	 	1.50	%
	 	 	 	 	 	4	Q	 	 	 	 	 	$	2,300,000	 	 	 	55	%	 	$	1,265,000	 	 	 	15.0	%	 	$	17,250	 	 	$	8,625	 	 	$	8,625	 	 	$	34,500	 	 	$	45,375	 	 	$	45,375	 	 	 	1.50	%
	 		 	 	 	1	Q	 			 	 	$	2,645,000	 	 	 	55	%	 	$	1,454,750	 	 	 	15.0	%	 	$	13,225	 	 	$	6,613	 	 	$	6,613	 	 	$	26,450	 	 	 	 	 	 	 	 	 	 	 	1.00	%
	 	2nd
                                         12	 	 	 	2	Q	 	 	 	 	 	$	3,041,750	 	 	 	55	%	 	$	1,672,963	 	 	 	15.0	%	 	$	15,209	 	 	$	7,604	 	 	$	7,604	 	 	$	30,418	 	 	 	 	 	 	 	 	 	 	 	1.00	%
	 	Months	 	 	 	3	Q	 	$ 	13,207,477	 	 	$	3,498,013	 	 	 	55	%	 	$	1,923,907	 	 	 	15.0	%	 	$	17,490	 	 	$	8,745	 	 	$	8,745	 	 	$	34,980	 	 	 	 	 	 	 	 	 	 	 	1.00	%
	 	 	 	 	 	4	Q	 	 	 	 	 	$	4,022,714	 	 	 	55	%	 	$	2,212,493	 	 	 	15.0	%	 	$	20,114	 	 	$	10,057	 	 	$	10,057	 	 	$	40,227	 	 	$	66,037	 	 	$	66,037	 	 	 	1.00	%
	 		 	 	 	1	Q	 			 	 	$	4,626,122	 	 	 	55	%	 	$	2,544,367	 	 	 	15.0	%	 	$	16,191	 	 	$	8,096	 	 	$	8,096	 	 	$	32,383	 	 	 	 	 	 	 	 	 	 	 	0.70	%
	 	3rd
                                         12 	 	 	 	2	Q	 	 	 	 	 	$	5,320,040	 	 	 	55	%	 	$	2,926,022	 	 	 	15.0	%	 	$	18,620	 	 	$	9,310	 	 	$	9,310	 	 	$	37,240	 	 	 	 	 	 	 	 	 	 	 	0.70	%
	 	Months 	 	 	 	3	Q	 	$	23,099,960	 	 	$	6,118,046	 	 	 	55	%	 	$	3,364,925	 	 	 	15.0	%	 	$	21,413	 	 	$	10,707	 	 	$	10,707	 	 	$	42,826	 	 	 	 	 	 	 	 	 	 	 	0.70	%
	 	 	 	 	 	4	Q	 	 	 	 	 	$	7,035,753	 	 	 	55	%	 	$	3,869,664	 	 	 	15.0	%	 	$	24,625	 	 	$	12,313	 	 	$	12,313	 	 	$	49,250	 	 	$	80,850	 	 	$	80,850	 	 	 	0.70	%
	 		 	 	 	1	Q	 			 	 	$	8,091,115	 	 	 	55	%	 	$	4,450,114	 	 	 	15.0	%	 	$	20,228	 	 	$	10,114	 	 	$	10,114	 	 	$	40,456	 	 	 	 	 	 	 	 	 	 	 	0.50	%
	 	4th
                                         12 	 	 	 	2	Q	 	 	 	 	 	$	9,304,783	 	 	 	55	%	 	$	5,117,631	 	 	 	15.0	%	 	$	23,262	 	 	$	11,631	 	 	$	11,631	 	 	$	46,524	 	 	 	 	 	 	 	 	 	 	 	0.50	%
	 	Months 	 	 	 	3	Q	 	$	40,401,974	 	 	$	10,700,500	 	 	 	55	%	 	$	5,885,275	 	 	 	15.0	%	 	$	26,751	 	 	$	13,376	 	 	$	13,376	 	 	$	53,503	 	 	 	 	 	 	 	 	 	 	 	0.50	%
	 	 	 	 	 	4	Q	 	 	 	 	 	$	12,305,575	 	 	 	55	%	 	$	6,768,066	 	 	 	15.0	%	 	$	30,764	 	 	$	15,382	 	 	$	15,382	 	 	$	61,528	 	 	$	101,005	 	 	$	101,005	 	 	 	0.50	%
	 		 	 	 	1	Q	 			 	 	$	14,151,412	 	 	 	55	%	 	$	7,783,276	 	 	 	15.0	%	 	$	24,765	 	 	$	12,382	 	 	$	12,382	 	 	$	49,530	 	 	 	 	 	 	 	 	 	 	 	0.35	%
	 	5th
                                         12 	 	 	 	2	Q	 	 	 	 	 	$	16,274,123	 	 	 	55	%	 	$	8,950,768	 	 	 	15.0	%	 	$	28,480	 	 	$	14,240	 	 	$	14,240	 	 	$	56,959	 	 	 	 	 	 	 	 	 	 	 	0.35	%
	 	Months 	 	 	 	3	Q	 	$	70,663,305	 	 	$	18,715,242	 	 	 	55	%	 	 	10,293,383	 	 	 	15.0	%	 	$	32,752	 	 	$	16,376	 	 	$	16,376	 	 	$	65,503	 	 	 	 	 	 	 	 	 	 	 	0.35	%
	 	 	 	 	 	4	Q	 	 	 	 	 	$	21,522,528	 	 	 	55	%	 	 	11,837,390	 	 	 	15.0	%	 	$	37,664	 	 	$	18,832	 	 	$	18,832	 	 	$	75,329	 	 	$	123,661	 	 	$	123,661	 	 	 	0.35	%

* Except in 1Q, 2Q, and 3Q of the
1st 12 months when dollars is 75%.

 

    	Employment Contract - Page 18

    	 

    

 

		(6)	Acceleration
                                         of Base Options if terminated by an acquirer upon a change of control event.
	 	 	 
		(7)	Employee
                                         Benefits:

 

		●	Car
                                         Allowance: $600 per month plus gas expended for Company business, but to commence only
                                         on the month after the the first to occur of (1) The Company closes at least $2 million
                                         in equity financing; or (2) The Company reaches $1 million in quarterly sales through
                                         the Resuscitation Division.
		●	Medical
                                         Insurance: None at this time. Participation is guaranteed if the Company re-establishes
                                         a medical insurance program, which is expected to occur during 2015.
		●	Vacation:
                                         14 days per annum. Timing is flexible based on discussion and by agreement from time
                                         to time.
		●	Travel:
                                         All pre-approved travel expenses reasonably incurred are reimbursed

 

		(8)	Discretionary
                                         meaning at the Board's sole discretion.
	 	 	 
		(9)	Performance
                                         Targets include only sales through or by the resuscitation division, worldwide. That
                                         means, all sales people reporting to Executive, and all distributors reporting to Executive,
                                         worldwide.

 

    	Employment Contract - Page 19

    	 

    

 

Exhibit B

Initial
List of Objectives and Responsibilities

(subject
to change)

Dated
_________

 

Initial Duties & Responsibilities
(partial list, not necessarily exhaustive)

 

		●	The
                                         primary goal is to develop, grow, and sustain a healthy robust revenue stream for the
                                         Company. This will require and include (but will not be limited to), building out the
                                         direct sales teams, developing the distributor channel organization worldwide and making
                                         them effective, and achieving the Company’s sales and corporate objectives year
                                         over year.
		●	Provide
                                         a high value return for the Company and its shareholders.
		●	Pursue
                                         activities for and on behalf of the Company that may be multi-functional and varied,
                                         and may include involvement in all business development activities, including fundraising,
                                         product development, and market development. Other duties and responsibilities may evolve
                                         over time.
		●	Report
                                         to the President and CEO

 

    	Employment Contract - Page 20

    	 

    

 

Exhibit C

 

To
All Employees:

 

The
nature and scope of the Company's operations place a significant trust in individual employees. Since its founding, the Company
has always operated with the highest ethical standards. The Company rewards the contribution of its employees by providing challenging
employment, pleasant working facilities, and a commitment to long term job security.

 

The
importance of ethical conduct to the success of the Company is further emphasized in our policies and procedures, which commits
the Company and all its employees to operate with the highest moral, ethical, and legal standards.
These guidelines apply in principle to all areas of the Company's business, both domestic
and international. Specific guidelines based on these principles may be required for certain international operations.

As
an employee of the Company, you are expected to study the Business Conduct Guidelines, and to pledge your personal commitment
and compliance. You will be asked to certify your compliance with the program. All employees have an obligation to maintain exemplary
business conduct.

 

I
am confident that Company employees will abide by the ethical standards that are vital to the continued success of the Company
and its employees. All of us are on a team. We must be able to depend on our teammates to support these standards for the mutual
benefit of all of us.

 

Julian Ross

Chairman, President and CEO

 

► Introduction

 

► Be
honest and fair in all business dealings

► Avoid conflicts of interest in any form

► Make sure that all entries in the books and records of the Company are complete
and accurate

► Complete, accurate and timely disclosure

► Government contracting guidelines

► Use of Company funds or resources, directly or indirectly, for political purposes
is prohibited

► Do not use the Company name, assets, or information improperly or for personal
gain

► Insider trading

► No promoting, using, or selling of illegal drugs

► Exercise good judgment in the use of alcohol

► Appropriate workplace behavior

► International business conduct guidelines

 

    	Employment Contract - Page 21

    	 

    

 

Introduction

 

The
Business Conduct Guidelines set forth the Company's expectations of legally and ethically correct conduct required of all employees,
officers and members of the Company's Board of Directors (collectively “employees”) in a variety of identified business
situations.

 

The
Business Conduct Guidelines do not and cannot cover every situation in which you will be faced with ethical questions. Questions
will arise concerning interpretation, intent, and application. All such questions should be discussed with your supervisor, who
will consult with higher authority, whenever appropriate.

The
term “Company” in this publication includes subsidiaries and the business units within and outside the U.S., except
where noted.

 

In
performing their duties for the Company, all employees must comply with all applicable laws, rules, and regulations and must avoid
situations that could result in the appearance of wrongdoing or impropriety under these guidelines. Employees are encouraged to
talk to supervisors or senior management about observed or suspected illegal or unethical behavior and, when in doubt, about the
best course of action in a particular situation. 

 

Unless
authorized by the employee or required by law, the identity of the employee reporting a violation, a concern, or a complaint will
not be disclosed. The Company will not allow retaliation of any kind for reports made in good faith.

 

If
you have any questions or concerns regarding potential violations of applicable laws, rules, and regulations or of these guidelines,
you should immediately contact senior management, the Chief Executive Officer, or the Company’s Board of Directors.

 

If
you believe that your immediate supervisor may be engaging in objectionable conduct, you should report your concerns through senior
management, the Chief Executive Officer, or a member of the Board of Directors. 

 

If
any employee of the Company has concerns or complaints regarding questionable accounting or auditing matters of the Company, then
he or she is encouraged to submit those concerns or complaints (anonymously, confidentially or otherwise) to the Board of Directors
by mail at the following address:

 

Board of
Directors

OxySure Systems, Inc.

10880 John W. Elliott Drive #600

Frisco,
Texas 75033

 

    	Employment Contract - Page 22

    	 

    

 

All
complaints regarding questionable accounting or auditing matters will be investigated by the Board
of Directors.

 

Business
Conduct Guideline 1:

 

►
Be honest and fair in all business dealings

 

As
a Company employee you are expected to be honest and fair in dealings with fellow employees, the Company, suppliers, customers,
competitors, and other members of the business community. At some time or another, you may have the opportunity to profit, at
the expense of the Company, fellow employees or others, by dishonesty. No employee should take unfair advantage of anyone through
manipulation, concealment, abuse of confidential information, misrepresentation of material facts, or any other intentional unfair-dealing
practice. Such behavior could take the form of filing a false expense statement; accepting a bribe or kickback from a supplier;
copying computer software; lying to a supervisor or customer concerning business facts; taking merchandise, supplies, or money;
or other similar misdeeds.

 

The
Company would like to see each of you enjoy a long-term, productive employment relationship with it, but will not hesitate to
discipline, discharge and/or prosecute in court, as appropriate, anyone who knowingly violates the rule of basic honesty and fairness,
even if not covered specifically by the Business Conduct Guidelines.

 

Business
Conduct Guideline 2:

 

►
Avoid conflicts of interest in any form

 

General
guidelines regarding conflicts of interest:

 

A
conflict of interest is divided loyalty between the interests of the Company and the personal interests of the employee. A conflict
situation can arise when an employee takes actions or has interests that may make it difficult to perform his or her work for
the Company objectively and effectively. Conflicts of interest can also arise when an employee, or a member of the employee's
family, receives improper personal benefits as a result of a Company position whether received from the Company or a third party.
You must act honestly and ethically and not allow personal considerations or relationships, either actual or potential, to influence
you in any way when representing the Company in dealings with other persons or organizations.

 

Each
of you has the obligation to avoid not only situations that give rise to a conflict of interest, but also those situations that
create the appearance of a conflict of interest.

 

You
may encounter potential conflicts of interest in a variety of situations. Some of the more likely areas are:

		1.	Relationships
                                         with customers or suppliers, especially relating to entertainment situations or gifts.
		2.	Financial
                                         or other dealings, including loans or guarantees, with outside organizations that do
                                         business with our Company.
		3.	Outside
                                         employment with any competitor, customer, or supplier of the Company, or any other outside
                                         employment arrangements that could jeopardize your independence or adversely affect your
                                         interests or productivity.
		4.	Transactions
                                         not in the ordinary course of business involving a member of the Company's Board of Directors
                                         that have not been appropriately approved by the Board and disclosed to the public.

 

    	Employment Contract - Page 23

    	 

    

 

You
should reexamine your investments, relationships, and activities periodically to avoid becoming involved in a conflict of interest.
If you are in doubt concerning the propriety of any activity, you are obliged to review the situation with your supervisor. You
are required to tell us immediately about any conflicts of interest or potential conflicts of interest between your personal and
your business relationships.

 

The
Company reserves the right to determine whether certain activities constitute a conflict of interest. If, after such determination
and appropriate discussion, you persist in engaging in such activities, discharge may result.

 

Outside relationships,
activities, employment, and directorships:

 

All employees
share a responsibility for the Company’s good public relations, especially at the community level. Their readiness to help
with religious, charitable, educational, and civic activities brings credit to the Company and is encouraged. However, employees
must avoid acquiring any business interest or participating in any other activity outside the Company that would, or would appear
to either create an excessive demand upon their time and attention, thus depriving the Company of their best efforts on the job
or create a conflict of interest - an obligation, interest, or distraction - that may interfere with the independent exercise
of judgment in the Company’s best interest.

 

In general,
it is a conflict of interest for an employee or officer to have a significant interest, financial or otherwise, with a supplier,
vendor, competitor or customer. Direct or indirect business connections with our customers or competitors should be avoided, except
as required on behalf of the Company or pre-authorized in writing by the Company.

 

Employees have
a right to privacy outside the work environment; however employees should be cautious of behaving in any manner that could jeopardize
the public’s trust in the Company, particularly if the employee is wearing a badge, clothing, or accessories with the Company’s
logo.

 

Business
Conduct Guideline 3:

 

►
Make sure that all entries in the books and records of the Company are complete and accurate

 

All
entries made in the Company's books, records, and accounts must properly and fairly reflect the transactions being recorded, to
the best knowledge, information, and belief of the employees making the entries.

 

    	Employment Contract - Page 24

    	 

    

 

All
employees create and use company records, both on paper and electronically, e.g., transactions with customers and suppliers, employee
data, pricing and payment of third party service providers. When you create Company records you are required to do so correctly,
and honestly. Our policy expressly forbids the improper
handling of our funds and assets. All funds and assets of the Company must be disclosed and recorded properly; no undisclosed
or unrecorded fund or asset of the Company is to be established for any purpose.

 

If
you have concerns or complaints regarding questionable accounting or auditing matters of the Company, you are encouraged to submit
those concerns and complaints to the Board of Directors.

 

Business
Conduct Guideline 4:

 

►
Complete, accurate and timely disclosure

 

The
Company's filings with the Securities and Exchange Commission must be full, fair, accurate, timely, and understandable. Depending
on their position with the Company, employees may be called upon to provide necessary information to assure that the Company's
securities filings and other public communications meet these standards. The Company expects employees to take this responsibility
very seriously and to promptly provide current, accurate and complete answers to inquiries related to the Company's public disclosure
requirements.

 

Business
Conduct Guideline 5:

 

►
Government contracting guidelines

 

The
Company values its federal, state and local government customers. Doing business with the government is a public trust and involves
a variety of procurement and ethics laws and regulations.

 

The
Company will conduct business with its government customers in strict compliance with these rules and in a manner that avoids
even the appearance of any conflict of interest. You
are expected to know and follow the procurement and ethics laws and regulations as they may impact the Company's customers, both
government and commercial. Any questions or concerns should be raised with the Company’s Chief Executive Officer.

Business Conduct Guideline 6:

 

►
Use of Company funds or resources, directly or indirectly, for political purposes is
prohibited

 

Personal
Political Activities

 

In
support of the democratic process, we encourage you to participate in political activities, provided that such activities are
kept separate from your work. If you are engaged in political activity of any kind, you must be careful not to use the Company
name or resources, and ensure that such activities do not adversely affect any business relationships. In addition, you should
exercise discretion in discussing political subjects with business contacts. If you have any questions about your participation
in political activities, you are obliged to discuss the situation with senior management or the Company’s
Chief Executive Officer.

 

    	Employment Contract - Page 25

    	 

    

 

Prohibition
Against Company Political Contributions

 

Company
funds or assets shall not be used for making political contributions of any kind, whether in the United States or in a foreign
country. This prohibition covers not only direct contributions, but indirect support of candidates or political parties; e.g.,
the purchase of tickets for special dinners or other fund-raising events, the loan of employees to political parties or committees,
and the furnishing of transportation or duplicating services. In exceptional situations, based on the Company's need and only
with the prior approval of the Chief Executive Officer, political activity may be permitted relative to matters that are:

 

		1.	Clearly
                                         lawful, and
		2.	Determined
                                         to be closely related to the interests of the Company, its employees, or its shareholders.

 

Business
Conduct Guideline 7:

 

►
Do not use the Company name, assets, or information improperly or for personal gain

 

Corporate
Opportunities

 

Employees
owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises. Employees are prohibited from
taking for themselves opportunities that are discovered through the use of corporate property, information, or position without
the consent of the Board of Directors. No employee may use corporate property, information, or position for personal gain and
no employee shall compete with the Company directly or indirectly.

 

General

 

The
Company name, assets, and information belong to the Company and not to individual employees, regardless of position in the Company.

 

Use
of Company Name

 

Employees
may not use the Company name in connection with personal activities, except as part of biographical summaries of work experience.
If you intend to speak to the media, participate in meetings or publish materials where your involvement is primarily that of
a Company representative so that you are perceived as acting on behalf of the Company or as expressing Company views, advance
approval of the Chief Executive Officer is required. In addition, the actual content of any speech, presentation material, paper,
or article to be published must be reviewed by the Chief Executive Officer, prior to presentation or publication.

 

    	Employment Contract - Page 26

    	 

    

 

Social
Media

 

Employees
are expected to exercise good judgment in general as it relates to your use of social media outlets (e.g. Facebook, Twitter, YouTube,
blogs, etc.). All existing Company policies apply to an employee’s use of social media just as they do in the workplace.
An employee’s online communications should adhere to the following standards:

 

	 	1.	Clearly indicate you are speaking
    for yourself and not on behalf of the Company. Where appropriate, add the disclaimer “the views expressed here are my
    own and do not necessarily reflect the views of my employer” to your profile.
	 	2.	Where communications are inconsistent
    with Company values or would reflect negatively on the Company brand, remove any identifiers such as work e-mail addresses
    that identify you as an employee of the Company.
	 	3.	Use your personal e-mail address
    for all personal communications.
	 	4.	During work hours and while performing
    work duties, refrain from excessive use of social networking sites, the internet, and other non-work related activities.

 

Only
those designated by the Company to speak on behalf of the Company in social media outlets as part of their jobs may do so. All
other employees must remember to never share specific business performance information, information on business initiatives or
other confidential data, or comment on anything that may be discussed about the brand in the press via social media or any other
media outlet. This policy is not intended to interfere with an employee’s rights under the National Labor Relations Act.

 

Use
of Company Assets 

 

Employees
must regard the protection of Company assets (both physical and intangible) and services as a vital responsibility. Company assets
include Company manuals, samples, forms, plans, customer lists, information and files, goodwill, databases, software, hardware,
and all other data, documents, writings, copies, and information in any format used or relied upon in your employment. These materials
and property are proprietary to the Company and must be protected and used appropriately.

 

Theft,
carelessness, loss, and waste have a direct impact on the Company's profitability.

 

All
Company assets should be used for legitimate business purposes. They must not be used for personal benefit or any other improper
purpose. They must not be sold, lent, given away, or otherwise disposed of, regardless of condition or value, except with proper
authorization. They must be returned upon request or upon termination of employment. Personal use of Company equipment and systems
must be reasonable.

 

While
employed at the Company and for a year thereafter, employees shall not employ or attempt to employ any current Company employee
about whom they had knowledge during their employment.

 

    	Employment Contract - Page 27

    	 

    

 

Confidentiality
and Use of Company Information

 

Employees
shall maintain the confidentiality of information entrusted to them by the Company or by its customers, except when disclosure
is authorized or legally mandated. Employees understand and agree that the Company will provide unique and specialized training
and confidential information concerning the Company's services, processes, techniques, and equipment, which were developed at
considerable effort and expense to the Company and for the Company's sole and exclusive use, and which if used by our competitors
would give them an unfair business advantage. Confidential information includes all non-public information that, if disclosed,
might be of use to competitors, or harmful to the Company or its customers. In today's technology environment, information is
a vital competitive advantage, which must be protected. This confidential and proprietary information includes, for example, pricing,
Company manuals, customer and sales data (including the identity of the Company's customers, former customers and customer prospects),
employee records, the special needs of the Company's customers and former customers, supplier information, confidential market
information, pricing information and analyses, business projections, financial statements and information, special procedures
and services of the Company and techniques, formulae and design plans, Company and employee manuals, contracts and fee arrangements,
correspondence with customers and prospective customers, marketing strategies, reference materials, technical information, drawings,
manufacturing processes, activity reports, other training and materials, and Intranet and Internet-related sites. Loss or improper
disclosure of such information could do harm to the business and have a material effect on the Company's financial well being.

 

The
loss or improper disclosure of confidential and proprietary information by one of us could affect all of us. Therefore, you are
required to take reasonable precautions to protect the Company information you have been entrusted with. This includes not disclosing
Company information on Internet chat rooms.

 

The
Company has established a set of controls to help guide you to protect Company information and to help prevent unauthorized distribution
of this information. Documents containing classified information are identified as: Company Limited, Company Confidential, Personal,
Proprietary, Proprietary & Confidential, or Privileged. You are required to use appropriate security measures to protect all
Company information in any form.

 

Physical
security and right to search

 

The Company
endeavors to provide a secure business environment for the protection of our employees, products, valuable materials, equipment
and proprietary systems and information. Materials, equipment and systems incorporated into the design of facilities and grounds
will ensure adequate security in these areas. Security is the responsibility of all employees. Any breach of security should be
reported immediately to your supervisor, the Chief Executive Officer or a member of the Board of Directors.

 

Accordingly,
the Company does not allow the unauthorized removal of the Company’s assets or physical property from our premises, or sharing
of our intellectual property in an unauthorized manner. To ensure proper protection of our employees and assets, the Company regulates
the possession and movement of assets, subject to the limitations imposed by local and other applicable laws.

 

The Company
reserves the right to conduct searches on its premises in order to provide a secure business environment. Employees should have
no reasonable expectation of privacy while on the Company premises, in their workspace, and in their work tools. Areas subject
to search include an employee’s workspace, desk, computer, file cabinet, locker or similar places where employees may place
personal possessions, whether or not such places are locked. Such inspections or searches may also include, but are not limited
to, computer files, CDs, DVDs, flash drives, voice mail, texts, hard drives, e-mail or other electronic mail; an employee’s
vehicle when on the Company’s property; or items of personal property while on the Company’s property.

 

    	Employment Contract - Page 28

    	 

    

 

Business
Conduct Guideline 8:

 

►
Insider trading

 

The
federal securities laws make it illegal to trade or “tip” others to trade in Company stock or the stock of other companies
if you have “material” non-public information from or about either OxySure or the other companies. This prohibition
applies whether or not you are relying on the “inside” information. Insider trading is both unethical and illegal,
and will be dealt with decisively.

 

A
specific area of concern relates to non-public information about the Company, positive or negative, that could have an effect
on the market price of the Company's stock. Examples are a pending acquisition, the expectation of substantially higher or lower
earnings, a stock split, a major new product line, or a major new customer. As a matter of law, you are prohibited from buying
or selling Company securities based on inside information.

 

You
are similarly prohibited from buying or selling securities of other companies on the basis of confidential information acquired
by reason of your relationship with the Company. Obvious situations include publicly held acquisition candidates, and publicly
held candidates to become important suppliers of goods or services to the Company.

 

The
same prohibitions apply to anyone to whom the inside information or other confidential information is communicated; e.g., a family
member, business associate, friend, or neighbor. Violating any of these prohibitions is cause for dismissal and could result in
criminal prosecution as well. In this connection, you also may not, other than pursuant to a Company-approved trading program
under SEC Rule 10b5-1, buy or sell Company securities prior to the 10th business day after such information is released
to the public. If you have any questions concerning your obligations in this regard, you should contact your supervisor, who will
consult with the Corporate Secretary as appropriate.

 

Short
sales of Company stock are inherently speculative. Company employees who engage in short sales of Company stock give the appearance
of attempting to profit through inside information, even if no such attempt is involved. Accordingly, you are strictly prohibited
from engaging in any short sales of Company stock.

 

Directors
and certain officers are subject to additional requirements with respect to Company securities.

 

    	Employment Contract - Page 29

    	 

    

 

Business
Conduct Guideline 9:

 

►
No promoting, using, or selling of illegal drugs

 

Improper
use of narcotics and other controlled substances, commonly referred to as illegal drugs, has become a significant problem to businesses,
employees, and society in general. Their sale, use, and abuse, when connected to the conduct of business and the work environment,
can threaten the safety, morale, and public image of the Company and its employees. Because of our strong concerns in this area,
we have established the following policy regarding illegal drugs:

 

		1.	No
                                         person will be hired who is known to be a promoter, user, or seller of illegal drugs.

		2.	Possession
                                         or use of illegal drugs on Company premises or during working hours, including break
                                         or meal periods, or working under the influence of illegal drugs, is strictly prohibited.
                                         Violation of this policy is cause for immediate disciplinary action, up to and including
                                         termination of employment.

		3.	Employees
                                         who are found to be sellers or involved in the sale, solicitation, or dealing of illegal
                                         drugs will be subject to immediate termination of employment from the Company.

 

Business
Conduct Guideline 10:

 

►
Exercise good judgment in the use of alcohol

 

The
Company discourages the use of alcoholic beverages during business hours, including lunch. The possession or use of alcoholic
beverages on Company premises, except for authorized functions, is prohibited. Reporting to work or performing your job assignments
under the influence of alcohol is cause for immediate disciplinary action, up to and including termination of employment.

 

Business
Conduct Guideline 11:

 

►
Appropriate workplace behavior

 

A
pleasant place to work is important to the effectiveness of Company employees. The workplace must have an atmosphere free of discrimination,
harassment, threats, and violence. Further, any behavior that results in creating hostile work environment for fellow employees
is strictly prohibited.

 

Harassment

 

The
Company strives to maintain a working environment free from ethnic, religious, racial, or sexual harassment. If any such inappropriate
conduct occurs, whether in verbal, written, pictorial, or physical form, the affected employees should immediately notify their
supervisor or senior management. All complaints of harassment will be promptly investigated, and treated with appropriate confidentiality.

 

Threats
and Violence

 

The
Company is committed to providing a workplace that is safe, secure, and free from threats of harm, intimidation, or violence.
If you feel threatened or unsafe, or are aware of a potentially threatening or unsafe situation, you should notify your supervisor
or senior management.

 

    	Employment Contract - Page 30

    	 

    

 

If
you observe harassment or threatening behavior, you are to report it immediately. If supervisors or managers observe such behavior,
they should take immediate action to stop the behavior, and then report it to senior management. Violation of this policy will
result in disciplinary action, up to and including termination of employment.

 

Equal
Opportunity Employment

 

It
is OxySure policy to provide equal employment opportunities for all persons, regardless of race, creed, color, religion, sex,
national origin, age, mental or physical disability, domestic partnership status, sexual orientation, gender identity, gender
expression, veteran status, marital status or citizenship status, and to ensure that all employment practices such as recruiting,
hiring, transfers, promotions, training, compensation, benefits, layoffs, and terminations are equally applied.

 

Business
Conduct Guideline 12:

 

►
International business conduct guidelines

 

Laws
and customs vary throughout the world, but all employees must uphold the integrity of the Company in other nations as diligently
as they do in the United States. Seemingly routine business transactions with customers, suppliers, partners and governments around
the world can violate U.S. and foreign laws. These laws are numerous and complex. Employees conducting business in other countries
must make certain that all their activities are in full conformity with OxySure's business ethics and all applicable laws, particularly
in dealing with foreign governments and exporting products.

 

Foreign
Corrupt Practices Act (FCPA) Compliance

 

In
particular, employees are expected to deal ethically in all interactions with foreign governments and companies and to comply
with the U.S. Foreign Corrupt Practices Act (FCPA). The FCPA generally makes it unlawful for a company, as well as its employees,
agents or intermediaries, to pay bribes or give anything of value to a foreign official for the purposes of obtaining or retaining
business. Failure to comply with the FCPA can result in criminal and civil penalties to companies and to individuals.

 

International
Trade and Export Controls 

 

Each
employee involved in international transactions must also follow the international trade and export controls laws. 

 

The
following are critical issues that employees need to be aware of in order to comply with Company policies and United States laws:

 

		1.	Country
                                         Prohibitions – Exports to certain countries such as Cuba, Iran, Myanmar, North
                                         Korea, and Sudan are prohibited and sales to other countries are significantly limited.
                                         This country list changes periodically.
		2.	Boycotts
                                         and Embargoes – There are strict prohibitions against participating in certain
                                         economic boycotts or embargoes.

 

    	Employment Contract - Page 31

    	 

    

 

		3.	Denied
                                         Parties – Sales to certain individuals are prohibited.
		4.	Restricted
                                         Goods – Exporting certain goods or technology without appropriate government
                                         approvals is restricted.

 

Failure
to comply with international trade and export laws can result in the loss of export privileges, and subject the Company and individuals
to civil and criminal penalties.

 

Implementation

 

Each
Company employee will be asked to complete and return an annual Business Conduct Guidelines certification as a condition of employment.

 

You
should read the guidelines carefully before you certify. Note that you are being asked to certify both that you personally are
in full compliance with the Business Conduct Guidelines and that you are not aware of any clear violations by other Company employees.
Any intentional violation of the Business Conduct Guidelines will result in disciplinary action, up to and including discharge
and prosecution, as determined by the circumstances. The guidelines described in this document are not to be considered as creating
terms and conditions of an employment contract, either express or implied. All employment at the Company, as it has always been,
is “at-will” employment. In other words, employment of all individuals is for no fixed duration, and can be terminated
by the employee or the Company at any time and for any reason with or without notice. No representative of the Company has the
authority to make any contrary agreement unless written approval is obtained from the Chief Executive Officer or Board of Directors.

 

The
Company may amend these guidelines at any time.

 

Waivers
of Guidelines

 

Any
waiver of these guidelines for executive officers or directors may be made only by the Company's Board of Directors or a Board
committee authorized by it to grant waivers and any waiver will be promptly disclosed as required by law, Securities and Exchange
Commission rules or stock exchange rules.

 

Consequences
of Violations

 

In the event
of violations of this Code or other Company policy, employees may be subject to disciplinary action, up to and including termination. 

 

 

Rev. January
2013

 

Employment Contract - Page 32Exhibit 4.1

 

EXECUTION VERSION

 

 

RIGHTS AGREEMENT

 

between

 

EPIQ SYSTEMS, INC.

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Rights Agent

 

Dated as of September 18, 2014

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
Definitions
    	
1
    
	
2.
    	
Appointment of Rights Agent
    	
5
    
	
3.
    	
Issue of Right Certificates
    	
5
    
	
4.
    	
Form of Right Certificates
    	
6
    
	
5.
    	
Countersignature and Registration
    	
6
    
	
6.
    	
Transfer, Split-up, Combination and Exchange of Right   Certificates; Lost, Stolen, Destroyed or Mutilated Right Certificates
    	
6
    
	
7.
    	
Exercise of Rights; Purchase Price; Expiration Time of   Rights
    	
7
    
	
8.
    	
Cancellation and Destruction of Right Certificates
    	
8
    
	
9.
    	
Status and Availability of Preferred Shares
    	
8
    
	
10.
    	
Preferred Shares Record Date
    	
9
    
	
11.
    	
Adjustment of Purchase Price, Number of Shares or Number of   Rights
    	
9
    
	
12.
    	
Certificate of Adjustment
    	
12
    
	
13.
    	
Consolidation, Merger, Share Exchange, Sale or Transfer of   Assets or Earning Power
    	
13
    
	
14.
    	
Fractional Rights and Fractional Shares
    	
13
    
	
15.
    	
Rights of Action
    	
14
    
	
16.
    	
Agreement of Right Holders
    	
14
    
	
17.
    	
Right Certificate Holder Not Deemed a Stockholder
    	
14
    
	
18.
    	
Concerning the Rights Agent
    	
15
    
	
19.
    	
Merger, Share Exchange, Consolidation or Change of Name of   Rights Agent
    	
15
    
	
20.
    	
Duties of Rights Agent
    	
15
    
	
21.
    	
Change of Rights Agent
    	
17
    
	
22.
    	
Issuance of New Right Certificates
    	
17
    
	
23.
    	
Redemption
    	
17
    
	
24.
    	
Exchange
    	
18
    
	
25.
    	
Notice of Certain Events
    	
18
    
	
26.
    	
Notices
    	
19
    
	
27.
    	
Supplements and Amendments
    	
19
    
	
28.
    	
Successors
    	
20
    
	
29.
    	
Benefits of This Agreement
    	
20
    
	
30.
    	
Severability
    	
20
    
	
31.
    	
Governing Law
    	
20
    
	
32.
    	
Exclusive Jurisdiction
    	
20
    
	
33.
    	
Counterparts
    	
20
    
	
34.
    	
Descriptive Headings
    	
21
    
	
35.
    	
Administration
    	
21
    
	
36.
    	
Force Majeure
    	
21
    

 

i

 

RIGHTS AGREEMENT

 

This Rights Agreement (this “Agreement”) dated as of September 18, 2014 is between EPIQ Systems, Inc., a Missouri corporation (the “Company”), and Wells Fargo Bank, National Association (the “Rights Agent”).

 

The Board of Directors of the Company (the “Board”) has authorized and declared a dividend of one preferred share purchase right (a “Right”) for each Common Share (as defined below) outstanding on the Close of Business (as defined below) on September 29, 2014 (the “Record Date”) and has authorized the issuance of one Right with respect to each additional Common Share issued by the Company between the Record Date and the earlier of the Distribution Date and the Expiration Time (each as defined below) and with respect to additional Common Shares that shall become outstanding after the Distribution Date as provided in Section 22, each Right initially representing the right to purchase one Unit (as defined below), upon the terms and subject to the conditions below.

 

Accordingly, in consideration of the premises and the mutual agreements herein set forth, the parties agree as follows:

 

1.                                      Definitions.  For purposes of this agreement, the following terms have the meanings indicated:

 

1.1                               “Acquiring Person” means any Person who or which, together with all Affiliates and Associates of such Person, is or becomes the Beneficial Owner of 10% or more of the Common Shares then outstanding, but shall not include any Exempt Person or any Person who becomes the Beneficial Owner of 10% or more of the Common Shares then outstanding solely as the result of a bona fide gift or by will or intestate succession.

 

Notwithstanding the foregoing, no Existing Holder shall be deemed to be an Acquiring Person; provided, however, that if an Existing Holder shall (i) become the Beneficial Owner of any additional Common Shares (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Shares,  pursuant to a split or subdivision of the outstanding Common Shares or under Company equity compensation plans or other compensation agreements or arrangements) or (ii) cease to be the Beneficial Owner of 10% or more of the Common Shares then outstanding, such Existing Holder shall thereafter cease to be considered an Existing Holder and this paragraph shall have no further force or effect with respect to such Person.

 

Notwithstanding the foregoing paragraphs of this Section 1.1, no Person shall become an Acquiring Person as the result of an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares Beneficially Owned by such Person to 10% (or such other percentage as would otherwise result in such Person becoming an Acquiring Person) or more of the Common Shares then outstanding; provided, however, that if a Person shall become the Beneficial Owner of 10% or more of the Common Shares then outstanding by reason of share purchases by the Company and shall, after such share purchases by the Company, become the Beneficial Owner of any additional Common Shares (other than pursuant to additional share purchases by the Company, or a dividend or distribution paid or made by the Company on the outstanding Common Shares, or pursuant to a split or subdivision of the outstanding Common Shares), then such Person shall be deemed to be an Acquiring Person.

 

Notwithstanding the foregoing paragraphs of this Section 1.1, if the Board determines in good faith that a Person who would otherwise be an Acquiring Person has become such without actual knowledge (i) that it Beneficially Owns a percentage of Common Shares that would otherwise cause such Person to be an “Acquiring Person” or (ii) of the consequences of such Beneficial Ownership under this Agreement, and, in each case, without any plan or intention to change or influence control of the Company, and such Person promptly reduces (or promptly enters into an agreement with the Company, which agreement is satisfactory to the Board in its sole discretion, to reduce and subsequently reduces in accordance with the terms of such agreement) its, together with all Affiliates and Associates of such Person, Beneficial Ownership of Common Shares so that such Person would no longer be an Acquiring Person, then such Person shall not be deemed to have become an Acquiring Person for any purposes of this Agreement.

 

 

Notwithstanding the foregoing paragraphs of this Section 1.1, if a bona fide swaps dealer who would otherwise be an “Acquiring Person” has become so as a result of its actions in the ordinary course of its business that the Board determines, in its sole discretion, were taken without the intent or effect of evading or assisting any other Person to evade the purposes and intent of this Agreement, or otherwise seeking to control or influence the management or policies of the Company, then, and unless and until the Board shall otherwise determine, such Person shall not be deemed to be an “Acquiring Person” for any purposes of this Agreement.

 

1.2                               “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement.

 

1.3                               “Agreement” has the meaning set forth in the Recitals to this Agreement.

 

1.4                               A Person shall be deemed the “Beneficial Owner” of and shall be deemed to “Beneficially Own” and have “Beneficial Ownership” of any securities:

 

1.4.1  which such Person or any of such Person’s Affiliates or Associates beneficially owns, directly or indirectly, for purposes of Section 13(d) of the Exchange Act and Regulations 13D and 13G thereunder, in each case, as in effect on the date of this Agreement;

 

1.4.2  which such Person or any of such Person’s Affiliates or Associates has (i) the right or the obligation to acquire (whether such right is exercisable, or such obligation is required to be performed, immediately or only after the passage of time or the fulfillment of a condition or both) pursuant to any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), written or otherwise, or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed to be the Beneficial Owner of, or to beneficially own, securities tendered pursuant to a tender or exchange offer made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act by or on behalf of such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (ii) the right to vote or dispose of, or direct the voting or disposal of, pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote such security (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act and (B) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report);

 

1.4.3  which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person’s Affiliates or Associates has (i) any agreement, arrangement or understanding (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), written or otherwise, for the purpose of acquiring, holding, voting (except to the extent contemplated by the proviso to Section 1.4.2(ii)) or disposing of any securities of the Company, or (ii) any agreement, arrangement or understanding (written or oral) to cooperate (other than solely by provision of a revocable proxy or consent given by such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act)) in obtaining, changing or influencing the control of the Company; or

 

1.4.4  which are the subject of, or the reference securities for, or that underlie, any Derivative Interest of such Person or any of such Person’s Affiliates or Associates, with the number of Common Shares deemed Beneficially Owned being the notional or other number of Common Shares specified in the documentation evidencing the Derivative Interest as being subject to be acquired upon the exercise or settlement of the Derivative Interest or as the basis upon which the value or settlement amount of such Derivative Interest is to be calculated in whole or in part or, if no such number of Common Shares is specified in such documentation, as determined by the Board in its sole discretion to be the number of Common Shares to which the Derivative Interest relates.

 

2

 

Notwithstanding anything in this Section 1.5 to the contrary, the phrase “then outstanding,” when used with reference to a Person’s Beneficial Ownership of securities of the Company, means the number of such securities then issued and outstanding together with the number of such securities not then actually issued and outstanding which such Person would be deemed to Beneficially Own hereunder.

 

1.5                               “Board” has the meaning set forth in the Recitals to this Agreement.

 

1.6                               “Book-Entry Shares” means uncertificated Common Shares registered in book-entry form.

 

1.7                               “Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in the state of New York are authorized or obligated by law or executive order to close.

 

1.8                               “Close of Business” on any given date means 5:00 p.m., New York City time, on such date; provided, however, that if such date is not a Business Day, it means 5:00 p.m., New York City time, on the next succeeding Business Day.

 

1.9                               “Common Shares” means the shares of Common Stock, par value $0.01 per share, of the Company, except that “Common Shares” when used with a specific reference to any Person other than the Company means 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.

 

1.10                        “Company” has the meaning set forth in the Recitals to this Agreement.

 

1.11                        “Current Market Price” has the meaning set forth in Section 11.6.

 

1.12                        “Derivative Interest” means an interest in any derivative securities (as defined under Rule 16a—1 under the Exchange Act) that increases in value as the value of the underlying securities increases, including a long convertible security, a long call option and a short put option position, in each case, regardless of whether (i) such interest conveys any voting rights in such security, (ii) such interest is required to be, or is capable of being, settled through delivery of such security or (iii) transactions hedge the economic effect of such interest.

 

1.13                        “Distribution Date” means the earlier of the Close of Business on (i) the tenth Business Day after the Stock Acquisition Date (or, in the event the Board determines on or before such tenth Business Day to effect an exchange in accordance with Section 24 and determines in accordance with Section 24.3 that a later date is advisable, such later date) and (ii) the tenth Business Day (or such later date as may be determined by the Board prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than an Exempt Person) of, or of the first public announcement of the intention of any Person (other than an Exempt Person) to commence, a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person.

 

1.14                        “Earning Power” means the earning power of the Company and its Subsidiaries as determined in good faith by the Board on the basis of the operating earnings of each business operated by the Company and its Subsidiaries during the three fiscal years preceding the date of such determination (or, in the case of any business not operated by the Company or any Subsidiary during three full fiscal years preceding such date, during the period such business was operated by the Company or any Subsidiary).

 

1.15                        “Equivalent Preferred Shares” has the meaning set forth in Section 11.2.

 

1.16                        “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

1.17                        “Exchange Ratio” has the meaning set forth in Section 24.1.

 

3

 

1.18                        “Exempt Person” means (i) the Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or (iv) any entity or trustee holding (or acting in a fiduciary capacity in respect of) Common Shares for or pursuant to the terms of any such employee benefit plan.

 

1.19                        “Existing Holder” means any Person who, together with all Affiliates and Associates of such Person, as of the Close of Business on the date of the first public announcement of this Agreement, is the Beneficial Owner of 10% or more of the Common Shares then outstanding.

 

1.20                        “Expiration Time” means the earliest to occur of (i) the Close of Business on May 15, 2015, (ii) the Redemption Time, or (iii) the effective time of an exchange of the Rights pursuant to Section 24.

 

1.21                        “NASDAQ” means The NASDAQ Stock Market LLC.

 

1.22                        “Person” means any individual, firm, corporation, partnership, unincorporated organization, business trust, trust, syndicate, joint venture, limited liability company, association, group (as such term is used in Rule 13d-5 under the Exchange Act, as such Rule is in effect on the date of this Agreement) or other entity, and, in each case, shall include any successor (by merger or otherwise) of any such Person.

 

1.23                        “Preferred Shares” means shares of Series A Participating Preferred Stock, par value $0.01 per share, of the Company having such rights and preferences as are set forth in the form of Certificate of Designation set forth as Exhibit A hereto, as the same may be amended from time to time.  For the avoidance of doubt, any reference in this Agreement to Preferred Shares shall be deemed to include any authorized fraction of a Preferred Share, unless the context otherwise requires.

 

1.24                        “Purchase Price” has the meaning set forth in Section 7.2.

 

1.25                        “Record Date” has the meaning set forth in the Recitals to this Agreement.

 

1.26                        “Redemption Price” has the meaning set forth in Section 23.1.

 

1.27                        “Redemption Time” has the meaning set forth in Section 23.2.

 

1.28                        “Right” has the meaning set forth in the Recitals to this Agreement.

 

1.29                        “Right Certificate” means a certificate evidencing a Right in substantially the form of Exhibit B hereto.

 

1.30                        “Rights Agent” has the meaning set forth in the Recitals to this Agreement.

 

1.31                        “Securities Act” means the Securities Act of 1933, as amended.

 

1.32                        “Stock Acquisition Date” means the earlier (i) the first date of a public announcement by the Company that a Person has become an Acquiring Person, which announcement makes express reference to such status as an Acquiring Person pursuant to this Agreement, or (ii) the date on which the Company first has notice, direct or direct, formal or informal, that any Person has become an Acquiring Person; provided, however, that, for the avoidance of doubt, if such Person is determined not to have become an Acquiring Person pursuant to the last two paragraphs in the definition of Acquiring Person contained in Section 1.1, then no such Stock Acquisition Date shall have been deemed to have occurred.

 

1.33                        “Subsidiary” of any Person means any Person of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by such Person.

 

1.34                        “Summary of Rights” means the Summary of Rights to Purchase Preferred Shares in substantially the form of Exhibit C hereto.

 

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1.35                        “Trading Day” means a day on which the principal national securities exchange on which a security is listed or admitted to trading is open for the transaction of business or, if a security is not listed or admitted to trading on any national securities exchange, a Business Day.

 

1.36                        “Transfer Tax” means any tax or charge, including any documentary stamp tax, imposed or collected by any governmental or regulatory authority in respect of any transfer of any security, instrument or right, including the Rights, Common Shares and Preferred Shares.

 

1.37                        “Unit” means one one-thousandth of a Preferred Share.

 

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 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.

 

3.                                      Issue of Right Certificates.

 

3.1                               Until the Distribution Date (i) the Rights will be evidenced (subject to the provisions of Section 3.2) by the certificates for Common Shares registered in the names of the holders thereof (which certificates shall also be deemed to be certificates for Rights) or, in the case of Book-Entry Shares, by notations in the respective book-entry accounts that evidence record ownership for such Common Shares and not by separate Right Certificates and (ii) the right to receive Right Certificates will be transferable only in connection with the transfer of Common Shares. As soon as practicable after the Distribution Date, the Company will prepare and execute, the Rights Agent will countersign, and the Company will deliver or cause to be delivered (and the Rights Agent will, if requested, deliver) to each record holder of Common Shares as of the Distribution Date (other than to any Acquiring Person or any Associate or Affiliate of such Acquiring Person), at the address of such holder shown on the records of the Company, a Right Certificate, in substantially the form of Exhibit B hereto, evidencing one Right for each Common Share so held, subject to adjustment as provided herein. As of the Distribution Date, the Rights will be evidenced solely by such Right Certificates (or by book-entry notations).

 

3.2                               As soon as practicable after the Record Date, the Company will deliver or cause to be delivered a copy of the Summary of Rights to any holder of Rights who may so request from time to time prior to the Expiration Time. With respect to certificates for Common Shares 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.  Until the earlier of the Distribution Date and the Expiration Time, the surrender for transfer of any certificate for Common Shares outstanding on the Record Date, with or without a copy of the Summary of Rights, shall also constitute the transfer of the Rights associated with the Common Shares represented thereby.

 

3.3                               Certificates for Common Shares which become outstanding (including reacquired Common Shares referred to in Section 3.4) after the Record Date but prior to the earlier of (i) the Distribution Date and (ii) the Expiration Time shall have impressed on, printed on, written on or otherwise affixed to them the following legend:

 

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between EPIQ Systems, Inc. and Wells Fargo Bank, National Association, as Rights Agent, dated as of September 18, 2014, as it may from time to time be amended or supplemented pursuant to its terms (the “Rights Agreement”), the terms of which are hereby incorporated herein by reference and a copy of which is on file at the principal executive offices of EPIQ Systems, Inc. Under certain circumstances, as set forth in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. EPIQ Systems, Inc. will deliver to the holder of this certificate a copy of the Rights Agreement without charge after receipt of a written request therefor. Under certain circumstances, Rights that are or were acquired or Beneficially Owned by Acquiring Persons or their Associates or Affiliates (each as defined in the Rights Agreement) may become null and void and may not be exercised or transferred to any Person.

 

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With respect to any Book-Entry Shares, a legend in substantially similar form will be included in a notice to the record holder of such shares in accordance with applicable law. Notwithstanding the foregoing, the omission of the legend required hereby, the inclusion of a legend that makes reference to a rights agreement other than this Agreement or the failure to provide notice thereof will not affect the enforceability of any part of this Agreement or the rights of any holder of Rights.

 

3.4                               If the Company purchases or acquires any Common Shares after the Record Date but prior to the Distribution Date, any Rights associated with such Common Shares shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the Common Shares which are no longer outstanding.

 

4.                                      Form of Right Certificates. The Right Certificates (and the forms of election to purchase and of 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 trading system, or to conform to usage. Subject to the other provisions of this Agreement, the Right Certificates shall entitle the holders thereof to purchase such number of Units as shall be set forth therein at the Purchase Price, but the amount and type of securities purchasable upon exercise and the Purchase Price shall be subject to adjustment as provided in Sections 11 and 13.  Receipt of a Right Certificate by any Person shall not preclude a later determination that such Rights are null and void pursuant to Section 11.1.2. The Company may implement such procedures as it deems appropriate, in its sole discretion, to minimize the possibility that Rights are received by Persons whose Rights would be null and void under Section 11.1.2. Notwithstanding anything to the contrary in this Agreement, the Company and the Rights Agent may amend this Agreement to provide for uncertificated Rights in addition to or in place of Rights evidenced by Right Certificates.

 

5.                                      Countersignature and Registration.

 

5.1                               The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board or its Chief Executive Officer, its President or any of its Vice Presidents, either manually or by facsimile signature; shall have affixed thereto the Company’s seal or a facsimile thereof; and shall be attested by the Secretary or any Assistant Secretary of the Company or the Treasurer or an assistant treasurer of the Company, either manually or by facsimile signature. The Right Certificates shall be countersigned, either manually or by facsimile signature, by the Rights Agent and shall not be valid for any purpose unless so countersigned. If any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates nevertheless may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the Person who signed such Right Certificates had not ceased to be such officer of the Company. Any Right Certificate may be signed on behalf of the Company by any Person who, at the actual date of the execution of such Right Certificate, is a proper officer of the Company to sign such Right Certificate, even if at the date of the execution of this Agreement such Person was not such an officer.

 

5.2                               Following the Distribution Date, the Rights Agent will keep or cause to be kept, at the office of the Rights Agent designated for such purpose, books for registration of the transfer of the Right Certificates issued hereunder. Such books shall show the names and addresses of the respective holders of the Right Certificates, the number of Rights evidenced on its face by each of the Right Certificates, and the date of each of the Right Certificates.

 

6.                                      Transfer, Split-up, Combination and Exchange of Right Certificates; Lost, Stolen, Destroyed or Mutilated Right Certificates.

 

6.1                               Subject to the provisions of Section 14, at any time after the Distribution Date and prior to the Expiration Time, any Right Certificate (other than a Right Certificate representing Rights that have become null and void pursuant to Section 11.1.2 or that have been exchanged pursuant to Section 24) may be transferred, split up, combined or exchanged for another Right Certificate, entitling the registered holder to purchase a like number of

 

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Units as the Right Certificate surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate to be transferred, split up, combined or exchanged at the office of the Rights Agent designated for such purpose. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment of a sum sufficient for any Transfer Tax that may be imposed in connection with any transfer, split-up, combination or exchange of Right Certificates.

 

6.2                               Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to them, and, at the Company’s request, reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and, in case of mutilation, upon surrender to the Rights Agent and cancellation of the Right Certificate, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

 

7.                                      Exercise of Rights; Purchase Price; Expiration Time of Rights.

 

7.1                               Subject to Section 9.3, the registered holder of any Right Certificate (other than a holder whose Rights have become null and void pursuant to Section 11.1.2 or have been exchanged pursuant to Section 24) may exercise the Rights evidenced thereby in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each Right that is exercised and an amount equal to any applicable Transfer Tax required to be paid pursuant to Section 9, prior to the Expiration Time.

 

7.2                               The purchase price to be paid upon the exercise of each Right shall initially be $40.00 (the “Purchase Price”), shall be subject to adjustment in accordance with Sections 11 and 13, and shall be payable in lawful money of the United States of America in accordance with Section 7.3.

 

7.3                               Upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and certificate properly completed and duly executed, accompanied by payment of the Purchase Price for the number of Rights exercised and an amount equal to any applicable Transfer Tax required to be paid by the holder of such Right Certificate in accordance with Section 9 by certified check, bank draft, cashier’s check or money order payable to the order of the Company, the Rights Agent shall thereupon promptly (i)(A) requisition from any transfer agent of the Preferred Shares certificates for the number of Units to be purchased, and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests, or (B) requisition from any depositary agent for the Preferred Shares depositary receipts representing such number of Units as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent with the depositary agent), and the Company hereby directs any 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 Preferred Shares in accordance with Section 14; (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 Right 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 Right Certificate. Notwithstanding the foregoing provisions of this Section 7.3, the Company may suspend (with prompt written notice thereof to the Rights Agent) the issuance of Preferred Shares and other securities upon exercise of a Right for a reasonable period, during which the Company seeks to register under the Securities Act, and any applicable securities law of any other jurisdiction, the Preferred Shares or other securities to be issued pursuant to the Rights; provided, however, that nothing contained in this Section 7.3 shall relieve the Company of its obligations under Section 9.3. Upon any such suspension, the Company shall issue a public announcement (with prompt written notice thereof to the Rights Agent) stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement (with prompt written notice thereof to the Rights Agent) at such time as the suspension is no longer in effect.

 

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7.4                               If the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to such holder’s duly authorized assigns, subject to the provisions of Section 14.

 

7.5                               Notwithstanding anything in this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to undertake any action with respect to a registered holder of a Right Certificate upon the occurrence of any purported exercise as set forth in this Section 7 unless such registered holder shall have (i) properly completed and duly executed the certificate contained in the form of election to purchase set forth on the reverse side of the Right Certificate surrendered for such exercise and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the Company and the Rights Agent shall reasonably request.

 

8.                                      Cancellation and Destruction of Right Certificates.  All Right Certificates surrendered for the purpose of exercise, transfer, split-up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in canceled form, or, if surrendered to the Rights Agent, shall be canceled by it, and no Right Certificates shall be issued in lieu thereof except as expressly permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company other than upon the exercise thereof.  Subject to applicable law and regulation, the Rights Agent shall maintain in a retrievable database electronic records of all cancelled or destroyed stock certificates which have been canceled or destroyed by the Rights Agent.  The Rights Agent shall maintain such electronic records or physical records for the time period required by applicable law and regulation.  Upon written request of the Company (and at the expense of the Company), the Rights Agent shall provide to the Company or its designee copies of such electronic records or physical records relating to rights certificates cancelled or destroyed by the Rights Agent.

 

9.                                      Status and Availability of Preferred Shares.

 

9.1                               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.

 

9.2                               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 non-assessable shares.

 

9.3                               The Company shall use its reasonable best efforts to (i) file, as soon as practicable following the later of the Stock Acquisition Date and Distribution Date, or as soon as is otherwise required by law, a registration statement under the Securities Act and the Exchange Act on an appropriate form, with respect to the Preferred Shares purchasable upon exercise of the Rights, (ii) cause any such registration statement to become effective as soon as practicable after such filing, and (iii) cause any such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of the date as of which the Rights are no longer exercisable for Preferred Shares and the Expiration Time. The Company shall also take such action as may be appropriate under, or to ensure compliance with, the securities or “blue sky” laws of the various states in connection with the exercisability of the Rights. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction unless the requisite qualification in such jurisdiction shall have been obtained and until a registration statement under the Securities Act (if required) shall have been declared effective.

 

9.4                               The Company further covenants and agrees that it will pay when due and payable any and all United States federal and state Transfer Taxes which may be payable in respect of the issuance or delivery of the Right 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 Right Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts for Preferred Shares in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise, and shall

 

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not be required to issue or deliver any certificates or depositary receipts for Preferred Shares upon the exercise of any Rights until any such Transfer Tax shall have been paid (any such Transfer Tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company’s reasonable satisfaction that no such tax is due.

 

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 Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable Transfer Tax) was made; provided, however, that, if the date of such surrender and payment is a date upon which the relevant Preferred Shares transfer books are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate shall be dated as of, the next succeeding Business Day on which such Preferred Shares (or Common Shares and/or other securities, as the case may be) transfer books are open.

 

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

 

11.1                        General.

 

11.1.1  In the event the Company shall at any time after the date of this Agreement (i) declare a dividend on the Preferred Shares payable in Preferred Shares, (ii) subdivide the outstanding Preferred Shares, (iii) combine the outstanding Preferred Shares into a smaller number of Preferred Shares or (iv) 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 11.1, the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date, the 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.

 

11.1.2  Subject to the second paragraph of this Section 11.1.2 and to Section 24, on the Stock Acquisition Date, each Right shall constitute the right to purchase from the Company, upon exercise thereof in accordance with the terms of this Agreement that number of Units as shall equal the result obtained by dividing the then current Purchase Price by 50% of the then Current Market Price per Unit (determined pursuant to Section 11.6) on the Stock Acquisition Date.

 

From and after the Stock Acquisition Date, any Rights that are or were acquired or Beneficially Owned by an Acquiring Person (or any Associate or Affiliate of such Acquiring Person) (including, for the avoidance of doubt, any Rights held by a counterparty to any Derivative Interest to which the Acquiring Person is a party) on or after the Stock Acquisition Date shall be null and void, and any holder of such Rights shall thereafter have no right to exercise such Rights under any provision of this Agreement or otherwise. No Right Certificate shall be issued (i) pursuant to Section 3 to any Person whose Rights would be null and void pursuant to this Section 11.1.2 or (ii) at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be null and void pursuant to this Section 11.1.2 or to any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate. Any Right Certificate delivered to the Rights Agent for transfer to a Person whose Rights would be null and void pursuant to the preceding sentence shall be canceled.  Neither the Company nor the Rights Agent shall have liability to any holder of Right Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder.

 

11.1.3  In lieu of issuing Units upon the exercise of a Right in accordance with Section 11.1.2, the Board may elect, to the extent permitted by applicable law, to substitute for any such Units any one or more of the following having, together with any Units issued upon the exercise of such Right, an aggregate value determined by the Board to be equal to the value of the Units issuable upon the exercise of a Right as provided in Section 11.1.2: cash, a reduction in the Purchase Price, other equity securities of the Company, debt securities of the Company or

 

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other assets.  For purposes of this Section 11.1.3, the value of a Unit shall be the Current Market Price per Unit (as determined pursuant to Section 11.6.2) as of the Stock Acquisition Date.

 

11.2                        If the Company fixes a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them 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 Market Price per Preferred Share (as determined pursuant to Section 11.6.2) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, (i) the numerator of which shall be (A) the number of Preferred Shares outstanding on such record date plus (B) the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares or Equivalent Preferred Shares to be offered (or the aggregate initial conversion price of the convertible securities to be offered) would purchase at such Current Market Price per Preferred Share and (ii) the denominator of which shall be (A) the number of Preferred Shares outstanding on such record date plus (B) the number of additional Preferred Shares or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities 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. If 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. Preferred Shares owned by or held for the account of the Company shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. If such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price that would then be in effect if such record date had not been fixed.

 

11.3                        If the Company fixes a record date for the distribution to all holders of Preferred Shares (including any 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 11.2), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, (i) the numerator of which shall be the Current Market Price per Preferred Share (as determined pursuant to Section 11.6.2) 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) of the portion of the evidences of indebtedness or assets to be distributed or of such subscription rights or warrants applicable to one Preferred Share and (ii) the denominator of which shall be such Current Market Price per Preferred Share; 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. If such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price that would have been in effect if such record date had not been fixed.

 

11.4                        If, at any time after the date of this Agreement and prior to the Distribution Date, the Company (i) declares or pays any dividend on the Common Shares payable in Common Shares or (ii) effects a subdivision, combination or consolidation of the Common Shares (by reclassification or otherwise other than by payment of dividends in Common Shares) into a greater or lesser number of Common Shares, then in any such case (i) the number of Units purchasable after such event upon exercise of each Right shall be determined by multiplying the number of Units so purchasable immediately prior to 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 (ii) 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 prior to such event had issued with respect to it. The adjustments provided for in this Section 11.4 shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected.

 

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11.5                        Other than in connection with a transaction contemplated by Section 11.4, if, at any time prior to the Distribution Date, the Company issues or distributes to all holders of Common Shares evidences of indebtedness or assets (other than a dividend payable in cash) or subscription rights or warrants (excluding those referred to in Section 11.2), then the Company will make such adjustments, if any, in the Purchase Price or the number of Rights or securities or other property purchasable upon exercise of Rights as the Board, in its sole discretion, may deem to be appropriate under the circumstances in order to adequately protect the interests of the holders of the Rights generally.

 

11.6                        Current Market Price.

 

11.6.1  For the purpose of any computation hereunder, the “Current Market Price” per Common Share on any date shall be deemed to be the average of the daily closing prices per share of such security for the 30 consecutive Trading Days immediately prior to such date; provided, however, that if the Current Market Price per Common Share is determined during a period (i) 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 other securities convertible into such shares, or (B) any subdivision, combination or reclassification of such security, and (ii) prior to the expiration of 30 Trading Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Market Price per Common Share 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 or, if no such sale takes place on such day, the average of the closing bid and asked prices, in either case as reported by NASDAQ, or, if on any such date the security is not listed or admitted to trading on NASDAQ, 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.

 

11.6.2  For the purpose of any computation hereunder, the “Current Market Price” per Preferred Share shall be determined in accordance with the method set forth in Section 11.6.1. If the Preferred Shares are not publicly traded, the “Current Market Price” per Preferred Share shall be conclusively deemed to be the Current Market Price per Common Share as determined pursuant to Section 11.6.1 (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof) multiplied by one thousand. If neither the Common Shares nor the Preferred Shares are publicly held or so listed or traded, “Current Market Price” with respect to each such security means the fair value per share as determined in good faith by the Board, whose determination shall be set forth in a statement filed with the Rights Agent.  For all purposes of this Agreement, the “Current Market Price” per Unit shall be equal to the “Current Market Price” per Preferred Share divided by 1,000.

 

11.7                        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 11.7 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 11.7, any adjustment required by this Section 11 shall be made no later than three years from the date of the transaction which requires such adjustment.

 

11.8                        If, as a result of an adjustment made pursuant to Section 11.1, the holder of any Right thereafter exercised shall become entitled to receive any shares of capital stock of the Company other than Units, the number of such other shares so receivable upon exercise of any Right shall thereafter be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Preferred Shares contained in Sections 11.1 through 11.3, inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on like terms to any such other shares.

 

11.9                        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 Units purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

11.10                 Unless the Company exercises its election as provided in Section 11.11, upon each adjustment of the Purchase Price as a result of the calculations made in Sections 11.2, 11.3 and 11.5, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted

 

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Purchase Price, that number of Units (calculated to the nearest one ten-thousandth of a Unit) obtained by (i) multiplying the number of Units covered by a Right immediately prior to the adjustment pursuant to this Section 11.10 by the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

11.11                 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 Units 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 Units for which a Right was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one hundred-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment and, if known at the time, the amount of the adjustment to be made. The record date may be the date on which the Purchase Price is adjusted or any day thereafter but, if Right Certificates have been distributed, shall be at least ten days after the date of the public announcement. If Right Certificates have been distributed, upon each adjustment of the number of Rights pursuant to this Section 11.11, the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date Right Certificates evidencing, subject to Section 14, the additional Rights to which such holders shall be entitled as a result of such adjustment or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates to be so 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 Right Certificates on the record date specified in the public announcement.

 

11.12                 Irrespective of any adjustment or change in the Purchase Price or the number of Units issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number of Units which were expressed in the initial Right Certificates issued hereunder.

 

11.13                 Before taking any action that would cause an adjustment reducing the Purchase Price below the then par value of the Preferred Shares issuable upon exercise of the Rights, the Company shall, subject to Sections 11.1.1, 11.2 and 11.3, 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 non-assessable Preferred Shares at such adjusted Purchase Price.

 

11.14                 If this Section 11 requires that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may defer, until the occurrence of such event, issuing to the holder of any Right exercised after such record date 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 prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares upon the occurrence of the event requiring adjustment.

 

11.15                 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 (i) combination or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the Current Market Price per Preferred Share, (iii) issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exchangeable for Preferred Shares, (iv) dividends on Preferred Shares payable in Preferred Shares, or (v) issuance of any rights, options or warrants referred to in Section 11.2 made by the Company after the date of this Agreement to holders of its Preferred Shares shall not be taxable to such stockholders.

 

12.                               Certificate of Adjustment.  Whenever an adjustment is made as provided in Sections 11 and 13, the Company shall promptly (i) prepare a certificate setting forth such adjustment and a brief statement of the facts

 

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accounting for such adjustment, (ii) file with the Rights Agent and with each transfer agent for the Common Shares and the Preferred Shares a copy of such certificate, and (iii) if such adjustment occurs following a Distribution Date, deliver or cause to be delivered a brief summary thereof to each holder of a Right Certificate in accordance with Section 25; provided, however, that the failure to give, or any defect in, any such certificate or notice shall not affect the validity of such adjustment.

 

13.                               Consolidation, Merger, Share Exchange, Sale or Transfer of Assets or Earning Power.

 

13.1                        In the event that, at any time on or after a Stock Acquisition Date, (i) the Company consolidates or merges or participates in a statutory share exchange with any other Person if, immediately prior to the time of consummation of the consolidation, merger or statutory share exchange or at the time the Company enters into any agreement with respect to any such consolidation, merger or statutory share exchange, the Acquiring Person is the Beneficial Owner of 50% or more of the outstanding Common Shares or controls the Board and either (A) any term of or arrangement concerning the treatment of shares of capital stock in such consolidation, merger or statutory share exchange relating to the Acquiring Person is not identical to the terms and arrangements relating to other holders of the Common Shares or (B) the Person with whom the transaction or series of transactions occurs is the Acquiring Person or an Affiliate or Associate of the Acquiring Person; or (ii) the Company sells or otherwise transfers (or one or more of its Subsidiaries 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 Person other than the Company or one or more of its Subsidiaries if, at the time of the entry by the Company or any such Subsidiary) into an agreement with respect to such sale or transfer of assets, the Acquiring Person or any of its Affiliates or Associates controls the Board, then proper provision shall be made so that (A) each Right (except as otherwise provided herein) shall thereafter constitute the right to purchase from the Company, upon exercise thereof in accordance with the terms of this Agreement, that number of Common Shares of such other Person (including the Company as successor thereto or as the surviving corporation) equal to the result obtained by dividing the then current Purchase Price by 50% of the then Current Market Price per Common Share of such other Person (determined pursuant to Section 11.6 hereof) on the date of consummation of such consolidation, merger, share exchange, sale or transfer; (B) the issuer of such Common Shares shall thereafter be liable for, and shall assume, by virtue of such consolidation, merger, share exchange, sale or transfer, all the obligations and duties of the Company pursuant to this Agreement; (C) the term “Company” shall thereafter be deemed to refer to such issuer; and (D) such issuer shall take steps (including the reservation of a sufficient number of its Common Shares in accordance with Section 9) in connection with such consummation as may be necessary to ensure that the provisions hereof shall thereafter be applicable in relation to the Common Shares thereafter deliverable upon the exercise of the Rights.

 

13.2                        The Company shall not consummate any such consolidation, merger, share exchange, sale or transfer unless prior thereto the Company and such issuer shall have executed and delivered to the Rights Agent a supplemental agreement providing for such issuer’s compliance with this Section 13. 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 apply to successive consolidations or mergers or share exchanges or sales or other transfers.

 

14.                               Fractional Rights and Fractional Shares.

 

14.1                        The Company shall not be required to issue fractions of Rights or to distribute Right Certificates which evidence fractional Rights. If the Company shall determine not to issue such fractional Rights (i.e., Rights to acquire less than one Unit), then, in lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14.1, the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price or, if no such sale takes place on such day, the average of the closing bid and asked prices, or if on any such date the Rights are not listed or admitted to trading on NASDAQ, 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

 

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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.

 

14.2                        The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of Units) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of Units). Fractions of Preferred Shares in integral multiples of Units may, at the election of the Company, be evidenced by depositary receipts, pursuant to an agreement between the Company and a depositary selected by the Company; 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 Units, the Company shall pay to each registered holder of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share as the fraction of one Preferred Share that such holder would otherwise receive upon the exercise of the aggregate number of Rights exercised by such holder. For purposes of this Section 14.2, the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to Section 11.6) for the Trading Day immediately prior to the date of such exercise.

 

14.3                        The holder of a Right by the acceptance of the Right expressly waives any right to receive fractional Rights or fractional Units upon exercise of a Right.

 

15.                               Rights of Action. All rights of action in respect of this Agreement, other than rights of action vested solely in the Rights Agent, the Board or the Company, are vested in the respective registered holders of the Right Certificates and, prior to the Distribution Date, the registered holders of the Common Shares. Any registered holder of any Right Certificate or, prior to the Distribution Date, of Common Shares may, without the consent of the Rights Agent or of the holder of any other Right Certificate or, prior to the Distribution Date, of Common Shares, on 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 Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.

 

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:

 

16.1                        prior to the Distribution Date, the Rights will be transferable only in connection with the transfer of the Common Shares;

 

16.2                        after the Distribution Date, the Right Certificates are transferable only on the registry books maintained by the Rights Agent if surrendered at the office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer with a completed form of certification; and

 

16.3                        the Company and the Rights Agent may deem and treat the Person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Shares certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right 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.                               Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right Certificate shall be entitled to vote or receive dividends, or be deemed for any purpose the holder of the Preferred Shares or any other securities of the Company that may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, to give or withhold consent to any

 

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corporate action, to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25), or to receive dividends or subscription rights, or otherwise, until the Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

 

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 and documented out-of-pocket expenses 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 or willful misconduct on the part of the Rights Agent or its director, officers, employees, Affiliates or agents, 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 or liability arising therefrom, directly or indirectly.

 

The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for Common Shares, Preferred Shares or other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be duly 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.

 

19.                               Merger, Share Exchange, 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 or be consolidated, or any corporation resulting from any merger, share exchange or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to the stock transfer or stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21. If, at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of any predecessor Rights Agent and deliver such Right Certificates so countersigned. If, at that time, any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificates either in the name of any predecessor Rights Agent or in the name of the successor Rights Agent. In all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

If, at any time, the name of the Rights Agent changes and any of the Right Certificates have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned. If, at that time, any of the Right Certificates have not been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name. In all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

 

20.                               Duties of Rights Agent.  The Rights Agent undertakes the duties and obligations set forth in this Agreement. The Rights Agent shall perform those duties and obligations upon the following terms and conditions, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

 

20.1                        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.

 

20.2                        Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof is specifically prescribed herein) may be deemed to be conclusively proved and established by a certificate signed by any one of the Chief Executive Officer, the Chairman of the Board, the President, a Vice President, the Treasurer or the Secretary of the Company

 

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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.

 

20.3                        The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except as to its countersignature thereof) or be required to verify the same. All such statements and recitals are and shall be deemed to have been made by the Company only.

 

20.4                        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 authorization, execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any adjustment required under the provisions of Sections 11 or 13 or for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after receipt of a certificate furnished pursuant to Section 12 describing such adjustment); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any such securities will, when so issued, be validly authorized and issued, fully paid, and non-assessable.

 

20.5                        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.

 

20.6                        The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from any one of the Chief Executive Officer, the Chairman of the Board, the President, a Vice President, the Treasurer or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties. The Rights Agent shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken or omitted by the Rights Agent under this Agreement and the date on or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken, or omission of such action, by the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than ten Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

 

20.7                        The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company, or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company, or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity.

 

20.8                        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. 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 of such attorneys or agents.

 

20.9                        From time to time after the Distribution Date, upon the written request of the Company, the Rights Agent will promptly deliver to the Company a list, as of the most reasonable practicable date (or as of such earlier date as my be specified by the Company), of the record holders of Rights and Rights Certificates.

 

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21.                               Change of Rights Agent.  The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days written notice to the Company (or such lessor notice as is acceptable to the Company) and, in the event that 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 and the Preferred Shares by registered or certified mail. In the event 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 upon 30 days notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares and the Preferred Shares by registered or certified mail, and, after the Distribution Date, to the holders of the Right Certificates. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit such Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation or trust company organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust powers, is subject to supervision or examination by federal or state authority, and has, along with its Affiliates, at the time of its appointment as Rights Agent a combined capital and surplus of at least $50 million. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed, and the predecessor Rights Agent shall deliver and transfer to the Company or the successor Rights Agent all books, records, funds, certificates or other documents or instruments of any kind held by it hereunder, and shall execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares and the Preferred Shares, and, after the Distribution Date, deliver a notice in writing to the holders of the Right Certificates. Failure to send 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.  Upon appointment, any successor Rights Agent will, unless the context requires otherwise, be deemed to be the Rights Agent for all purposes of this Agreement.

 

22.                               Issuance of New Right Certificates. Notwithstanding any of the provisions of this Agreement or of the Right Certificates to the contrary, the Company may, at its option, issue new Right 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 Right Certificates made in accordance with this Agreement. In addition, in connection with the issuance or sale of Common Shares following the Distribution Date and prior to the Expiration Time, the Company may, with respect to Common Shares so issued or sold (i) pursuant to the exercise of stock options; (ii) under any employment plan or arrangement; (iii) upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company, or (iv) pursuant to a contractual obligation of the Company, in each case existing prior to the Distribution Date, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale.

 

23.                               Redemption.

 

23.1                        The Board may, at its option, at any time prior to the Stock Acquisition Date, redeem all of 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, the “Redemption Price”). The redemption of the Rights by the Board may be made effective at such time, on such basis and subject to such conditions as the Board in its sole discretion may establish.

 

23.2                        Immediately upon the action of the Board electing to redeem the Rights, or, if the resolution of the Board electing to redeem the Rights states that the redemption will not be effective until the occurrence of a specified future time or event, upon the occurrence of such future time or event (the “Redemption Time”), and without any further action and without any notice, the right to exercise the Rights shall terminate and the only right

 

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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 days after action of the Board ordering the redemption of the Rights, the Company shall deliver 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, prior to the Distribution Date, on the registry books of the transfer agent for the Common Shares. Any notice delivered in the manner herein provided shall be deemed given, whether or not the holder receives the notice. If the payment of the Redemption Price is not included with such notice, each such notice shall 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 as specifically set forth in this Section 23 or in Section 24, other than in connection with the purchase of Common Shares prior to the Stock Acquisition Date.

 

24.                               Exchange.

 

24.1                        The Board may, at its option, at any time after the Stock Acquisition Date, exchange all of the then outstanding and exercisable Rights (which excludes Rights that have become null and void pursuant to Section 11.1.2) for Common Shares at an exchange ratio of one Common Share per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (the “Exchange Ratio”). Notwithstanding the foregoing, the Board shall not be empowered to effect such exchange at any time after an Acquiring Person becomes the Beneficial Owner of a majority of the Common Shares then outstanding. From and after the occurrence of an event specified in Section 13.1, any rights that theretofore have not been exchanged pursuant to this Section 24 shall thereafter be exercisable only in accordance with Section 13 and may not be exchanged pursuant to this Section 24.

 

24.2                        Immediately upon the action of the Board ordering the exchange of any Rights pursuant to Section 24.1, 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 Units 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 deliver 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 delivered 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 Preferred Shares for Rights will be effected.

 

24.3                        Notwithstanding anything in this Section 24 to the contrary, the exchange of the Rights may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish. Without limiting the preceding sentence, the Board may (i) in lieu of issuing Common Shares to the Persons entitled thereto in connection with the exchange (such Persons, the “Exchange Recipients,” and such Common Shares, together with any dividends or distributions made on such shares, the “Exchange Property”) issue, transfer or deposit the Exchange Property to or into a trust or other entity that may hold such Exchange Property for the benefit of the Exchange Recipients (provided that such trust or other entity may not be controlled by the Company or any of its Affiliates or Associates and provided further that the trustee or similar fiduciary of the trust or other entity will attempt to distribute the Exchange Property to the Exchange Recipients as promptly as practicable), (ii) permit such trust or other entity to exercise all of the rights that a stockholder of record would possess with respect to any shares deposited in such trust or other entity and (iii) impose such procedures as are necessary to verify that the Exchange Recipients are not Acquiring Persons or Affiliates or Associates of Acquiring Persons as of any time periods established by the Board or such trust or other entity. In the event the Board determines, before the Distribution Date, to effect an exchange, the Board may delay the occurrence of the Distribution Date to such time as it deems advisable.

 

25.                               Notice of Certain Events.  If the Company shall at any time after the Distribution Date propose (i) to pay any dividend payable in stock of any class to the holders of Preferred Shares or to make any other distribution to the holders of Preferred Shares (other than a regular quarterly cash dividend); (ii) to offer to the holders of 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) to effect any reclassification of the Preferred Shares (other than a

 

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reclassification involving only the subdivision of outstanding Preferred Shares); (iv) to effect any share exchange, consolidation or merger into or with any other Person, 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) to effect the liquidation, dissolution or winding-up of the Company; or (vi) to declare or pay any dividend on the Common Shares payable in Common Shares, or to effect a subdivision, combination or 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 Right Certificate, in accordance with Section 26, 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 reclassification, share exchange, 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 or Preferred Shares or both, 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 days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least ten days prior to the date of the taking of such proposed action or the date of participation therein by the holders of the Common Shares or Preferred Shares or both, whichever shall be the earlier.

 

26.                               Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the Company shall be deemed given upon receipt by overnight delivery service or first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

 

EPIQ Systems, Inc.

501 Kansas Avenue

Kansas City, Kansas  66105

Attention: Corporate Secretary

 

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be deemed given upon receipt by overnight delivery service, fax (when such fax is transmitted to the fax number set forth below and confirmation of transmission is received), or registered or certified mail addressed (until another address is filed in writing with the Company) as follows:

 

Wells Fargo Bank, National Association

1110 Centre Pointe Curve

Suite 101

MAC N9173-010

Mendota Heights, MN 55120

Attention: Client Services

 

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right or Right Certificate (or if prior to the Distribution Date, to the holder of Common Shares) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.  Notwithstanding anything to the contrary in this Agreement, prior to the Distribution Date, the issuance of a press release or the making of a publicly-available filing by the Company with the Securities and Exchange Commission will constitute sufficient notice by the Rights Agent or the Company to the holders of securities of the Company, including the Rights, for all purposes of this Agreement and no other notice need be given.

 

27.                               Supplements and Amendments. Prior to the Stock Acquisition Date, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holder of Rights or Common Shares. From and after the Stock Acquisition Date, the Company may, and the Rights Agent shall if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holder of Rights, Common Shares or Preferred Shares in order to cure any ambiguity, to correct or supplement any provision contained herein which may be inconsistent with any other provisions herein or otherwise defective (including any change in order to satisfy any applicable law, rule or regulation) or to supplement or amend

 

19

 

any provision hereunder in any manner that would not materially adversely affect the interests of the holders of Rights (other than an Acquiring Person and its Affiliates and Associates). Any supplement or amendment authorized by this Section 27 will be evidenced by a writing signed by the Company and the Rights Agent. Notwithstanding anything in this Agreement to the contrary, no supplement or amendment that adversely affects the rights and duties of the Rights Agent under this Agreement will be effective against the Rights Agent without the execution of such supplement or amendment by the Rights Agent.

 

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.

 

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 Right Certificates (and, prior to the Distribution Date, the Common Shares in their capacity as holders of the Rights) any legal or equitable right, remedy or claim under this Agreement. This Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares in their capacity as holders of the Rights).

 

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; provided, however, that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board determines in its good faith judgment that severing the invalid, void or unenforceable language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the Close of Business on the tenth day following the date of such determination by the Board.

 

31.                               Governing Law. This Agreement, each Right and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the state of Missouri and for all purposes shall be governed by and construed in accordance with the laws of such state applicable to contracts made and to be performed entirely within such state.

 

32.                               Exclusive Jurisdiction.

 

32.1                        The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Common Shares) each hereby irrevocably submits to the exclusive jurisdiction of the Circuit Courts of Jackson County in the State of Missouri, or, if such court lacks subject matter jurisdiction, the United States District Court for the Western District of Missouri, over any suit, action or proceeding arising out of or relating to or concerning this Agreement. The Company and the registered holders of Right Certificates (and, prior to the Distribution Date, the registered holders of Common Shares) each acknowledge that the forum designated by this Section 32.1 has a reasonable relation to this Agreement and to such Persons’ relationship with one another.

 

32.2                        The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Common Shares) each hereby waive, to the fullest extent permitted by applicable law, any objection that they now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in any court referred to in Section 32.1 (or the appellate courts thereof). The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Common Shares) each undertake not to commence any action subject to this Agreement in any forum other than the forum described in Section 32.1. The Company and the registered holders of Rights Certificates (and, prior to the Distribution Date, the registered holders of Common Shares) each hereby agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or proceeding brought in any such court will be conclusive and binding upon such Persons.

 

33.                               Counterparts. This Agreement may be executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but

 

20

 

one and the same instrument. A signature to this Agreement transmitted electronically shall have the same authority, effect and enforceability as an original signature.

 

34.                               Descriptive Headings. Descriptive headings of the 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.

 

35.                               Administration. The Board (or an authorized committee thereof) shall have the exclusive power and authority to administer and interpret the provisions of this Agreement and to exercise all rights and powers specifically granted to the Board or the Company, or as may be necessary or advisable in the administration of this Agreement (including a determination as to whether to redeem the Rights or to amend or supplement this Agreement). All such actions, calculations, determinations and interpretations which are done or made by the Board (or an authorized committee thereof) in good faith shall be final, conclusive and binding on the Company, the Rights Agent, holders of the Rights and all other parties and shall not subject the Board to any liability, including to the holders of the Rights.

 

36.                               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 acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction 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.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

21

 

The parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

 

 

	
EPIQ SYSTEMS, INC.
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Tom W. Olofson
    	
 
    
	
 
    	
Name:   Tom W. Olofson
    	
 
    
	
 
    	
Title:   Chairman and CEO
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Rights   Agent
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
/s/   Andrea Severson
    	
 
    
	
 
    	
Name:   Andrea Severson
    	
 
    
	
 
    	
Title:   AVP-Client Services
    	
 
    

 

22

 

EXHIBIT A

 

FORM

 

of

 

CERTIFICATE OF DESIGNATION

 

of

 

PARTICIPATING PREFERRED STOCK, SERIES A

 

of

 

EPIQ SYSTEMS, INC.

 

 

(Pursuant to Section 351.180 of the General and Business Corporation Law of Missouri)

 

 

EPIQ Systems, Inc., a corporation organized and existing under the General and Business Corporation Law of Missouri (hereinafter called the “Corporation”), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 180 of the General and Business Corporation Law of Missouri at a meeting duly called and held on September 18, 2014:

 

RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the “Board of Directors” or the “Board”) in accordance with the provisions of the Restated For Profit Articles of Incorporation of the Corporation (the “Articles”), the Board of Directors hereby creates a series of Preferred Stock, par value $0.01 per share (the “Preferred Stock”), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

 

Section 1.                                           Designation and Amount.  The shares of this series shall be designated as “Participating Preferred Stock, Series A” (the “Series A Preferred Stock”) and the number of shares constituting the Series A Preferred Stock shall be 100,000.  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 Corporation 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 other stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred 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 (if any) per share (rounded to the nearest cent), subject to the

 

A-1

 

provision for adjustment hereinafter set forth, equal to 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, par value $0.01 per share (the “Common Stock”), of the Corporation 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.  In the event the Corporation 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 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.

 

(B)                               The Corporation 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, however, that, in the event no cash dividend 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 or, with respect to the first Quarterly Dividend Payment Date, during the period between the first issuance of any share or fraction of a share of Series A Preferred Stock, a dividend of $0.10 per whole share of Series A Preferred Stock shall nevertheless accrue on such subsequent Quarterly Dividend Payment Date or the first Quarterly Dividend Payment Date, as the case may be.

 

(C)                               Dividends due pursuant to paragraph (A) of this Section 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 (i) be not more than 60 days prior to the date fixed for the payment thereof, and (ii) shall be the same as the record date for any corresponding dividend or distribution on the Common Stock.

 

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 stockholders of the Corporation.  In the event the Corporation 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 in the Articles, including any other Certificate of Designations creating a series of 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 Corporation having

 

A-2

 

general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

 

(C)                               Except as set forth herein, or as otherwise required 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 Corporation shall not:

 

(i)                                     declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

 

(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; or

 

(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 Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (as to dividends and upon dissolution, liquidation or winding up) to the Series A Preferred Stock.

 

(B)                               The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

Section 5.                                           Reacquired Shares.  Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof.  The Corporation shall take all such actions as are necessary to cause all such shares to become authorized but unissued shares of Preferred Stock that may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein or in the Articles, including any Certificate of Designations creating a series of Preferred Stock or any similar stock, or as otherwise required by law.

 

Section 6.                                           Liquidation, Dissolution or Winding Up.  Upon any liquidation, dissolution or winding up of the Corporation 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 plus an amount equal to any accrued and unpaid dividends.  In the event the Corporation 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 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 Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or

 

A-3

 

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.  In the event the Corporation 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.

 

Section 8.                                           Amendment.  The Articles shall not be amended in any manner, including in a merger or consolidation, which would alter, change, or repeal 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.

 

Section 9.                                           Rank.  The Series A Preferred Stock shall rank, with respect to the payment of dividends and upon liquidation, dissolution and winding up, junior to all series of Preferred Stock.

 

IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf of the Corporation by its duly authorized officer this 18 day of September, 2014.

 

 

	
 
    	
EPIQ   SYSTEMS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

A-4

 

EXHIBIT B

 

Form of Right Certificate

 

	
Certificate No. R-
    	
Rights
    

 

NOT EXERCISABLE AFTER MAY 15, 2015 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 RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES, RIGHTS THAT ARE OR WERE ACQUIRED OR BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY ASSOCIATES OR AFFILIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

 

Right Certificate

 

EPIQ SYSTEMS, INC.

 

This certifies that                                                       , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement, dated as of September 18, 2014 (the “Rights Agreement”), between EPIQ Systems, Inc., a Missouri corporation (the “Company”), and Wells Fargo Bank, National Association (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to Expiration Time (as such term is defined in the Rights 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 Participating Preferred Stock, Series A, par value $0.01 per share (the “Preferred Shares”), of the Company, at a purchase price of $40.00 per one one-thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this Right Certificate with the certification and the Form of Election to Purchase duly executed.  The number of Rights evidenced by this Right 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 September 18, 2014, based on the Preferred Shares as constituted at such date.  As provided in the Rights 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 Right Certificate are subject to modification and adjustment upon the happening of certain events.

 

From and after the occurrence of an event described in Section 11.1.2 of the Rights Agreement, if the Rights evidenced by this Right Certificate are or were at any time on or after the earlier of (x) the date of such event and (y) the Distribution Date (as such term is defined in the Rights Agreement) acquired or beneficially owned by an Acquiring Person or an Associate or Affiliate of an Acquiring Person (as such terms are defined in the Rights Agreement), such Rights shall become void, and any holder of such Rights shall thereafter have no right to exercise such Rights.

 

This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Rights Agreement are on file at the principal executive offices of the Company and the offices of the Rights Agent.

 

B-1

 

This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of Preferred Shares as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase.  If this Right Certificate shall be exercised in part, the holder shall be entitled to receive upon surrender hereof another Right Certificate or Right Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, at the Company’s option, the Rights evidenced by this 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 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 Rights Agreement.

 

No holder of this Right Certificate shall be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement.

 

This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

 

B-2

 

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal.  Dated as of                         ,           .

 

 

	
Attest:
    	
 
    	
EPIQ   SYSTEMS, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
Countersigned:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Rights Agent
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Authorized   Signature
    	
 
    	
 
    

 

B-3

 

Form of Reverse Side of Right Certificate

 

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the Right Certificate.)

 

FOR VALUE RECEIVED                                                                        hereby sells, assigns and transfers unto

	
 
    
	
(Please print name and address of transferee)
    

this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint                                                               , Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.

 

Date:                               ,

 

	
 
    	
 
    
	
 
    	
Signature
    

 

Signature Guaranteed:

 

Signatures should be guaranteed by an eligible guarantor institution (bank, stock broker or savings and loan association with membership in an approved signature medallion program).

 

The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not beneficially owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement).

 

	
 
    	
 
    
	
 
    	
Signature
    

 

B-4

 

Form of Reverse Side of Right Certificate — continued

 

FORM OF ELECTION TO PURCHASE

(To be executed if holder desires to exercise the Right Certificate.)

 

To EPIQ Systems, INC.

 

The undersigned hereby irrevocably elects to exercise                                Rights represented by this Right 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

 

	
 
    
	
(Please print name and address)
    
	
 
    

 

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance remaining of such Rights shall be registered in the name of and delivered to:

 

Please insert social security

or other identifying number

 

	
 
    
	
(Please print name and address)
    
	
 
    

 

Dated:                                ,

 

	
 
    	
 
    
	
 
    	
Signature
    

 

Signature Medallion Guaranteed:

 

Signatures should be guaranteed by an eligible guarantor institution (bank, stock broker or savings and loan association with membership in an approved signature medallion program).

 

B-5

 

Form of Reverse Side of Right Certificate — continued

 

The undersigned hereby certifies that the Rights evidenced by this Right Certificate are not Beneficially Owned by an Acquiring Person or an Affiliate or Associate thereof (in each case, as defined in the Rights Agreement).

 

	
 
    	
 
    
	
 
    	
Signature
    

 

NOTICE

 

The signature in the foregoing Forms of Assignment and Election must conform to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

 

In the event the certification set forth above in the Form of Assignment or the Form of Election to Purchase, as the case may be, is not completed, the Company and the Rights Agent will deem the beneficial owner of the Rights evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement) and such Assignment or Election to Purchase will not be honored.

 

B-6

 

EXHIBIT C

 

SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES

 

The following is a summary of the terms of the Rights Agreement. It is qualified in its entirety by the full text of the Rights Agreement, which includes as Exhibit A the form of Certificate of Designation of the Participating Preferred Stock, Series A, of the Company (the “Preferred Shares”) and as Exhibit B the forms of Right Certificate and Election to Exercise). The Rights Agreement is attached as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed September 18, 2014 and incorporated by reference herein.

 

General. The Rights will initially trade with, and will be inseparable from, the Common Shares. The Rights will not be evidenced by separate certificates or book-entry credits until they become exercisable. As long as the Rights are attached to the Common Shares, the Company will issue one Right with each new Common Share so that each Common Share will have a Right attached. The Rights will not be exercisable until the “Distribution Date” discussed below and, prior to exercise, a Right does not give its holder any dividend, voting or liquidation rights.

 

Exercise Price. Each Right will allow its holder to receive from the Company one one-thousandth of a Preferred Share for $40.00 (or, in certain circumstances, alternative consideration which may include cash, property or other securities of the Company), subject to adjustment in accordance with the terms of the Rights Agreement (the “Purchase Price”), once the Rights become exercisable. This fraction of a Preferred Share will give the shareholder approximately the same dividend, voting, and liquidation rights as would one Common Share.

 

Exercisability. The Rights will separate from the Common Shares and become exercisable at the earlier to occur of the following dates (or such later date as the Board of Directors may determine under certain circumstances):

 

·                  the tenth business day after the date of a public announcement, or public announcement of facts indicating, that a person or group has become an Acquiring Person (as discussed below); or

 

·                  the tenth business day after the date that any person or group commences or announces an intention to commence a tender or exchange offer that, if consummated, would result in that person or group becoming an Acquiring Person.

 

The date when the Rights become exercisable is referred to as the “Distribution Date.” After that date, the Rights will separate from the Common Shares and be evidenced by book-entry credits or by Rights certificates.

 

Acquiring Person. Subject to certain exceptions, an “Acquiring Person” generally means any person or group that acquires beneficial ownership of 10% or more of the Common Shares or, in the case of a shareholder that beneficially owns 10% or more of the Common Shares on the date of announcement of the Company’s adoption of the Rights Agreement, any such person or group that acquires any additional Common Shares. Beneficial ownership is defined to include, among other things, ownership of options, warrants and convertible securities, whether or not presently exercisable or convertible, as well as of Common Shares that are the subject of, or that reference securities for, or underlie certain derivative securities.

 

Consequences of Exercising the Rights. Prior to the expiration of the Rights, in the event that any person or group becomes an Acquiring Person, upon exercise in accordance with the terms of the Rights Agreement:

 

·                  each Right will constitute the right to purchase from the Company that number of Preferred Shares (or, in certain circumstances, alternative consideration which may include cash, property or other securities of the Company) having an aggregate current market price (determined in accordance with the Rights Agreement) equal to twice the Purchase Price for an amount in cash equal to the Purchase Price; or

 

·                  if the Company is involved in (i) a merger or consolidation or (ii) a sale of more than 50% of the Company’s assets or earning power, each Right will constitute the right to purchase from the surviving or resulting entity that number of shares of common stock of such entity having an aggregate current market price equal to twice the Purchase Price for an amount in cash equal to the Purchase Price.

 

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In either case, however, any Rights that are or were beneficially owned by an Acquiring Person (and such Acquiring Person’s affiliates or associates and, in each case, any transferee thereof) will be null and void.

 

Provisions of the Preferred Shares. If issued, each one one-thousandth of a Preferred Share:

 

·                  will not be redeemable;

 

·                  will entitle holders to certain dividend and liquidation payments;

 

·                  will generally have the same voting power as one Common Share; and

 

·                  will entitle holders to a per share payment equal to the payment made on one Common Share if Common Shares are exchanged by way of merger, consolidation, or similar transaction.

 

Exchange. After a person or group becomes an Acquiring Person, but before an Acquiring Person owns a majority of the outstanding Common Shares, the Board of Directors may extinguish the Rights by exchanging one Common Share or an equivalent security for each Right, other than Rights held by the Acquiring Person or its affiliates or associates.

 

Redemption. The Board of Directors may redeem the Rights for $0.001 per Right at any time prior to such time as any person or group becomes an Acquiring Person.  If the Board of Directors redeems any Rights, it must redeem all of the Rights. Once the Rights are redeemed, holders of Rights will only be entitled to receive the redemption price of $0.001 per Right. The redemption price will be adjusted in the event of a stock split or stock dividend with respect to the Common Shares.

 

Expiration. The Rights will expire on the earliest of (i) May 15, 2015, (ii) the date on which the Rights are redeemed as described above, and (iii) the effective time of an exchange of Rights as described above

 

Anti-Dilution Provisions. The Board of Directors shall have the right to adjust, among other things, the Purchase Price, as well as 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, or a reclassification of the Preferred Shares or Common Shares.

 

Supplements and Amendments. The Rights Agreement may be supplemented or amended by the Board of Directors without the consent of the holders of the Rights, except that, from and after such time as any person or group becomes an Acquiring Person, no such supplement or amendment may materially adversely affect the interests of the holders of the Rights (other than an Acquiring Person and its affiliates and associates).

 

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