Document:

Exhibit 10(iii)(m)

 

Old FHLMC No. 002733501

New FHLMC Loan No. 504180622

Parktown
Townhouses

 

AMENDED AND
RESTATED

MULTIFAMILY
NOTE

MULTISTATE – FIXED
RATE

(REVISION DATE 
2-15-2008)

(Recast
Transaction)

 

           
THIS AMENDED AND RESTATED MULTIFAMILY NOTE (“Amended and Restated Note”)
is made effective as of the 11th day of March, 2010, by
SHELTER PROPERTIES II
LIMITED PARTNERSHIP,a South Carolina limited partnership
("Borrower")and the FEDERAL HOME LOAN MORTGAGE
CORPORATION (“Lender”).

 

                                                                   
RECITALS

 

A.                
Borrower is
the maker of a Multifamily Note (the
"Note"), dated as of December 15, 2000, in the original principal amount
of Seven Million Eight Hundred Thousand and 00/100 Dollars ($7,800,000.00), evidencing a loan (the "Loan") to
Borrower in such amount from Reilly Mortgage Group, Inc., a District of Columbia
corporation (the "Original Lender").

 

B.                
The Note is
secured by that certain Multifamily Deed of Trust, Assignment of Rents, and
SecurityAgreement
dated as of December 15, 2000, from Borrower, as grantor, to Original Lender, as
grantee, recorded in the Harris County, Texas Records (the “Land
Records”) at Clerk’s File Number U793933 (the "Instrument"). 
The Instrument encumbers, among other things, Borrower's interest in the land
described in Exhibit A to the Instrument.

 

C.                
Pursuant to a
Limited Guaranty dated as of December 15,
2000,AIMCO
Properties, L.P., a Delaware limited partnership, guaranteed some or all of
Borrower’s obligations under the terms of the Note and the
Instrument.

 

D.                
Original
Lender (i) endorsed the Note to Lender and (ii) assigned the Instrument to
Lender by Assignment of Security Instrument dated as of December 15,
2000and recorded
in the Land Records at Clerk’s File Number U793934.

E.                 
Borrower has
confirmed to Lender that Borrower has no defenses or offsets of any kind against
any of the indebtedness due underthe
Note.

 

F.                 
Borrower and
Lender have now agreed to amend and restate the Note so as to, among other
things, (i) reflect a current unpaidbalance of
Five Million Five Hundred Five Thousand Nine Hundred Eighty and 00/100 Dollars
($5,505,980.00), and (ii) amend the terms of payment.

 

NOW,
THEREFORE, in consideration of these premises, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties agree that the Note is amended and restated in its entirety in the form
attached hereto and made a part hereof.

 

FHLMC Loan No.
504180622
Parktown Townhouses

MULTIFAMILY
NOTE

MULTISTATE – FIXED
RATE

(REVISION DATE 
2-15-2008)

 

	
US $5,505,980.00
	
Effective Date:  As of
March 11, 2010

FOR VALUE RECEIVED, the undersigned
(together with such party's or parties' successors and assigns,
"Borrower") jointly and severally (if more than one) promises to pay to
the order of FEDERAL HOME LOAN MORTGAGE CORPORATION, the principal sum of
Five Million
Five Hundred Five Thousand Nine Hundred Eighty and 00/100 Dollars (US $5,505,980.00), with interest on the unpaid
principal balance, as hereinafter provided.

1.                 
Defined Terms.  

(a)               
As used in this Note: 

"Base Recourse" means a
portion of the Indebtedness equal to zero percent (0%) of the original principal
balance of this Note.

"Business Day" means any day
other than a Saturday, a Sunday or any other day on which Lender or the national
banking associations are not open for business.

"Default Rate" means an annual
interest rate equal to four (4) percentage points above the Fixed Interest
Rate.  However, at no time will the Default Rate exceed the Maximum
Interest Rate.

"Fixed Interest Rate" means the
annual interest rate of seven and twenty-one hundredths percent (7.21%).

"Installment Due Date" means,
for any monthly installment of interest only or principal and interest, the date
on which such monthly installment is due and payable pursuant to Section 3 of
this Note. The "First Installment Due Date" under this Note is May 1,
2010.  

"Lender" means the holder from
time to time of this Note.

"Loan" means the loan evidenced
by this Note.

"Maturity Date" means
the earlier of (i) January 1, 2021 (the "Scheduled Maturity
Date"), and (ii) the date on which the unpaid principal
balance of this Note becomes due and payable by acceleration or otherwise
pursuant to the Loan Documents or the exercise by Lender of any right or remedy
under any Loan Document. 

"Maximum Interest Rate" means
the rate of interest that results in the maximum amount of interest allowed by
applicable law. 

"Prepayment Premium Period"
means the period during which, if a prepayment of principal occurs, a prepayment
premium will be payable by Borrower to Lender.  The Prepayment Premium
Period is the period from and including the date of this Note until but not
including the first day of the Window Period.

"Security
Instrument" means the multifamily mortgage, deed to secure debt or deed of
trust effective as of the effective date of this Note, from Borrower to or for
the benefit of Lender and securing this Note.

"Treasury Security" means the
8.750% U.S. Treasury Security due August 15, 2020.

"Window Period" means the six
(6) consecutive calendar month period prior to the Scheduled Maturity
Date.

"Yield Maintenance Period"
means the period from and including the date of this Note until but not
including July 1, 2020. 

(b)              
Other capitalized terms used but not defined in this Note shall
have the meanings given to such terms in the Security Instrument.

2.                 
Address for Payment.  All payments due under this
Note shall be payable at 2010 Corporate Ridge, Suite 1000, McLean, Virginia
22102, or such other place as may be designated by Notice to Borrower from or on
behalf of Lender.

3.                 
Payments.  

(a)               
Interest will accrue on the outstanding principal balance of this
Note at the Fixed Interest Rate, subject to the provisions of Section 8 of this
Note.  

(b)              
Interest under this Note shall be computed, payable and allocated
on the basis of a 360-day year consisting of twelve 30-day months. 

(c)               
Unless disbursement of principal is made by Lender to Borrower on
the first day of a calendar month, interest for the period beginning on the date
of disbursement and ending on and including the last day of such calendar month
shall be payable by Borrower simultaneously with the execution of this
Note.  If disbursement of principal is made by Lender to Borrower on the
first day of a calendar month, then no payment will be due from Borrower at the
time of the execution of this Note.  The Installment Due Date for the first
monthly installment payment under Section 3(d) of interest only or principal and
interest, as applicable, will be the First Installment Due Date set forth in
Section 1(a) of this Note.  Except as provided in this Section 3(c) and in
Section 10, accrued interest will be payable in arrears. 

(d)              
Beginning on the First Installment Due Date, and continuing until
and including the monthly installment due on the Maturity Date, principal and
accrued interest shall be payable by Borrower in consecutive monthly
installments due and payable on the first day of each calendar month.  The
amount of the monthly installment of principal and interest payable pursuant to
this Section 3(d) on an Installment Due Date shall be Thirty-Seven Thousand Four
Hundred Eleven and 22/100 Dollars ($37,411.22).

(e)               
All remaining Indebtedness, including all principal and interest,
shall be due and payable by Borrower on the Maturity Date.

(f)                
All payments under this Note shall be made in immediately
available U.S. funds.

(g)               
Any regularly scheduled monthly installment of interest only or
principal and interest payable pursuant to this Section 3 that is received
by Lender before the date it is due shall be deemed to have been received on the
due date for the purpose of calculating interest due.

(h)               
Any accrued interest remaining past due for 30 days or more, at
Lender's discretion, may be added to and become part of the unpaid principal
balance of this Note and any reference to "accrued interest" shall refer to
accrued interest which has not become part of the unpaid principal
balance.  Any amount added to principal pursuant to the Loan Documents
shall bear interest at the applicable rate or rates specified in this Note and
shall be payable with such interest upon demand by Lender and absent such
demand, as provided in this Note for the payment of principal and
interest.    

4.                 
Application of Payments.  If at any time Lender
receives, from Borrower or otherwise, any amount applicable to the Indebtedness
which is less than all amounts due and payable at such time, Lender may apply
the amount received to amounts then due and payable in any manner and in any
order determined by Lender, in Lender's discretion.  Borrower agrees that
neither Lender's acceptance of a payment from Borrower in an amount that is less
than all amounts then due and payable nor Lender's application of such payment
shall constitute or be deemed to constitute either a waiver of the unpaid
amounts or an accord and satisfaction.

5.                 
Security.  The Indebtedness is secured by, among
other things, the Security Instrument, and reference is made to the Security
Instrument for other rights of Lender as to collateral for the
Indebtedness.

6.                 
Acceleration.  If an Event of Default has occurred
and is continuing, the entire unpaid principal balance, any accrued interest,
any prepayment premium payable under Section 10, and all other amounts
payable under this Note and any other Loan Document, shall at once become due
and payable, at the option of Lender, without any prior notice to Borrower
(except if notice is required by applicable law, then after such notice). 
Lender may exercise this option to accelerate regardless of any prior
forbearance.  For purposes of exercising such option, Lender shall
calculate the prepayment premium as if prepayment occurred on the date of
acceleration.  If prepayment occurs thereafter, Lender shall recalculate
the prepayment premium as of the actual prepayment date.

7.                 
Late Charge.

(a)               
If any monthly installment of interest or principal and interest
or other amount payable under this Note or under the Security Instrument or any
other Loan Document is not received in full by Lender within ten (10) days after
the installment or other amount is due, counting from and including the date
such installment or other amount is due (unless applicable law requires a longer
period of time before a late charge may be imposed, in which event such longer
period shall be substituted), Borrower shall pay to Lender, immediately and
without demand by Lender, a late charge equal to five percent (5%) of such
installment or other amount due (unless applicable law requires a lesser amount
be charged, in which event such lesser amount shall be substituted). 

(b)              
Borrower acknowledges that its failure to make timely payments
will cause Lender to incur additional expenses in servicing and processing the
Loan and that it is extremely difficult and impractical to determine those
additional expenses.  Borrower agrees that the late charge payable pursuant
to this Section represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
expenses Lender will incur by reason of such late payment.  The late charge
is payable in addition to, and not in lieu of, any interest payable at the
Default Rate pursuant to Section 8.

8.                 
Default Rate.  

(a)               
So long as (i) any monthly installment under this Note
remains past due for thirty (30) days or more or (ii) any other Event of
Default has occurred and is continuing, then notwithstanding anything in Section
3 of this Note to the contrary, interest under this Note shall accrue on the
unpaid principal balance from the Installment Due Date of the first such unpaid
monthly installment or the occurrence of such other
Event of Default, as applicable, at the Default Rate.  

(b)              
From and after the Maturity Date, the unpaid principal balance
shall continue to bear interest at the Default Rate until and including the date
on which the entire principal balance is paid in full.  

(c)               
Borrower acknowledges that (i) its failure to make timely
payments will cause Lender to incur additional expenses in servicing and
processing the Loan, (ii) during the time that any monthly installment
under this Note is delinquent for thirty (30) days or more, Lender will incur
additional costs and expenses arising from its loss of the use of the money due
and from the adverse impact on Lender's ability to meet its other obligations
and to take advantage of other investment opportunities; and (iii)  it is
extremely difficult and impractical to determine those additional costs and
expenses.  Borrower also acknowledges that, during the time that any
monthly installment under this Note is delinquent for thirty (30) days or more
or any other Event of Default has occurred and is continuing, Lender's risk of
nonpayment of this Note will be materially increased and Lender is entitled to
be compensated for such increased risk.  Borrower agrees that the increase
in the rate of interest payable under this Note to the Default Rate represents a
fair and reasonable estimate, taking into account all circumstances existing on
the date of this Note, of the additional costs and expenses Lender will incur by
reason of the Borrower's delinquent payment and the additional compensation
Lender is entitled to receive for the increased risks of nonpayment associated
with a delinquent loan.

9.                 
Limits on Personal Liability. 

(a)               
Except as otherwise provided in this Section 9, Borrower
shall have no personal liability under this Note, the Security Instrument or any
other Loan Document for the repayment of the Indebtedness or for the performance
of any other obligations of Borrower under the Loan Documents and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and to any other collateral held by Lender as security
for the Indebtedness.  This limitation on Borrower's liability shall not
limit or impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any other obligations of Borrower.

(b)              
Borrower shall be personally liable to Lender for the amount of
the Base Recourse, plus any other amounts for which Borrower has personal
liability under this Section 9. 

(c)               
In addition to the Base Recourse, Borrower shall be personally
liable to Lender for the repayment of a further portion of the Indebtedness
equal to any loss or damage suffered by Lender as a result of the occurrence of
any of the following events:

(i)                 
Borrower fails to pay to Lender upon demand after an Event of
Default all Rents to which Lender is entitled under Section 3(a) of the
Security Instrument and the amount of all security deposits collected by
Borrower from tenants then in residence.  However, Borrower will not be
personally liable for any failure described in this subsection (i) if
Borrower is unable to pay to Lender all Rents and security deposits as required
by the Security Instrument because of a valid order issued in a bankruptcy,
receivership, or similar judicial proceeding.

(ii)               
Borrower fails to apply all insurance proceeds and condemnation
proceeds as required by the Security Instrument.  However, Borrower will
not be personally liable for any failure described in this subsection (ii)
if Borrower is unable to apply insurance or condemnation proceeds as required by the Security Instrument because of a valid order
issued in a bankruptcy, receivership, or similar judicial proceeding.

(iii)              
Borrower fails to comply with Section 14(g) or (h) of the
Security Instrument relating to the delivery of books and records, statements,
schedules and reports.  

(iv)             
Borrower fails to pay when due in accordance with the terms of the
Security Instrument the amount of any item below marked "Deferred";
provided however, that if no item is marked "Deferred", this
Section 9(c)(iv) shall be of no force or effect.   
 

[Deferred]       
Hazard Insurance premiums or other insurance premiums,

[Deferred]       
Taxes, 

[Deferred]       
water and sewer charges (that could become a lien on the Mortgaged
Property),

[N/A]  
            ground rents,

[Deferred]       
assessments or other charges (that could become a lien on the Mortgaged
Property)

(d)              
In addition to the Base Recourse, Borrower shall be personally
liable to Lender for:

(i)                 
the performance of all of Borrower's obligations under
Section 18 of the Security Instrument (relating to environmental
matters);

(ii)               
the costs of any audit under Section 14(g) of the Security
Instrument; and 

(iii)              
any costs and expenses incurred by Lender in connection with the
collection of any amount for which Borrower is personally liable under this
Section 9, including Attorneys' Fees and Costs and the costs of conducting
any independent audit of Borrower's books and records to determine the amount
for which Borrower has personal liability.

(e)               
All payments made by Borrower with respect to the Indebtedness and
all amounts received by Lender from the enforcement of its rights under the
Security Instrument and the other Loan Documents shall be applied first to the
portion of the Indebtedness for which Borrower has no personal liability.

(f)                
Notwithstanding the Base Recourse, Borrower shall become
personally liable to Lender for the repayment of all of the Indebtedness upon
the occurrence of any of the following Events of Default: 

(i)                 
Borrower's ownership of any property or operation of any business
not permitted by Section 33 of the Security Instrument;

(ii)               
a Transfer (including, but not limited to, a lien or encumbrance)
that is an Event of Default under Section 21 of the Security Instrument,
other than a Transfer consisting solely of the involuntary removal or
involuntary withdrawal of a general partner in a limited partnership or a
manager in a limited liability company; or 

(iii)              
fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or
any request for any action or consent by Lender.

(g)               
To the extent that Borrower has personal liability under this
Section 9, Lender may exercise its rights against Borrower personally
without regard to whether Lender has exercised any rights against the Mortgaged
Property or any other security, or pursued any rights against any guarantor, or
pursued any other rights available to Lender under this Note, the Security
Instrument, any other Loan Document or applicable law.  To the fullest
extent permitted by applicable law, in any action to enforce Borrower's personal
liability under this Section 9, Borrower waives any right to set off the
value of the Mortgaged Property against such personal liability.

10.             
Voluntary and Involuntary Prepayments.

(a)               
Any receipt by Lender of principal due under this Note prior to
the Maturity Date, other than principal required to be paid in monthly
installments pursuant to Section 3, constitutes a prepayment of principal
under this Note.  Without limiting the foregoing, any application by
Lender, prior to the Maturity Date, of any proceeds of collateral or other
security to the repayment of any portion of the unpaid principal balance of this
Note constitutes a prepayment under this Note. 

(b)              
Borrower may voluntarily prepay all of the unpaid principal
balance of this Note on an Installment Due Date so long as Borrower designates
the date for such prepayment in a Notice from Borrower to Lender given at least
30 days prior to the date of such prepayment.  If an Installment Due Date
(as defined in Section 1(a)) falls on a day which is not a Business Day, then
with respect to payments made under this Section 10 only, the term "Installment
Due Date" shall mean the Business Day immediately preceding the scheduled
Installment Due Date.

(c)               
Notwithstanding subsection (b) above, Borrower may voluntarily
prepay all of the unpaid principal balance of this Note on a Business Day other
than an Installment Due Date if Borrower provides Lender with the Notice set
forth in subsection (b) and meets the other requirements set forth in this
subsection.  Borrower acknowledges that Lender has agreed that Borrower may
prepay principal on a Business Day other than an Installment Due Date only
because Lender shall deem any prepayment received by Lender on any day other
than an Installment Due Date to have been received on the Installment Due Date
immediately following such prepayment and Borrower shall be responsible for all
interest that would have been due if the prepayment had actually been made on
the Installment Due Date immediately following such prepayment.

(d)              
Unless otherwise expressly provided in the Loan Documents,
Borrower may not voluntarily prepay less than all of the unpaid principal
balance of this Note.  In order to voluntarily prepay all or any part of
the principal of this Note, Borrower must also pay to Lender, together
with the amount of principal being prepaid, (i) all accrued and unpaid
interest due under this Note, plus (ii) all other sums due to Lender at the
time of such prepayment, plus (iii) any prepayment premium calculated
pursuant to Section 10(e).

(e)               
Except as provided in Section 10(f), a prepayment premium shall be
due and payable by Borrower in connection with any prepayment of principal under
this Note during the Prepayment Premium Period.  The prepayment premium
shall be computed as follows:

(i)                 
For any prepayment made during the Yield Maintenance Period, the
prepayment premium shall be whichever is the greater of subsections (A) and (B)
below:

(A)             
1.0% of the amount of principal being prepaid; or 

(B)             
the product obtained by multiplying:

(1)              
the amount of principal being prepaid or accelerated, 

by

(2)              
the excess (if any) of the Monthly Note Rate over the Assumed
Reinvestment Rate, 

by

(3)              
the Present Value Factor.

For purposes of subsection (B),
the following definitions shall apply:

Monthly Note Rate:one-twelfth (1/12) of the Fixed
Interest Rate, expressed as a decimal calculated to five digits.

Prepayment Date:  in the case of a voluntary
prepayment, the date on which the prepayment is made; in the case of the
application by Lender of collateral or security to a portion of the principal
balance, the date of such application.

Assumed Reinvestment
Rate: 
one-twelfth (1/12) of the yield rate, as of the close of the trading session
which is 5 Business Days before the Prepayment Date, on the Treasury Security,
as reported in The Wall Street Journal, expressed as a decimal calculated
to five digits.  In the event that no yield is published on the applicable
date for the Treasury Security, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the Treasury
Security with the lowest yield published in The Wall Street Journal as of
the applicable date.  If the publication of such yield rates in The Wall
Street Journal is discontinued for any reason, Lender shall select a
security with a comparable rate and term to the Treasury Security.  The
selection of an alternate security pursuant to this Section shall be made
in Lender’s discretion.

Present Value Factor: 
the factor that
discounts to present value the costs resulting to Lender from the difference in
interest rates during the months remaining in the Yield Maintenance Period,
using the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:

 

 [1-{1/(1+ARR)}n]/ARR

 

n= the number of months remaining in
Yield Maintenance Period; provided, however, if a prepayment occurs on an
Installment Due Date, then the number of months remaining in the Yield
Maintenance Period shall be calculated beginning with the month in which such
prepayment occurs and if such prepayment occurs on a Business Day other than an
Installment Due Date, then the number of months remaining
in the Yield Maintenance Period shall be calculated beginning with the month
immediately following the date of such prepayment.

ARR = Assumed Reinvestment Rate

(ii)               
For any prepayment made after the expiration of the Yield
Maintenance Period but during the remainder of the Prepayment Premium Period,
the prepayment premium shall be 1.0% of the amount of principal being
prepaid.

(f)                
Notwithstanding any other provision of this Section 10, no
prepayment premium shall be payable with respect to (i) any prepayment made
during the Window Period, or (ii) any prepayment occurring as a result of
the application of any insurance proceeds or condemnation award under the
Security Instrument.

(g)               
Unless Lender agrees otherwise in writing, a permitted or required
prepayment of less than the unpaid principal balance of this Note shall not
extend or postpone the due date of any subsequent monthly installments or change
the amount of such installments. 

(h)               
Borrower recognizes that any prepayment of any of the unpaid
principal balance of this Note, whether voluntary or involuntary or resulting
from an Event of Default by Borrower, will result in Lender's incurring loss,
including reinvestment loss, additional expense and frustration or impairment of
Lender's ability to meet its commitments to third parties.  Borrower agrees
to pay to Lender upon demand damages for the detriment caused by any prepayment,
and agrees that it is extremely difficult and impractical to ascertain the
extent of such damages.  Borrower therefore acknowledges and agrees that
the formula for calculating prepayment premiums set forth in this Note
represents a reasonable estimate of the damages Lender will incur because of a
prepayment.  Borrower further acknowledges that the prepayment premium
provisions of this Note are a material part of the consideration for the Loan,
and that the terms of this Note are in other respects more favorable to Borrower
as a result of the Borrower's voluntary agreement to the prepayment premium
provisions. 

11.             
Costs and Expenses.  To the fullest extent allowed
by applicable law, Borrower shall pay all expenses and costs, including
Attorneys' Fees and Costs incurred by Lender as a result of any default under
this Note or in connection with efforts to collect any amount due under this
Note, or to enforce the provisions of any of the other Loan Documents, including
those incurred in post-judgment collection efforts and in any bankruptcy
proceeding (including any action for relief from the automatic stay of any
bankruptcy proceeding) or judicial or non-judicial foreclosure
proceeding.

12.             
Forbearance.  Any forbearance by Lender in
exercising any right or remedy under this Note, the Security Instrument, or any
other Loan Document or otherwise afforded by applicable law, shall not be a
waiver of or preclude the exercise of that or any other right or remedy. 
The acceptance by Lender of any payment after the due date of such payment, or
in an amount which is less than the required payment, shall not be a waiver of
Lender's right to require prompt payment when due of all other payments or to
exercise any right or remedy with respect to any failure to make prompt
payment.  Enforcement by Lender of any security for Borrower's obligations
under this Note shall not constitute an election by Lender of remedies so as to
preclude the exercise of any other right or remedy available to Lender.

13.             
Waivers.  Borrower and all endorsers and
guarantors of this Note and all other third party obligors waive presentment,
demand, notice of dishonor, protest, notice of acceleration, notice of intent to
demand or accelerate payment or maturity, presentment for payment, notice of
nonpayment, grace, and diligence in collecting the Indebtedness.

14.             
Loan Charges (Texas Only).  Borrower and Lender
intend at all times to comply with the law of the State of Texas governing the
Maximum Interest Rate or the maximum amount of interest payable on or in
connection with this Note and the Indebtedness (or applicable United States
federal law to the extent that it permits Lender to contract for, charge, take,
reserve or receive a greater amount of interest than under Texas law).  If
the applicable law is ever judicially interpreted so as to render usurious any
amount payable under this Note or under any other Loan Document, or contracted
for, charged, taken, reserved or received with respect to the Indebtedness, or
as a result of acceleration of the maturity of this Note, or if any prepayment
by Borrower results in Borrower having paid any interest in excess of that
permitted by any applicable law, then Borrower and Lender expressly intend that
all excess amounts collected by Lender shall be applied to reduce the unpaid
principal balance of this Note (or, if this Note has been or would thereby be
paid in full, shall be refunded to Borrower), and the provisions of this Note,
the Security Instrument and any other Loan Documents immediately shall be deemed
reformed and the amounts thereafter collectible under this Note or any other
Loan Document reduced, without the necessity of the execution of any new
documents, so as to comply with any applicable law, but so as to permit the
recovery of the fullest amount otherwise payable under this Note or any other
Loan Document.  The right to accelerate the Maturity Date of this Note does
not include the right to accelerate any interest, which has not otherwise
accrued on the date of such acceleration, and Lender does not intend to collect
any unearned interest in the event of acceleration.  All sums paid or
agreed to be paid to Lender for the use, forbearance or detention of the
Indebtedness shall, to the extent permitted by any applicable law, be amortized,
prorated, allocated and spread throughout the full term of the Indebtedness
until payment in full so that the rate or amount of interest on account of the
Indebtedness does not exceed the applicable usury ceiling.  Notwithstanding
any provision contained in this Note, the Security Instrument or any other Loan
Document that permits the compounding of interest, including any provision by
which any accrued interest is added to the principal amount of this Note, the
total amount of interest that Borrower is obligated to pay and Lender is
entitled to receive with respect to the Indebtedness shall not exceed the amount
calculated on a simple (i.e., non-compounded) interest basis at the
maximum rate on principal amounts actually advanced to or for the account of
Borrower, including all current and prior advances and any advances made
pursuant to the Security Instrument or other Loan Documents (such as for the
payment of taxes, insurance premiums and similar expenses or costs).

15.             
Commercial Purpose.  Borrower represents that
Borrower is incurring the Indebtedness solely for the purpose of carrying on a
business or commercial enterprise, and not for personal, family, household, or
agricultural purposes.

16.             
Counting of Days.  Except where otherwise
specifically provided, any reference in this Note to a period of "days" means
calendar days, not Business Days.

17.             
Governing Law.  This Note shall be governed by the
law of the Property Jurisdiction.

18.             
Captions.  The captions of the Sections of
this Note are for convenience only and shall be disregarded in construing this
Note.

19.             
Notices; Written Modifications.  

(a)               
All Notices, demands and other communications required or
permitted to be given pursuant to this Note shall be given in accordance with
Section 31 of the Security Instrument.  

(b)              
Any modification or amendment to this Note shall be ineffective
unless in writing signed by the party sought to be charged with such
modification or amendment; provided, however, in the event of a Transfer under
the terms of the Security Instrument that requires Lender's consent, any or some
or all of the Modifications to Multifamily Note set forth in Exhibit A to this Note may be modified or rendered void
by Lender at Lender's option, by Notice to Borrower and the transferee, as a
condition of Lender's consent.

20.             
Consent to Jurisdiction and Venue.  Borrower
agrees that any controversy arising under or in relation to this Note may be
litigated in the Property Jurisdiction.  The state and federal courts and
authorities with jurisdiction in the Property Jurisdiction shall have
jurisdiction over all controversies that shall arise under or in relation to
this Note.  Borrower irrevocably consents to service, jurisdiction, and
venue of such courts for any such litigation and waives any other venue to which
it might be entitled by virtue of domicile, habitual residence or
otherwise.  However, nothing in this Note is intended to limit any right
that Lender may have to bring any suit, action or proceeding relating to matters
arising under this Note in any court of any other jurisdiction.

21.             
WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH
(A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING
OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER
THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY
JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR
IN THE FUTURE.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN
BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL
COUNSEL. 

22.             
State-Specific Provisions.  N/A.

ATTACHED EXHIBIT.  The Exhibit noted below, if
marked with an "X" in the space provided, is attached to this Note: 

	
X
	
 
	
Exhibit A
	
Modifications to Multifamily
Note

IN WITNESS WHEREOF, and in consideration of the Lender's
agreement to lend Borrower the principal amount set forth above, Borrower has
signed and delivered this Note under seal or has caused this Note to be signed
and delivered under seal by its duly authorized representative. Borrower intends
that this Note shall be deemed to be signed and delivered as a sealed
instrument. 

SHELTER
PROPERTIES II LIMITED PARTNERSHIP, a South Carolina limited
partnership

 

By:  Shelter Realty II
Corporation, a South Carolina corporation, its general partner

 

 

 

By: /s/Patti K.
Fielding

Patti K. Fielding

Executive Vice President and
Treasurer

 

 

 

 

 

 

LENDER:

FEDERAL HOME LOAN MORTGAGE CORPORATION

 

 

 

By:  /s/Dennis B. Graven

Name:  Dennis B. Graven

Title:  Regional Director of Underwriting and
Credit

SEEN AND
AGREED:

 

AIMCO PROPERTIES, L.P., a Delaware limited partnership

 

By:    AIMCO-GP, Inc., a Delaware
corporation, its general partner

 

 

 

By:  /s/Patti K. Fielding

Patti K. Fielding

Executive Vice President and Treasurer

 

EXHIBIT A

 

MODIFICATIONS TO MULTIFAMILY
NOTE

 

The following modifications are made to the text of the
Multifamily Note that precedes this Exhibit 

 

I.         
Transaction Specific Modifications

 

1.        
Paragraph 9 of the Note is modified to add the following to subsection 9(d)(i)
before the semi-colon:

 

"and
under Section 17 of the Security Instrument relating to galvanized steel piping/polybutylene piping; as well
as for any costs, loss or damage incurred or suffered by Lender as a result of
the existence at the Mortgaged Property of galvanized
steel piping/polybutylene piping, such loss or damage to include the cost
of replacing all such piping and the cost of repairing any damage associated
with the leaks in or other failure of any galvanized
steel piping/polybutylene piping"

 

II.        AIMCO
Standard Modifications

 

1.     
Intentionally
Deleted.

 

2.     
The following
definition is added to Section 1(a) of this Note:

”Prime Rate” means the rate
of interest announced by The Wall Street Journal from time to time as the
“Prime Rate”.

 

3.   The second sentence of
Section 9(c)(i) is deleted and replaced with the following:

 

           
However, Borrower will not be personally liable for any failure described in
this subsection (i) if Borrower is unable to pay to Lender all Rents and
security deposits as required by the Security Instrument (a) because of a valid
order issued in a bankruptcy, receivership, or similar judicial proceeding, or
(b) if such funds have been applied by Borrower as required or permitted by the
Security Instrument prior to the occurrence of an Event of Default.

 

4.   Section 19(b) of this
Note is modified by deleting: “provided, however, in the event of a Transfer
under the terms of the Security Instrument that requires Lender's consent, any
or some or all of the Modifications to Multifamily Note set forth in
Exhibit A to this Note may be modified or rendered void by Lender at
Lender's option, by Notice to Borrower and the transferee, as a condition of
Lender's consent” in the last sentence of the Section; and by adding the
following new sentence: 

 

           
The Modifications to Multifamily Note set forth in this Exhibit A shall be null
and void unless title to the Mortgaged Property is vested
in an entity whose Controlling Interest(s) are directly or indirectly held by
AIMCO REIT or AIMCO OP.  The capitalized terms used in this Section are
defined in the Security Instrument.

5.     
Section 20 of this
Note is deleted and replaced with the following:

 

20.      
Consent to Jurisdiction and Venue.  Borrower agrees that any
controversy arising under or in relation to this Note shall be litigated
exclusively in the jurisdiction in which the Land is located (the "Property
Jurisdiction").  The state and federal courts and authorities with
jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over
all controversies which shall arise under or in relation to this Note. 
Borrower irrevocably consents to service, jurisdiction, and venue of such courts
for any such litigation and waives any other venue to which it might be entitled
by virtue of domicile, habitual residence or otherwise.rightsagr.htm

 

 

 

 

 

RIGHTS AGREEMENT

 

 

dated as of

 

March 16, 2010

 

 

between

 

 

Abraxas Petroleum Corporation

 

 

and

 

 

American Stock Transfer & Trust Company, LLC

 

 

as Rights Agent

 

  

  

  

TABLE OF CONTENTS

 

	  	  	
Page

	
Section 1

	
Certain Definitions

	
1

	
Section 2

	
Appointment of Rights Agent

	
7

	
Section 3

	
Issuance of Rights Certificates

	
7

	
Section 4

	
Form of Rights Certificates

	
10

	
Section 5

	
Countersignature and Registration

	
10

	
Section 6

	
Transfer, Split−Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

	
11

	
Section 7

	
Exercise of Rights; Purchase Price; Expiration Date of Rights

	
12

	
Section 8

	
Cancellation and Destruction of Rights Certificates

	
13

	
Section 9

	
Company Covenants Concerning Securities and Rights

	
13

	
Section 10

	
Record Date

	
15

	
Section 11

	
Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights

	
16

	
Section 12

	
Certificate of Adjusted Purchase Price or Number of Shares

	
23

	
Section 13

	
Fractional Rights and Fractional Shares

	
23

	
Section 14

	
Rights of Action

	
25

	
Section 15

	
Agreement of Rights Holders

	
25

	
Section 16

	
Rights Certificate Holder Not Deemed a Stockholder

	
26

	
Section 17

	
Concerning the Rights Agent

	
26

	
Section 18

	
Merger, Consolidation or Change of Name of Rights Agent

	
27

	
Section 19

	
Duties of Rights Agent

	
28

	
Section 20

	
Change of Rights Agent

	
30

	
Section 21

	
Issuance of New Rights Certificates

	
31

	
Section 22

	
Redemption

	
31

	
Section 23

	
Exchange

	
32

	
Section 24

	
Notice of Certain Events

	
33

	
Section 25

	
Notices

	
34

	
Section 26

	
Supplements and Amendments

	
35

	
Section 27

	
Successors

	
35

	
Section 28

	
Determinations and Actions by the Board

	
36

	
Section 29

	
Process to Seek Exemption

	
36

	
Section 30

	
Benefits of this Agreement

	
36

	
Section 31

	
Severability

	
37

	
Section 32

	
Governing Law

	
37

	
Section 33

	
Counterparts

	
37

	
Section 34

	
Descriptive Headings; Interpretation

	
38

	  	  	  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  i

  

  

EXHIBITS

 

Exhibit A:  Form of Certificate of Designation of Series 2010 Junior Participating Preferred Stock

Exhibit B:  Form of Rights Certificate

Exhibit C:  Summary of Rights

ii  

  

  

RIGHTS AGREEMENT

 

RIGHTS AGREEMENT, dated as of March 16, 2010 (the “Agreement”), between Abraxas Petroleum Corporation., a Nevada corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as Rights Agent (the “Rights Agent”).

 

W I T N E S S E T H

 

WHEREAS, the Company has generated net operating loss carryovers and tax credit carryovers for United States federal income tax purposes;

 

WHEREAS, the ability to use the NOLs may be impaired or destroyed by an “ownership change” within the meaning of Section 382 (as defined below);

 

WHEREAS, the Company desires to avoid such an “ownership change” and thereby preserve the ability to utilize the NOLs; and

 

WHEREAS, on March 16, 2010 (the “Rights Dividend Declaration Date”), the Board (as hereinafter defined) authorized and declared a dividend distribution of one right (a “Right”) for each share of common stock, par value $0.01 per share, of the Company (the “Common Stock”) outstanding at the Close of Business (as hereinafter defined) on March 16, 2010 (the “Record Date”), each Right initially representing the right to purchase one one−thousandth of a share of Preferred Stock (as hereinafter defined) of the Company, upon the terms and subject to the conditions hereinafter set forth, and further authorized and directed the issuance of one Right (subject to adjustment as provided herein) with respect to each share of Common Stock issued or delivered by the Company (whether originally issued or delivered from the Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date (as hereinafter defined) and the Expiration Date (as hereinafter defined) as provided in Section 21.

 

NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereby agree as follows:

 

	
Section 1

	
Certain Definitions

 

For purposes of this Agreement, the following terms shall have the meanings indicated:

 

(a)           “Acquiring Person” shall mean any Person (other than the Company, any Related Person or any Exempt Person) that has become, in itself or, together with all Affiliates and Associates of such Person, the Beneficial Owner of 4.9% or more of the shares of Common Stock then outstanding, provided, however, that any Person who would otherwise qualify as an Acquiring Person as of the Close of Business on the Record Date will not be deemed to be an Acquiring Person for any purpose of this Agreement on and after such date unless and until such time as such stockholder acquires the beneficial ownership of one additional share of Common Stock, and provided, further, that a Person will not be deemed to have become an Acquiring Person solely as a result of (i) a reduction in the number of shares of Common Stock outstanding, (ii) the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees, (iii) any unilateral grant of any

 

  

  

  

security by the Company, or (iv) an Exempt Transaction, unless and until such time as such stockholder acquires the beneficial ownership of one additional share of Common Stock. The Board shall not make any determination with respect to a potential Acquiring Person until five (5) Business Days after the date on which all Board members first received notice of the change of beneficial ownership at issue. Notwithstanding the foregoing, if the Board determines in good faith that a Person who would otherwise be an "Acquiring Person," as defined pursuant to the foregoing provisions of this Section 1(a), has become such inadvertently (including, without limitation, because (A) such Person was unaware that it beneficially owned a percentage of Common Stock that would otherwise cause such Person to be an “Acquiring Person” or (B) such Person was aware of the extent of its Beneficial Ownership of Common Stock but had no actual knowledge of the consequences of such Beneficial Ownership under this Agreement), and such Person divests as promptly as practicable a sufficient number of shares of Common Stock so that such Person would no longer be an Acquiring Person, as defined in the foregoing provisions of this Section 1(a), then such Person shall not be deemed to be or to have become an “Acquiring Person” for purposes of this Agreement as a result of such inadvertent acquisition.  In addition, notwithstanding the foregoing, if a Person who would otherwise be an “Acquiring Person,” as defined pursuant to the foregoing provisions of this Section 1(a), has become such as a result of an acquisition of Beneficial Ownership of shares of Common Stock that the Board in its sole discretion determines in good faith, prior to the Distribution Date that would otherwise occur as a result of such acquisition, will not jeopardize or endanger the availability to the Company of the NOLs, then such Person shall not be deemed to be or to have become an “Acquiring Person” for purposes of this Agreement as a result of such acquisition, unless and until such time as such Person thereafter acquires Beneficial Ownership of one additional share of Common Stock (other than pursuant to a dividend or distribution paid or made by the Company on the outstanding Common Stock or pursuant to a split or subdivision of the outstanding Common Stock), unless, upon becoming the Beneficial Owner of such additional share of Common Stock, such Person is not then the Beneficial Owner of 4.9% or more of the shares of Common Stock then outstanding or the Board determines otherwise in accordance with this sentence or the preceding sentence.  For all purposes of this Agreement, any calculation of the number of shares of Common Stock outstanding at any particular time, including for purposes of determining the particular percentage of the outstanding shares of Common Stock of which any Person or Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(l)(i) of the General Rules and Regulations under the Exchange Act (as defined below) as in effect on the date thereof.

 

(b)           “Act” shall mean the Securities Act of 1933, as amended.

 

(c)           “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, and to the extent not included within the foregoing clause of this Section 1(c), shall also include, with respect to any Person, any other Person (whether or not a Related Person or an Exempt Person) whose shares of Common Stock would be deemed constructively owned by such first Person, owned by a single “entity” as defined in Section 1.382−3(a)(1) of the Treasury Regulations, or otherwise aggregated with shares owned by such first Person pursuant to the provisions of the Code, or any successor provision or replacement provision, and the Treasury Regulations thereunder, provided, however, that a Person shall not

 

  

2

  

be deemed to be the Affiliate or Associate of another Person solely because either or both Persons are or were directors of the Company.

 

(d)           “Agreement” shall have the meaning set forth in the preamble of this Agreement.

 

(e)           “Authorized Officer” shall mean the Chief Executive Officer, President, any Vice President, the Treasurer or the Secretary of the Company.

 

(f)           A Person shall be deemed the “Beneficial Owner” of, and to “beneficially own” any securities:

 

(i)           which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, warrants, options, or other rights (in each case, other than upon exercise or exchange of the Rights); provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own” securities (including rights, options or warrants) which are convertible or exchangeable into Common Stock until such time as the convertible or exchangeable securities are exercised and converted or exchanged into Common Stock except to the extent the acquisition or transfer of such rights, options or warrants would be treated as exercised on the date of its acquisition or transfer under Section 1.382−4(d) of the Treasury Regulations; and, provided further, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange;

 

(ii)           which such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has or shares the right to vote or dispose of, or has “beneficial ownership” of (as defined under Rule 13d−3 of the General Rules and Regulations under the Exchange Act), including pursuant to any agreement, arrangement or understanding (whether or not in writing), but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” under Section 1.382−3(a)(1) of the Treasury Regulations, or

 

(iii)           which any other Person is the Beneficial Owner, if such Person or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) with such other Person (or any of such other Person’s Affiliates or Associates) with respect to acquiring, holding, voting or disposing of any securities of the Company, but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” under Section 1.382−3(a)(1) of the Treasury Regulations; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own” any security (A) if such Person has the right to vote such security pursuant to an agreement, arrangement or understanding (whether or not in writing) which (1) arises solely from a revocable proxy given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations of the Exchange Act and (2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report), or (B) if such beneficial ownership arises solely as a result of such Person’s

 

  

3

  

status as a “clearing agency,” as defined in Section 3(a)(23) of the Exchange Act; provided further, however, that nothing in this Section 1(f) shall cause a Person engaged in business as an underwriter of securities or member of a selling to group to be the Beneficial Owner of, or to “beneficially own,” any securities acquired through such Person’s participation in good faith in an underwriting syndicate until the expiration of forty (40) calendar days after the date of such acquisition, or such later date as the directors of the Company may determine in any specific case. Notwithstanding anything herein to the contrary, to the extent not within the foregoing provisions of this Section 1(f), a Person shall be deemed the “Beneficial Owner” of and shall be deemed to “beneficially own” or have “beneficial ownership” of, securities which such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such pursuant to Section 382 of the Code, or any successor provision or replacement provision and the Treasury Regulations thereunder.

 

(g)           “Board” shall mean the Board of Directors of the Company or any committee of the Board.

 

(h)           “Book Entry” shall mean an uncertificated book entry for the Common Stock.

 

(i)           “Business Day” shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York (or such other state in which the principal office of the Rights Agent may be located) are authorized or obligated by law or executive order to close.

 

(j)           “Close of Business” on any given date shall mean 5:00 P.M., San Antonio, Texas time, on such date; provided, however, that if such date is not a Business Day, it shall mean 5:00 P.M., San Antonio, Texas time, on the next succeeding Business Day.

 

(k)           “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(l)           “Common Stock” shall have the meaning set forth in the preamble of this Agreement.

 

(m)           “Company” shall have the meaning set forth in the preamble of this Agreement.

 

(n)           “Current Per Share Market Price” shall have the meaning set forth in Section 11(d)(i) or Section 11(d)(ii) hereof, as applicable.

 

(o)           “Current Value” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(p)           “Distribution Date” shall mean the earliest of (i) the Close of Business on the tenth (10th) Business Day after the Stock Acquisition Date or (ii) the Close of Business on the tenth Business Day (or, unless the Distribution Date shall have previously occurred, such later date as may be specified by the Board of Directors of the Company) after the commencement of a tender or exchange offer by any Person (other than the Company, any Related Person or any Exempt Person), if upon the consummation thereof such Person would be the Beneficial Owner of 4.9% or more of the then outstanding Common Stock.

 

  

4

  

(q)           “Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b) hereof.

 

(r)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(s)           “Exchange Ratio” shall have the meaning set forth in Section 23(a) hereof.

 

(t)           “Exempt Person” shall mean (i) a Person whose Beneficial Ownership (together with all Affiliates and Associates of such Person) of 4.9% or more of the then outstanding Common Stock would not, as determined by the Board in its sole discretion, jeopardize or endanger the availability to the Company of its NOLs and (ii) any Person that beneficially owns, as of the Record Date, 4.9% or more of the outstanding shares of Common Stock, provided, however, that, with respect to clause (ii) of this paragraph, any such Person shall only be deemed to be an Exempt Person for so long as it beneficially owns no more than the amount of Common Stock it owned on the Record Date; and provided, further, that, with respect to clauses (i) and (ii) of this paragraph, any Person shall cease to be an Exempt Person as of the date that such Person ceases to beneficially own 4.9% or more of the shares of the then outstanding Common Stock. Additionally, a Person shall cease to be an Exempt Person if the Board, in its sole discretion, makes a contrary determination with respect to the effect of such Person’s Beneficial Ownership (together with all Affiliates and Associates of such Person) with respect to the availability to the Company of its NOLs.

 

(u)           “Exempt Transaction” shall mean any transaction that the Board determines, in its sole discretion, has declared exempt pursuant to Section 29, which determination shall be irrevocable.

 

(v)           “Expiration Date” shall mean the earliest of (i) the Final Expiration Date, (ii) the time at which the Rights are redeemed as provided in Section 22 hereof, (iii) the time at which the Rights are exchanged as provided in Section 23 hereof, (iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that this Agreement is no longer necessary for the preservation of Tax Benefits and (v) the beginning of a taxable year of the Company to which the Board determines that no Tax Benefits may be carried forward.

 

(w)           “Final Expiration Date” shall be March 16, 2015.

 

(x)           “Nasdaq” means The Nasdaq Stock Market.

 

(y)           “NOLs” shall have the meaning set forth in the recitals hereto.

 

(z)           “Person” shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust or other entity, group of Persons making a “coordinated acquisition” of shares or otherwise treated as an entity within the meaning of Section 1.382−3(a)(1) of the Treasury Regulations or otherwise, and includes any successor (by merger or otherwise) of such individual or entity.

 

(aa)           “Preferred Stock” shall mean shares of Series 2010 Junior Participating Preferred Stock, par value $0.01 per share, of the Company having the rights and preferences set forth in the form of Certificate of Designation of Series 2010 Junior Participating Preferred Stock attached hereto as Exhibit A.

 

  

5

  

(bb)           “Purchase Price” shall mean initially $7.00 per one one−thousandth of a share of Preferred Stock, subject to adjustment from time to time as provided in this Agreement.

 

(cc)           “Record Date” shall have the meaning set forth in the recitals to this Agreement.

 

(dd)           “Redemption Price” shall mean $0.01 per Right, subject to adjustment by the Company to reflect any stock split, stock dividend or similar transaction occurring after the date hereof.

 

(ee)           “Related Person” shall mean (i) any Subsidiary of the Company or (ii) any employee benefit or stock ownership plan of the Company or of any Subsidiary of the Company or any Person holding shares of Common Stock for or pursuant to the terms of any such plan.

 

(ff)           “Rights” shall have the meaning set forth in the recitals to this Agreement.

 

(gg)           “Rights Agent” shall have the meaning set forth in the preamble of this Agreement.

 

(hh)           “Rights Certificates” shall mean certificates evidencing the Rights, in substantially the form attached hereto as Exhibit B.

 

(ii)           “Rights Dividend Declaration Date” shall have the meaning set forth in the recitals to this Agreement.

 

(jj)           “Section 382” shall mean Section 382 of the Code or any comparable successor provision.

 

(kk)           “Section 11(a)(ii) Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(ll)           “Securities Act” shall mean Securities Act of 1933, as amended.

 

(mm)           “Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(nn)           “Stock Acquisition Date” shall mean the first date of public announcement (which for purposes of this definition shall include, without limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person has become such or such earlier date as a majority of the Board shall become aware of the existence of an Acquiring Person.

 

(oo)           “Subsidiary” shall mean, with reference to any Person, any corporation or other entity of which a majority of the voting power of the voting equity securities or other equity interests is owned, directly or indirectly, by such Person, or otherwise controlled by such Person.

 

(pp)           “Substitution Period” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(qq)           “Summary of Rights” shall mean a copy of a summary of the terms of the Rights, in substantially the form attached hereto as Exhibit C.

 

  

6

  

(rr)           “Tax Benefits” shall mean the net operating loss carry−overs, capital loss carry−overs, general business credit carry−overs, alternative minimum tax credit carry−overs and foreign tax credit carry−overs, as well as any “net unrealized built−in loss” within the meaning of Section 382, of the Company or any direct or indirect Subsidiary thereof.

 

(ss)           “Trading Day” shall mean a day on which the principal national securities exchange on which the shares of Common Stock are listed or admitted to trading is open for the transaction of business or, with respect to the shares of Common Stock which are not listed or admitted to trading on any national securities exchange, a Business Day.

 

(tt)           “Treasury Regulations” shall mean final, temporary and proposed income tax regulations promulgated under the Code, including any amendments thereto.

 

Any determination or interpretation required by the definitions in this Agreement or any application requiring a determination or interpretation shall be made by the Board in its good faith judgment, which determination or interpretation shall be binding on the Rights Agreement and the holders of Rights.

 

	
Section 2

	
Appointment of Rights Agent

 

The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co−rights agents as it may deem necessary or desirable. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omission of any such co−rights agent. Prior to the appointment of a co−rights agent, the specific duties and obligations of each such co−rights agents shall be set forth in writing and delivered to the Rights Agent and the proposed co−rights agent. Any actions which may be taken by the Rights Agent pursuant to the terms of this Agreement may be taken by any such co−rights agent. To the extent that any co−rights agent takes any action pursuant to this Agreement, such co−rights agent shall be entitled to all of the rights and protections of, and subject to all of the applicable duties and obligations imposed upon, the Rights Agent pursuant to the terms of this Agreement.

 

	
Section 3

	
Issuance of Rights Certificates

 

(a)           Until the Distribution Date, (i) the Rights shall be evidenced (subject to Section 3(b)) by the certificates representing the shares of Common Stock registered in the names of the record holders thereof (or by Book Entry shares in respect of such Common Stock) and not by separate Rights Certificates, (ii) the Rights shall be transferable only in connection with the transfer of the underlying shares of Common Stock, and (iii) the surrender for transfer of any certificates representing such shares of Common Stock in respect of which Rights have been issued shall also constitute the transfer of the Rights associated with the shares of Common Stock represented by such certificates.

 

(b)           On or as promptly as practicable after the Record Date, the Company shall send by first class, postage prepaid mail, to each record holder of shares of Common Stock as of the Close of Business on the Record Date, at the address of such holder shown on the records of the Company as of such date, a copy of a Summary of Rights to Purchase Preferred Stock in

 

  

7

  

substantially the form attached hereto as Exhibit C. With respect to certificates for Common Stock (or Book Entry shares of Common Stock) 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 (or the Book Entry shares) together with the Summary of Rights.

 

(c)           Rights shall be issued by the Company in respect of all shares of Common Stock (other than any shares of Common Stock that may be issued upon the exercise or exchange of any Right) issued or delivered by the Company (whether originally issued or delivered from the Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date and the Expiration Date, except as specially provided in Section 21 hereof, after the Distribution Date. Certificates representing such shares of Common Stock shall have stamped on, impressed on, printed on, written on, or otherwise affixed to them a legend in substantially the following form or such similar legend as the Company may deem appropriate and is not inconsistent with the provisions of this Agreement and as do not affect the rights, duties or responsibilities of the Rights Agent, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the shares of Common Stock may from time to time be listed or quoted:

 

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in the Rights Agreement between Abraxas Petroleum Corporation and American Stock Transfer & Trust Company, as Rights Agent, dated as of March 16, 2010 and as amended from time to time (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 Abraxas Petroleum Corporation. The Rights are not exercisable prior to the occurrence of certain events specified in the Rights Agreement. Under certain circumstances, as set forth in the Rights Agreement, such Rights may be redeemed, may be exchanged, may expire, may be amended, or may be evidenced by separate certificates and no longer be evidenced by this certificate. Abraxas Petroleum Corporation shall mail to the holder of this certificate a copy of the Rights Agreement, as in effect on the date of mailing, without charge promptly after receipt of a written request therefor. Under certain circumstances as set forth in the Rights Agreement, Rights that are or were beneficially owned by an Acquiring Person or any Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement) may become null and void.

 

With respect to any Book Entry shares of Common Stock, such legend shall be included in a notice to the registered holder of such shares in accordance with applicable law.  With respect to certificates containing the foregoing legend, or any notice of the foregoing legend delivered to holders of Book Entry shares, until the Distribution Date, the Rights associated with the Common Stock represented by such certificates or Book Entry shares shall be evidenced by such certificates or Book Entry shares alone, and the surrender for transfer of any such certificate or Book Entry share, except as otherwise provided herein, shall also constitute the transfer of the Rights associated with the Common Stock represented thereby.  In the event that the Company purchases or otherwise acquires any Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.

 

  

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Notwithstanding this paragraph (c), neither the omission of the legend required hereby, nor the failure to deliver the notice of such legend, shall amend or affect the enforceability of any part of this Agreement or the rights of any holder of the Rights or the Company or the Board with respect thereto.

 

(d)           Any Rights Certificate issued pursuant to this Section 3 or Section 21 hereof that represents Rights beneficially owned by an Acquiring Person or any of its Associates or Affiliates and any Rights Certificate issued at any time upon the transfer of any Rights to an Acquiring Person or any of its Associates or Affiliates or to any nominee of such Acquiring Person, Associate or Affiliate and any Rights Certificate issued pursuant to Section 6 or 11 hereof upon transfer, exchange, replacement or adjustment of any other Rights Certificate referred to in this sentence, shall be subject to and contain a legend in substantially the following form or such similar legend as the Company may deem appropriate and is not inconsistent with the provisions of this Agreement or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange on which the Rights may from time to time be listed:

 

The Rights represented by this Rights Certificate are or were beneficially owned by a Person who was an Acquiring Person or an Affiliate or an Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). This Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 11(a)(ii) of the Rights Agreement.

 

With respect to any Book Entry shares of Common Stock, such legend shall be included in a notice to the registered holder of such shares in accordance with applicable law.  With respect to certificates containing the foregoing legend, or any notice of the foregoing legend delivered to holders of Book Entry shares, until the Distribution Date, the Rights associated with the Common Stock represented by such certificates or Book Entry shares shall be evidenced by such certificates or Book Entry shares alone, and the surrender for transfer of any such certificate or Book Entry share, except as otherwise provided herein, shall also constitute the transfer of the Rights associated with the Common Stock represented thereby.  In the event that the Company purchases or otherwise acquires any Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.

 

Notwithstanding this paragraph (d), neither the omission of the legend required hereby, nor the failure to deliver the notice of such legend, shall amend or affect the enforceability of any part of this Agreement or the rights of any holder of the Rights or the Company or the Board with respect thereto.

 

(e)           As promptly as practicable after the Distribution Date, the Company shall prepare and execute, the Rights Agent shall countersign and the Company shall send or cause to be sent (and the Rights Agent will, if requested, and if provided with all necessary information, send), by first class, insured, postage prepaid mail, to each record holder of shares of Common Stock, as of the Close of Business on the Distribution Date (other than an Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the address of such holder shown on the records of the

 

  

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Company or the transfer agent or registrar for the Common Stock, a Rights Certificate representing one Right for each share of Common Stock so held, subject to adjustment as provided herein. As of and after the Distribution Date, the Rights shall be represented solely by such Rights Certificates, and the Rights will be transferable only separately from the transfer of Common Stock. The Company shall promptly notify the Rights Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm same in writing on or prior to the next Business Day. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.

 

(f)           In the event that the Company purchases or otherwise acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock so purchased or acquired.

 

	
Section 4

	
Form of Rights Certificates

 

The Rights Certificates (and the form of election to purchase and the form of assignment to be printed on the reverse thereof) shall each be substantially in the form attached hereto as Exhibit B with such changes and marks of identification or designation, and such legends, summaries or endorsements printed thereon as the Company may deem appropriate (but which do not affect the rights, duties, liabilities or responsibilities of the Rights Agent) and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or transaction reporting system on which the Rights may from time to time be listed or quoted, or to conform to usage. Subject to the provisions of Section 21 hereof, the Rights Certificates, whenever distributed shall entitle the holders thereof to purchase such number of one one−thousandths of a share of Preferred Stock as is set forth therein at the Purchase Price; provided, however, that the Purchase Price, the number and kind of securities issuable upon exercise of each Right and the number of Rights outstanding shall be subject to adjustments as provided in this Agreement.

 

	
Section 5

	
Countersignature and Registration

 

(a)           The Rights Certificates shall be executed on behalf of the Company by any Authorized Officer, either manually or by facsimile signature, and shall have affixed thereto the Company’s seal or a facsimile thereof which shall be attested by any Authorized Officer, either manually or by facsimile signature. The Rights Certificates shall be countersigned by the Rights Agent, either manually or by facsimile signature and shall not be valid for any purpose unless so countersigned. In case any Authorized Officer of the Company who shall have signed any of the Rights Certificates shall cease to be such Authorized Officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Rights Certificates, nevertheless, may be countersigned by the Rights Agent and issued and delivered by the Company with the same force and effect as though the person who signed such Rights Certificates had not ceased to be such Authorized Officer of the Company; and any Rights Certificates may be signed on behalf of the Company by any person who, at the actual date of the

 

  

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execution of such Rights Certificate, shall be a proper Authorized Officer of the Company to sign such Rights Certificate, although at the date of the execution of this Agreement any such person was not such an Authorized Officer.

 

(b)           Following the Distribution Date, upon receipt by the Rights Agent of written notice of the occurrence of the Distribution Date pursuant to Section 3(e) hereof, a stockholder list and all other relevant information referred to in Section 3(e) or as reasonably requested by the Rights Agent, the Rights Agent shall keep, books for registration and transfer of the Rights Certificates issued hereunder, or cause to be kept, at its office or offices designated for such purposes and at such other offices as may be required to comply with any applicable law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or any transaction reporting system on which the rights may from time to time be listed or quoted. Such books shall show the names and addresses of the respective holders of the Rights Certificates, the number of Rights evidenced on its face by each of the Rights Certificates and the date of each of the Rights Certificates.

 

	
Section 6

	
Transfer, Split−Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates

 

(a)           Subject to the provisions of Section 7(d) and Section 13 hereof, at any time after the Close of Business on the Distribution Date, and prior to the Expiration Date, any Rights Certificate(s) (other than Rights Certificates representing Rights that have become null and void pursuant to Section 11(a)(ii) hereof or that may have been exchanged pursuant to Section 23 hereof) representing exercisable Rights may be transferred, split up, combined or exchanged for another Rights Certificate(s), entitling the registered holder to purchase a like number of one one−thousandths of a share of Preferred Stock (or other securities, as the case may be) as the Rights Certificate(s) surrendered then entitled such holder (or former holder in the case of a transfer) to purchase. Any registered holder desiring to transfer, split up, combine or exchange any such Rights Certificate(s) must make such request in writing delivered to the Rights Agent, and must surrender the Rights Certificate(s) to be transferred, split up, combined or exchanged, with the forms of assignment and certificate contained therein duly executed, at the office or offices of the Rights Agent designated for such purpose. The Rights Certificates are transferable only on the registry books of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Rights Certificate(s) until the registered holder thereof shall have (i) completed and signed the certificate contained in the form of assignment on the reverse side of each such Rights Certificate, (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights evidenced thereby and the Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner) as the Company or the Rights Agent shall reasonably request and (iii) paid a sum sufficient to cover any tax or charge that may be imposed in connection with any transfer, split up, combination or exchange or Rights Certificates as required by Section 9(d) hereof. Thereupon the Rights Agent shall countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, as so requested registered in such name or names as may be designated by the surrendering registered holder. The Rights Agent shall promptly forward any such sum collected by it to the Company or to such Person or Persons as the Company shall specify by written notice. The Rights Agent shall have no duty or obligation under any Section of this Agreement

 

  

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which requires the payment of taxes or charges unless and until it is satisfied that all such taxes and/or charges have been paid.

 

(b)           Upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Rights Certificate, and, in case of loss, theft or destruction, of indemnity or security satisfactory to them, and reimbursement to the Company and the Rights Agent of all reasonable expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Rights Certificate, if mutilated, the Company shall execute and deliver a new Rights Certificate of like tenor to the Rights Agent and the Rights Agent will countersign and deliver such new Rights Certificate to the registered holder in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

 

	
Section 7

	
Exercise of Rights; Purchase Price; Expiration Date of Rights

 

(a)           Except as otherwise provided herein, the Rights shall become exercisable on the Distribution Date and prior to the Expiration Date, and thereafter the registered holder of any Right Certificate may, subject to Section 11(a)(ii) and Section 23 hereof, exercise the Rights evidenced thereby in whole or in part upon surrender of the Rights Certificate, with the form of election to purchase on the reverse side thereof properly completed and duly executed, to the Rights Agent at the office or agency of the Rights Agent designated for such purpose, together with payment of the Purchase Price (including any applicable tax or charge required to be paid by the holder of such Rights Certificate in accordance with the provisions of Section 9(d)) hereof for each one one−thousandth of a share of Preferred Stock (or other securities, cash or assets, as the case may be) as to which the Rights are exercised.  Except for those provisions herein which expressly survive the termination of this Agreement, this Agreement shall terminate on the Expiration Date.

 

(b)           Upon receipt of a Rights Certificate representing exercisable Rights with the form of election to purchase and the certificate properly completed and duly executed, accompanied by payment of the Purchase Price for the shares to be purchased and an amount equal to any applicable tax or charge required to be paid under Section 9(d) hereof by certified check, cashier’s check, bank draft or money order payable to the order of the Company, subject to Section 19(j) hereof, the Rights Agent shall, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates representing the total number of one one−thousandths of a share of Preferred Stock to be purchased (and the Company hereby irrevocably authorizes and directs each such transfer agent to comply with all such requests) or (B) if the Company shall have elected to deposit any shares of Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one−thousandths of a share of Preferred Stock as are to be purchased (and the Company hereby irrevocably authorizes and directs such depositary agent to comply with all such requests), (ii) after receipt of such certificates (or depositary receipts, as the case may be) cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, (iii) when necessary to comply with this Agreement, requisition from the Company or any transfer agent therefor of certificates representing the number of equivalent shares to be issued in lieu of the issuance of shares of Common Stock in accordance with the provisions of Section 11(a)(iii),

 

  

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(iv) when necessary to comply with this Agreement, after receipt of such certificates, cause the same to be delivered to or upon the order of the registered holder of such Rights Certificate, registered in such name or names as may be designated by such holder, (v) when necessary to comply with this Agreement, requisition from the Company the amount of cash to be paid in lieu of the issuance of fractional shares in accordance with the provisions of Section 13 hereof, and (vi) when necessary to comply with this Agreement, after receipt, deliver such cash to the registered holder of such Rights Certificate.

 

(c)           In case the registered holder of any Rights Certificate shall exercise less than all the Rights evidenced thereby, the Rights Agent shall prepare, execute and deliver a new Rights Certificate evidencing Rights equivalent to the Rights remaining unexercised to the registered holder of such Rights Certificate or to his duly authorized assigns, subject to the provisions of Section 13 hereof.

 

(d)           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 any purported transfer, split up, combination or exchange of any Rights Certificate pursuant to Section 6 or exercise or assignment of a Rights Certificate as set forth in this Section 7 unless the registered holder of such Rights Certificate shall have (i) properly completed and duly executed the certificate following the form of assignment or the form of election to purchase, as applicable, set forth on the reverse side of the Rights Certificate surrendered for such transfer, split up, combination, exchange, exercise or assignment and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) thereof and of the Rights evidenced thereby and of the Affiliates and Associates of such Beneficial Owner (or former Beneficial Owner) as the Company or the Rights Agent may reasonably request.

 

	
Section 8

	
Cancellation and Destruction of Rights Certificates

 

All Rights Certificates surrendered for the purpose of exercise, transfer, split−up, combination or exchange shall, if surrendered to the Company or any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Rights Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof to the Company.

 

	
Section 9

	
Company Covenants Concerning Securities and Rights

 

(a)           The Company covenants and agrees that it shall cause to be reserved, authorized for issuance and kept available out of its authorized and unissued shares of Preferred Stock, and/or other securities, or any shares of any such security of the Company held in its treasury, a number of shares of Preferred Stock (or any other security of the Company as may be applicable at the time of exercise) that shall be sufficient to permit the exercise in full of all outstanding Rights in accordance with Section 7.

 

  

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(b)           The Company covenants and agrees that so long as the shares of Preferred Stock (and, following the occurrence of any Person becoming an Acquiring Person, shares of Common Stock and/or other securities) issuable upon the exercise of the Rights may be listed on any national securities exchange it shall endeavor to cause, from and after such time as the Rights become exercisable, all securities reserved for issuance upon the exercise of Rights to be listed on such exchange upon official notice of issuance upon such exercise.

 

(c)           The Company covenants and agrees that it will take all such actions as may be necessary to ensure that all shares of Preferred Stock (and, following the occurrence of any Person becoming an acquiring Person shares of Common Stock and/or other securities) delivered upon exercise of Rights, at the time of delivery of the certificates for such securities, shall be (subject to payment of the Purchase Price and compliance with all other applicable provisions of this Agreement) duly authorized, validly issued, fully paid and nonassessable securities.

 

(d)           The Company covenants and agrees that it will pay when due and payable any and all taxes and charges that may be payable in respect of the issuance or delivery of the Rights Certificates and of any certificates representing securities issued upon the exercise of Rights; provided, however, that the Company shall not be required to pay any tax or charge which may be payable in respect of any transfer or delivery of Rights Certificates to a Person other than, or the issuance or delivery of certificates or depositary receipts representing securities issued upon the exercise of Rights in a name other than that of, the registered holder of the Rights Certificate evidencing Rights surrendered for exercise, or to issue or deliver any certificates or depositary receipts representing securities issued upon the exercise of any Rights until any such tax or charge has been paid (any such tax or charge being payable by the holder of such Rights Certificate at the time of surrender) or until it has been established to the Company’s or the Rights Agent’s satisfaction that no such tax or charge is due.

 

(e)           If the Company determines that registration under the Securities Act is required, then the Company shall use commercially reasonable efforts (i) to file, as soon as practicable after the Distribution Date, on an appropriate form, a registration statement under the Securities Act with respect to the securities issuable upon exercise of the Rights, (ii) to cause such registration statement to become effective as soon as practicable after such filing and (iii) to cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Securities Act) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the Expiration Date. The Company 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. The Company may temporarily suspend, for a period of time not exceed ninety (90) days, the exercisability of the Rights in order to prepare and file such registration statement and to permit it to become effective or to qualify the rights, the exercise thereof or the issuance of shares of Preferred Stock, Common Stock, or other securities upon the exercise thereof under state securities or “blue sky” laws. Upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. The Company shall notify the Rights Agent in writing whenever it makes a public announcement pursuant to this Section 9(e) and give the Rights Agent a copy of such announcement. In addition, if the Company determines that a registration statement or other document should be filed under the Securities Act or any state

 

  

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securities laws following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights, for a period of time not to exceed ninety (90) days, in each relevant jurisdiction until such time as a registration statement has been declared effective or any such other document filed and, if required, approved, and, upon any such suspension, the Company shall issue a public announcement stating that the exercisability of the rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect.  Notwithstanding anything in this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite registration or qualification in such jurisdiction has not been effected or the exercise of the Rights is not permitted under applicable law.

 

(f)           Notwithstanding anything in this Agreement to the contrary, after the later of the Stock Acquisition Date and the Distribution Date, the Company shall not take (or permit any Subsidiary to take) any action if at the time such action is taken it is reasonably foreseeable that such action shall eliminate or otherwise diminish the benefits intended to be afforded by the Rights.

 

(g)           In the event that the Company is obligated to issue other securities of the Company and/or pay cash pursuant to Sections 7, 11, 13 or 23 it shall make all arrangements necessary so that such other securities and/or cash are available for distribution by the Rights Agent, if and when necessary to comply with this Agreement.

 

	
Section 10

	
Record Date

 

Each Person in whose name any certificate for a number of one one−thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of such shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate shall be dated, the date upon which the Rights Certificate representing such Rights was duly surrendered and payment of the Purchase Price (and all applicable taxes and charges) was made; provided, however, that if the date of such surrender and payment is a date upon which the transfer books of the Company for shares of Preferred Stock (or Common Stock and/or other securities, as the case may be) are closed, such Person shall be deemed to have become the record holder of such securities on, and such certificate shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Rights Certificate shall not be entitled to any rights as holder of any security of the Company with respect to shares for which the Rights are or may be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

 

  

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Section 11                      Adjustment of Purchase Price, Number and Kind of Securities or Number of Rights

 

The Purchase Price, the number of shares of Preferred Stock or other securities or property purchasable upon exercise of each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

 

(a)           (i)           In the event the Company shall at any time after the Record Date (A) declare a dividend on the shares of Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C) combine the outstanding shares of Preferred Stock into a smaller number of shares of Preferred Stock or (D) issue any shares of its capital stock in a reclassification of the shares of Preferred Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a), the Purchase Price in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification, as the case may be, and the number and kind of shares of capital stock issuable on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive the aggregate number and kind of shares of capital stock which, if such Right had been exercised immediately prior to such date and at a time when the transfer books of the Company for the shares of Preferred Stock were open, 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 (1) Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one (1) Right.

 

(ii)           Subject to Section 23 of this Agreement and except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii), in the event that any Person becomes an Acquiring Person, each holder of a Right shall thereafter have the right to receive, upon exercise thereof at a price equal to the then current Purchase Price, in accordance with the terms of this Agreement and in lieu of shares of Preferred Stock, such number of shares of Common Stock (or at the option of the Company, such number of one one−thousandths of a share of Preferred Stock) as shall equal the result obtained by (x) multiplying the then current Purchase Price by the number of one one−thousandths of a share of Preferred Stock for which a Right is then exercisable and dividing that product by (y) 50% of the Current Per Share Market Price of the Company’s Common Stock (determined pursuant to Section 11(d) hereof) on the date of the occurrence of such event; provided, however, that the Purchase Price (as so adjusted) and the number of shares of Common Stock so receivable upon exercise of a Right shall thereafter be subject to further adjustment as appropriate in accordance with Section 11(f) hereof.

 

Notwithstanding anything in this Agreement to the contrary, however, from and after the time (the “Invalidation Time”) when any Person first becomes an Acquiring Person, any Rights that are beneficially owned by (A) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (B) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the Invalidation Time or (C) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with the Invalidation Time pursuant to either (1) a transfer from the Acquiring

 

  

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Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding, written or otherwise, regarding the transferred Rights or (2) a transfer that the Board has determined is part of a plan, arrangement or understanding, written or otherwise, which has the purpose or effect of avoiding the provisions of this paragraph, and subsequent transferees of such Persons, shall be null and void without any further action and any holder of such Rights shall thereafter have no rights whatsoever with respect to such Rights under any provision of this Agreement. The Company will use commercially reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are complied with, but shall have no liability to any holder of Rights Certificates or other Person as a result of its failure to make any determinations with respect to an Acquiring Person or its Affiliates, Associates or transferees hereunder. From and after the Invalidation Time, no Right Certificates shall be issued pursuant to Section 3 or Section 6 hereof that represent Rights that are or have become null and void pursuant to the provisions of this paragraph, and any Right Certificates delivered to the Rights Agent that represent Rights that are or have become null and void pursuant to the provisions of this paragraph shall be cancelled. The Company shall give the Rights Agent written notice of the identity of any such Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing, and the Rights Agent may rely on such notice in carrying out its duties under this Agreement and shall be deemed not to have any knowledge of the identity of any such Acquiring Person, Associate or Affiliate, or the nominee of any of the foregoing unless and until it shall have received such notice.

 

(iii)           The Company may at its option substitute for a share of Common Stock issuable upon the exercise of Rights in accordance with the foregoing subparagraph (ii) such number or fractions of shares of Preferred Stock having an aggregate current market value equal to the Current Per Share Market Price of a share of Common Stock. In the event that there shall be an insufficient number of shares of Common Stock authorized but unissued (and unreserved) to permit the exercise in full of the Rights in accordance with the foregoing subparagraph (ii), the Board shall, with respect to such deficiency, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party (A) determine the excess of (x) the value of the shares of Common Stock issuable upon the exercise of a Right in accordance with the foregoing subparagraph (ii) (the “Current Value”) over (y) the then current Purchase Price multiplied by the number of one one−thousandths of shares of Preferred Stock for which a Right was exercisable immediately prior to the time that the Acquiring Person became such (such excess, the “Spread”), and (B) with respect to each Right (other than Rights which have become null and void pursuant to Section 11(a)(ii)), make adequate provision to substitute for the shares of Common Stock issuable in accordance with subparagraph (ii) upon exercise of the Right and payment of the applicable Purchase Price, (1) cash, (2) a reduction in such Purchase Price, (3) shares of Preferred Stock or other equity securities of the Company (including, without limitation, shares or fractions of shares of Preferred Stock) which, by virtue of having dividend, voting and liquidation rights substantially comparable to those of the shares of Common Stock, are deemed in good faith by the Board to have substantially the same value as the shares of Common Stock (such shares of preferred stock and shares or fractions of shares of preferred stock are hereinafter referred to as “Common Stock Equivalents”), (4) debt securities of the Company, (5) other assets or (6) any combination of the foregoing, having a value which, when added to the value of the shares of Common Stock actually issued upon exercise of such Right, shall have an aggregate value equal to the Current Value (less the amount of any reduction in such Purchase Price), where such aggregate value has been determined by the Board (upon the

 

  

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advice of a nationally recognized investment banking firm selected by the Board in good faith); provided, however, if the Company shall not make adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the date that the Acquiring Person became such (the “Section 11(a)(ii) Trigger Date”), then the Company shall be obligated to deliver, to the extent permitted by applicable law and any material agreements then in effect to which the Company is a party, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available), and then, if necessary, such number or fractions of shares of Preferred Stock (to the extent available) and then, if necessary, cash, which shares and/or cash have an aggregate value equal to the Spread. If within the thirty (30) day period referred to above, the Board shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, then, if the Board so elects, such thirty (30) day period may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is hereinafter called the “Substitution Period”). To the extent that the Company determines that some action need be taken pursuant to the second and/or third sentence of this Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this Section 11(a)(iii) hereof, that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to such second sentence and to determine the value thereof. In the event of 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.

 

(b)           If the Company fixes a record date for the issuance of rights, options or warrants to all holders of shares of Preferred Stock entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase shares of Preferred Stock (or securities having equivalent rights, privileges and preferences as the shares of Preferred Stock (for purposes of this Section 11(b), “Equivalent Preferred Stock”)) or securities convertible into shares of Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into shares of Preferred Stock or Equivalent Preferred Stock) less than the Current Per Share Market Price of the shares of Preferred Stock (determined pursuant to Section 11(d)) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which is the number of shares of Preferred Stock outstanding on such record date plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Per Share Market Price and the denominator of which is the number of shares of Preferred Stock outstanding on such record date plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however, that in no event shall the consideration to be paid upon the exercise of one (1) Right be

 

  

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less than the aggregate par value of the shares of capital stock issuable upon exercise of one (1) Right. In case such subscription price may be paid in a consideration part or all of which is in a form other than cash, the value of such consideration shall be as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent and which shall be binding on the Rights Agreement. Shares of Preferred Stock 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, and in the event that such rights, options or warrants are not so issued, the Purchase Price shall be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

(c)           If the Company fixes a record date for the making of a distribution to all holders of shares of Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness, cash (other than a regular periodic cash dividend), assets, stock (other than a dividend payable in shares of Preferred Stock) or subscription rights, options or warrants (excluding those referred to in Section 11(b)), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which is the Current Per Share Market Price of the shares of Preferred Stock (as determined pursuant to Section 11(d)) on such record date or, if earlier, the date on which shares of Preferred Stock begin to trade on an ex−dividend or when issued basis for such distribution, less the fair market value (as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent) of the portion of the evidences of indebtedness, cash, assets or stock so to be distributed or of such subscription rights, options or warrants applicable to one share of Preferred Stock, and the denominator of which is such Current Per Share Market Price of the shares of Preferred Stock; provided, however, that in no event shall the consideration to be paid upon the exercise of one (1) Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon exercise of one (1) Right. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

 

(d)           (i)           For the purpose of any computation hereunder, the “Current Per Share Market Price” of any security (a “Security” for purposes of this Section 11(d)(i) only) on any date shall be deemed to be the average of the daily closing prices per share of a share of the Common Stock for the thirty (30) consecutive Trading Days immediately prior to, but not including, such date; provided, however, that in the event that the Current Per Share Market Price of the Security is determined during a period following the announcement by the issuer of such Security of (A) a dividend or distribution on such Security payable in shares of such Security or securities convertible into such shares (other than the Rights) or (B) any subdivision, combination or reclassification of such Security, and prior to, but not including, the expiration of thirty (30) Trading Days after, but not including, the ex−dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Current Per Share Market Price shall be appropriately adjusted to take into account ex−dividend trading or to reflect the current per share market price per share equivalent of such Security. The closing price for each day shall be the last sale price, regular way, or, in

 

  

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case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Security is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over−the−counter market, as reported by Nasdaq or such other system then in use, or, if on any such date Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board. If the Security is not publicly held or not so listed or traded, or is not the subject of available bid and asked quotes, the Current Per Share Market Price of such Security shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent.

 

(ii)           For the purpose of any computation hereunder, the “Current Per Share Market Price” of shares of the Preferred Stock shall be determined in accordance with the method set forth above in Section 11(d)(i) other than the last sentence thereof.  If the Current Per Share Market Price of Preferred Stock cannot be determined in the manner provided above, it shall be conclusively deemed to be an amount equal to the current per share market price of the shares of Common Stock multiplied by one thousand (as such number may be appropriately adjusted to reflect events such as stock splits, stock dividends, recapitalizations or similar transactions relating to the shares of Common Stock occurring after the date of this Agreement). If neither the Common Stock nor the Preferred Stock are publicly held or so listed or traded, or the subject of available bid and asked quotes, “Current Per Share Market Price” of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent. For all purposes of this Agreement, the current per share market price of one one−thousandth of a Preferred Share will be equal to the current per share market price of one Preferred Share divided by one thousand.

 

(e)           Except as set forth below, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 11(e) are not required to be made 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 one−hundreth of a share of Preferred Stock or one one−hundreth of a share of Common Stock or other security, as the case may be. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three (3) years from the date of the transaction which requires such adjustment and (ii) the Expiration Date.

 

(f)           If as a result of an adjustment made pursuant to Section 11(a), the holder of any Right thereafter exercised becomes entitled to receive any securities of the Company other than shares of Preferred Stock, thereafter the number and/or kind of such other securities so receivable upon exercise of any Right (and/or the Purchase Price in respect thereof) shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as

 

  

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practicable to the provisions with respect to the shares of Preferred Stock (and the Purchase Price in respect thereof) contained in this Section 11, and the provisions of Sections 7, 9, 10, 12 and 13 with respect to the shares of Preferred Stock (and the Purchase Price in respect thereof) shall apply on like terms to any such other securities (and the Purchase Price in respect thereof).

 

(g)           All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one−thousandths of a share of Preferred Stock issuable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

 

(h)           Unless the Company has exercised its election as provided in Section 11(i), upon each adjustment of the Purchase Price pursuant to Section 11(b) or Section 11(c), each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one−thousandths of a share of Preferred Stock (calculated to the nearest one one−hundreth of a share of Preferred Stock) obtained by (i) multiplying (x) the number of one one−hundreth of a share of Preferred Stock issuable upon exercise of a Right immediately prior to such adjustment of the Purchase Price by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

 

(i)           The Company may elect, on or after the date of any adjustment of the Purchase Price, to adjust the number of Rights in substitution for any adjustment in the number of one one−thousandths of a share of Preferred Stock issuable upon the exercise of a Right.  Each of the unexercised Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one−thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each unexercised Right held of record prior to such adjustment of the number of unexercised Rights shall become that number of Rights (calculated to the nearest one one−hundreth) 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 Company shall also, as promptly as practicable, notify the Rights Agent in writing of same pursuant to Section 9(e) hereof and give the Rights Agent a copy of such announcement. Such record date may be the date on which the Purchase Price is adjusted or any day thereafter, but if the Rights Certificates have been issued, such record date shall be at least ten (10) calendar days later than the date of the public announcement. If Rights Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i), the Company shall, as promptly as practicable, cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing, subject to the provision of Section 13, the additional Rights to which such holders are entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior to the date of adjustment, and upon surrender thereof if required by the Company, new Rights Certificates evidencing all the Rights to which such holders are entitled after such adjustment. Rights Certificates so to be distributed shall be issued, executed, and countersigned in the manner provided for herein (and

 

  

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may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Rights Certificates on the record date specified in the public announcement.

 

(j)           Without respect to any adjustment or change in the Purchase Price and/or the number and/or kind of securities issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price and the number and kind of securities which were expressed in the initial Rights Certificate issued hereunder.

 

(k)           Before taking any action that would cause an adjustment reducing the Purchase Price below one one−thousandth of the then par value, if any, of the shares of Preferred Stock or below the then par value, if any, of any other securities of the Company issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Preferred Stock or such other securities, as the case may be, at such adjusted Purchase Price.

 

(l)           In any case in which this Section 11 otherwise requires that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer (with prompt written notice thereof to the Rights Agent) until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one−thousandths of a share of Preferred Stock or other securities of the Company, if any, issuable upon such exercise over and above the number of one one−thousandths of a share of Preferred Stock or other securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company delivers to such holder a due bill or other appropriate instrument evidencing such holder’s right to receive such additional shares of Preferred Stock or other securities upon the occurrence of the event requiring such adjustment.

 

(m)           Notwithstanding anything in this Agreement to the contrary, 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 in its judgment the Board determines to be necessary or advisable in order that any (i) consolidation or subdivision of the shares of Preferred Stock, (ii) issuance wholly for cash of shares of Preferred Stock at less than the Current Per Share Market Price therefor, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its shares of Preferred Stock is not reasonably expected to be taxable to such stockholders.

 

(n)           Notwithstanding anything in this Agreement to the contrary, in the event that the Company at any time after the Record Date and prior to the Distribution Date (i) pays a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or

 

  

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surviving corporation), the number of Rights associated with each share of Common Stock then outstanding, or issued or delivered thereafter but prior to the Distribution Date, shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following any such event equals the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately prior to such event by a fraction the numerator of which is the total number of shares of Common Stock outstanding immediately prior to the occurrence of the event and the denominator of which is the total number of shares of Common Stock outstanding immediately following the occurrence of such event.  The adjustments provided for in this Section 11(n) shall be made successively whenever such a dividend is paid or such a subdivision, combination or reclassification is effected.

 

	
Section 12

	
Certificate of Adjusted Purchase Price or Number of Shares

 

Whenever an adjustment is made or any event affecting the Rights or their exercisability (including, without limitation, an event which causes Rights to become null and void) occurs as provided in Section 11, the Company shall promptly (a) prepare a certificate setting forth such adjustment and a brief, reasonably detailed statement of the facts and calculations accounting for such adjustment or describing such event, (b) file with the Rights Agent, and with each transfer agent for the shares of Preferred Stock and the shares of Common Stock, a copy of such certificate, and (c) mail a brief summary thereof to each holder of a Rights Certificate (or if prior to the Distribution Date, to each holder of a certificate representing shares of Common Stock or Book Entry shares in respect thereof) in accordance with Section 24 and Section 25 hereof. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment or statement therein contained and shall have no duty or liability with respect to, and shall not be deemed to have knowledge of, any such adjustment or any such events unless and until it shall have received such a certificate.

 

	
Section 13

	
Fractional Rights and Fractional Shares

 

(a)           The Company shall not be required to issue fractions of Rights or to distribute Rights Certificates which evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay to the registered holders of the Rights Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of one Right. For purposes of this Section 13(a), the current market value of one Right is the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price for any Trading Day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Rights are not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over−the−counter market, as reported by the Nasdaq or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional

 

  

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market maker making a market in the Rights, such market maker to be selected by the Board. If the Rights are not publicly held or are not so listed or traded, or are not the subject of available bid and asked quotes, the current market value of one Right shall mean the fair value thereof as determined in good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent.

 

(b)           The Company shall not be required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one−thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one−thousandth of a share of Preferred Stock). Fractions of Preferred Stock in integral multiples of one one−thousandth of such Preferred Stock may, in the sole discretion of the Company, be evidenced by depositary receipts pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement provides that the holders of such depositary receipts have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Stock represented by such depositary receipts. In lieu of fractional shares of Preferred Stock that are not integral multiples of one one−thousandth of a share of Preferred Stock, the Company may pay to the registered holders of Rights Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one one−thousandth of a share of Preferred Stock. For purposes of this Section 13(b), the current market value of one one−thousandth of a share of Preferred Stock shall be one one−thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise; provided, however, that if the closing price of the shares of the Preferred Stock cannot be so determined, the closing price of the shares of the Preferred Stock for such Trading Day shall be conclusively deemed to be an amount equal to the closing price of the shares of Common Stock shares for such Trading Day multiplied by one thousand (as such number may be appropriately adjusted to reflect events such as stock splits, stock dividends, recapitalizations or similar transactions relating to the Common Stock shares occurring after the date of this Agreement).

 

(c)           Following the occurrence of any Person becoming an Acquiring Person, the Company shall not be required to issue fractions of shares of Common Stock upon exercise or exchange of the Rights or to distribute certificates which evidence fractional shares of Common Stock. In lieu of issuing any such fractional securities, the Company may pay to any Person to whom or which such fractional securities would otherwise be issuable an amount in cash equal to the same fraction of the current market value of one such security. For purposes of this Section 13(c), the current market value of one (1) share of Common Stock, or other security issuable upon the exercise or exchange of Rights shall be the closing price thereof (as determined pursuant to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise or exchange.

 

(d)           The holder of a Right by the acceptance of the Rights expressly waives his right to receive any fractional Rights or any fractional shares upon exercise of a Right, except as permitted by this Section 13.

 

  

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(e)           Whenever a payment for fractional Rights or fractional shares is to be made by the Rights Agent, the Company shall (i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to such payments and the prices and/or formulas utilized in calculating such payments, and (ii) provide sufficient monies to the Rights Agent in the form of fully collected funds to make such payments.  The Rights Agent shall be fully protected in relying upon such a certificate and shall have no duty with respect to, and shall not be deemed to have knowledge of any payment for fractional Rights or fractional shares under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights Agent shall have received such a certificate and sufficient monies.

 

	
Section 14

	
Rights of Action

 

(a)           All rights of action in respect of this Agreement, excepting the rights of action given to the Rights Agent hereunder, are vested in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of shares of Common Stock); and any registered holder of any Rights Certificate (or, prior to the Distribution Date, of the shares of Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate (or, prior to the Distribution Date, of the shares of Common Stock), may, in his own behalf and for his own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his right to exercise the Rights evidenced by such Rights Certificate in the manner provided in such Rights Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and shall be entitled to specific performance of the obligations hereunder and injunctive relief against actual or threatened violations of the obligations hereunder of any Person subject to this Agreement.

 

(b)           Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, judgment, decree or ruling (whether interlocutory or final) issued by a court of competent jurisdiction or by a governmental regulatory, self−regulatory or administrative agency or commission, or any statute, rule, regulation, or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of such obligation; provided, however that the Company shall use commercially reasonable efforts to have any such injunction, order, judgment, decree or ruling lifted or otherwise overturned as soon as possible.

 

	
Section 15

	
Agreement of Rights Holders

 

Every holder of a Right, by acceptance of the Right, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

 

(a)           prior to the Distribution Date, the Rights shall be transferable only in connection with the transfer of shares of Common Stock;

 

  

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(b)           after the Distribution Date, the Rights Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or offices of the Rights Agent designated for such purposes, duly endorsed and accompanied by a properly executed instrument of transfer with the appropriate forms and certificates fully executed;

 

(c)           the Company and the Rights Agent may deem and treat the Person in whose name a Rights Certificate (or, prior to the Distribution Date, the associated Common Stock share certificate (or Book Entry shares in respect of Common Stock)) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights Certificates or the associated Common Stock share certificate (or notices provided to holders of Book Entry shares of Common Stock) 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; and

 

(d)           such holder expressly waives any right to receive any fractional Rights and any fractional securities upon exercise or exchange of a Right, except as otherwise provided in Section 13.

 

	
Section 16

	
Rights Certificate Holder Not Deemed a Stockholder

 

No holder, of any Rights Certificate, by means of such possession, shall be entitled to vote, receive dividends or be deemed for any purpose the holder of the number of one one−thousandths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of any Rights Certificate, by means of such possession, any of the rights of a stockholder of the Company including any right to vote on any matter submitted to stockholders at any meeting thereof, including the election of directors, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 24 hereof), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by such Rights Certificate have been exercised in accordance with the provisions of this Agreement.

 

	
Section 17

	
Concerning the Rights Agent

 

(a)           The Company agrees to pay to the Rights Agent reasonable compensation for all services rendered by it hereunder, and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and disbursements and other disbursements incurred in the preparation, negotiation, delivery, amendment, 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, damage, judgment, fine, penalty, claim, demand, settlement, cost or expense (including, without limitation, the reasonable fees and expenses of legal counsel), incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent (which gross negligence, bad faith or willful misconduct must be determined by a final, non−appealable order, judgment, decree or ruling of a court of competent jurisdiction), for any action taken, suffered or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement and the performance of its

 

  

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duties and responsibilities and the exercise of its rights hereunder, including the costs and expenses of defending against any claim of liability arising therefrom, directly or indirectly. The costs and expenses of enforcing this right of indemnification shall also be paid by the Company. The provisions of this Section 17 and Section 19 below shall survive the exercise, exchange, redemption or expiration of the Rights, the resignation, replacement or removal of the Rights Agent and the termination of this Agreement.

 

(b)           The Rights Agent shall be authorized and may conclusively rely on, and will be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with, its acceptance or administration of this Agreement and the exercise and performance of its duties and responsibilities and the exercise of its rights hereunder, in reliance upon any Rights Certificate or certificate evidencing shares of Preferred Stock, Common Stock or other securities of the Company, or any instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, statement, or other paper or document believed by it to be genuine and to be signed, executed and, where necessary, verified or acknowledged, by the proper Person or Persons, or otherwise upon the advice of counsel as set forth in Section 19.  The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take any action in connection therewith unless and until it has received such notice.

 

(c)           Notwithstanding anything in this Agreement to the contrary, in no event will the Rights Agent be liable for special, punitive, indirect, incidental or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

	
Section 18

	
Merger, Consolidation or Change of Name of Rights Agent

 

(a)           Any Person into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any Person succeeding to the shareholder services business of the Rights Agent or any successor Rights Agent, will be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided that such Person would be eligible for appointment as a successor Rights Agent under the provisions of Section 20 hereof. If at the time such successor Rights Agent shall succeed to the agency created by this Agreement any of the Rights Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of a predecessor Rights Agent and deliver such Rights Certificates so countersigned; and if at that time any of the Rights Certificates shall not have been countersigned, any successor Rights Agent may countersign such Rights Certificates either in the name of the predecessor or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

(b)           If at any time the name of the Rights Agent changes and at such time any of the Rights Certificates have been countersigned but not delivered, the Rights Agent may adopt the

 

  

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countersignature under its prior name and deliver Rights Certificates so countersigned; and if at that time any of the Rights Certificates have been countersigned, the Rights Agent may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement.

 

	
Section 19

	
Duties of Rights Agent

 

The Rights Agent undertakes to perform the duties and obligations expressly imposed by this Agreement (and no implied duties) upon the following terms and conditions, by all of which the Company and the holders of Rights Certificates, by their acceptance thereof, shall be bound:

 

(a)           The Rights Agent may consult with legal counsel (who may be legal counsel for the Company or an employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it in accordance with the content of such advice or opinion.

 

(b)           Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of the Current Per Share Market Price) be proved or established by the Company prior to taking, suffering or omitting to take any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by any Authorized Officer and delivered to the Rights Agent; and such certificate, pursuant to its terms, shall be full and complete authorization and protection to the Rights Agent and the Rights Agent shall incur no liability for or in respect of any action taken, suffered or omitted by it under the provisions of this Agreement in reliance upon such certificate.

 

(c)           The Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith or willful misconduct (which gross negligence, bad faith or willful misconduct must be determined by a final, non−appealable order, judgment, decree or ruling of a court of competent jurisdiction).  Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the Company to the Rights Agent.

 

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

 

(e)           The Rights Agent will have no liability for or be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate; nor shall it be responsible for any adjustment required under the provisions of

 

  

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Sections 3, 11, 12, 22 or 23 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such change or adjustment (except with respect to the exercise of Rights evidenced by Rights Certificates after receipt of the certificate described in Section 12 hereof, upon which the Rights Agent may rely); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred Stock shall, when so issued, be validly authorized and issued, fully paid and nonassessable.

 

(f)           The Company agrees that it shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

 

(g)           The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties and the exercise of the rights hereunder from any person reasonably believed by the Rights Agent to be one of the Authorized Officers, and to apply to such Authorized Officers for advice or instructions in connection with its duties, and such instructions shall be full authorization and protection to the Rights Agent and the Rights Agent shall not be liable for or in respect of any action taken, suffered or omitted by it in accordance with instructions of any such Authorized Officer or for any delay in acting while waiting for those instructions. The Rights Agent shall be fully authorized and protected in relying upon the most recent instructions received by any such Authorized Officer.  Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed to be taken, suffered or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken or suffered or such omission shall be effective. The Rights Agent shall not be liable for any action taken or suffered by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five Business Days after the date any Authorized Officer of the Company actually receives such application, unless any such Authorized 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.

 

(h)           The Rights Agent and any stockholder, affiliate, 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 the Rights Agent were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent or any such stockholder, affiliate, director, officer or employee from acting in any other capacity for the Company or for any other Person.

 

(i)           The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself (through its directors, officers or employees) or by or through its attorneys or agents, and the Rights Agent shall not be answerable

 

  

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or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct in the selection and continued employment thereof (which gross negligence, bad faith or willful misconduct must be determined by a final, non−appealable order, judgment, decree or ruling of a court of competent jurisdiction).

 

(j)           If, with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, the certificate contained in the form of assignment or the form of election to purchase set forth on the reverse thereof, as the case may be, has either not been completed to certify the holder is not an Acquiring Person (or an Affiliate or Associate thereof) or a transferee thereof, or indicates an affirmative response to clause 1 or 2 thereof, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

 

(k)           No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if it believes that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

 

(l)           The Rights Agent will not be required to take notice or be deemed to have notice of any fact, event or determination (including, without limitation, any dates or events defined in this Agreement or the designation of any Person as an Acquiring Person, Affiliate or Associate) under this Agreement unless and until the Rights Agent is specifically notified in writing by the Company of such fact, event or determination.

 

(m)           The provisions of this Section 19 shall survive the exercise, exchange, redemption or expiration of the Rights, the resignation, replacement or removal of the Rights Agent and the termination of this Agreement.

 

	
Section 20

	
Change of Rights Agent

 

The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days’ written notice mailed to the Company, and to each transfer agent of the shares of Common Stock and Preferred Stock known to the Rights Agent, respectively, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the registered holders of the Rights Certificates by first−class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) days’ written notice, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the shares of Common Stock and the Preferred Stock, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the holders of the Rights Certificates by first−class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall, in its sole discretion, appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for

 

  

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inspection by the Company), then any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized and doing business under the laws of the United States or of the State of New York or of any other state of the United States, in good standing, which is authorized under such laws to exercise corporate trust, stock transfer or shareholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a Person described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the shares of Common Stock and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to give any notice provided for in this Section 20, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.

 

	
Section 21

	
Issuance of New Rights Certificates

 

Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares or other securities or property purchasable under the Rights Certificates made in accordance with the provisions of this Agreement. In addition, in connection with the issuance or sale by the Company of shares of Common Stock following the Distribution Date and prior to the Expiration Date, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise, exchange or conversion of securities (other than Rights) issued prior to the Distribution Date which are exercisable or exchangeable for, or convertible into, shares of Common Stock and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing the appropriate number of Rights as would have been issued in respect of such shares of Common Stock if they had been issued or sold prior to the Distribution Date, as appropriately adjusted as provided herein as if they had been so issued or sold; provided, however, that (i) no such Rights Certificate shall be issued if, and to the extent that, in its good faith judgment the Board determines that the issuance of such Rights Certificate could have a material adverse tax consequence to the Company or to the Person to whom or which such Rights Certificate otherwise would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

 

	
Section 22

	
Redemption

 

(a)           The Board may, at any time prior to such time as any Person first becomes an Acquiring Person, redeem all but not less than all the then−outstanding Rights at the Redemption

 

  

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Price. The redemption 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. The Company may, at its option, pay the Redemption Price in cash, securities or any other form of consideration deemed appropriate by the Board.

 

(b)           Immediately upon the effectiveness of the redemption of the Rights, and without any further action and without any notice, the right to exercise the Rights shall terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price for each Right so held without interest thereon. Promptly after the effectiveness of the redemption of the Rights, the Company shall give written notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all such holders at each holder’s last address as it appears upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the shares of Common Stock; provided however, that the failure to give, or any defect in, any such notice will not affect the validity of the Redemption of the Rights.  Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption shall state the method by which the payment of the Redemption Price shall be made.

 

(c)           In the case of a redemption under Section 23(a) hereof, the Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent of the Common Stock, and upon such action, all outstanding Right Certificates shall be void without any further action by the Company.

 

	
Section 23

	
Exchange

 

(a)           The Board may, at its option, at any time after any Person first becomes an Acquiring Person, exchange all or part of the then outstanding and exercisable Rights (which shall not include Rights that have not become effective or that have become null and void pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Common Stock at an exchange ratio of one (1) share of Common Stock (or one−thousandth of a share of Preferred Stock) per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such amount per Right being hereinafter referred to as the “Exchange Ratio”).  The exchange of the Rights by the Board may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.  Prior to effecting an exchange pursuant to this Section 23, the Board may direct the Company to enter into a Trust Agreement in such form and with such terms as the Board shall then approve (the “Trust Agreement”).  If the Board so directs, the Company shall enter into the Trust Agreement and shall issue to the trust created by such agreement (the “Trust”) all of the shares of Common Stock issuable pursuant to the exchange, and all Persons entitled to receive shares pursuant to the exchange shall be entitled to receive such shares (and any dividends or distributions made thereon after the date on which such shares are deposited in the Trust) only from the Trust and solely upon compliance with the relevant terms and provisions of the Trust Agreement.

 

  

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(b)           Immediately upon the effectiveness of the action of the Board ordering the exchange of any Rights pursuant to subsection (a) of this Section 23 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 shares of Common Stock 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 (with prompt written notice thereof to the Rights Agent); provided, however, that the failure to give, or any defect in, such notice shall not affect the legality or validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of the holders of the Rights so exchanged at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock, for Rights shall be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become null and void pursuant to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.

 

(c)           The Company may at its option substitute and, in the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued (and unreserved) to permit an exchange of Rights as contemplated in accordance with this Section 23, the Company shall substitute to the extent of such insufficiency, for each share of Common Stock that would otherwise be issuable upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof (or equivalent preferred shares as such term is defined in Section 11(b)) such that the Current Per Share Market Price of one share of Preferred Stock (or equivalent preferred share) multiplied by such number or fraction is equal to the Current Per Share Market Price as of the date of such exchange.

 

	
Section 24

	
Notice of Certain Events

 

(a)           If the Company proposes to (i) pay any dividend payable in stock of any class to the holders of shares of Preferred Stock or to make any other distribution to the holders of shares of Preferred Stock (other than a regular periodic cash dividend), (ii) offer to the holders of shares of Preferred Stock rights, options, warrants or any similar instrument to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, (iii) effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock), (iv) effect any consolidation or merger into or with any other Person or the sale or other transfer of assets or earning power aggregating more than 50% of the assets or earning power of the Company and its Subsidiaries taken as a whole, (v) to effect the liquidation, dissolution or winding up of the Company or (vi) declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or to effect a subdivision, combination or reclassification of the Common Stock then, in each such case, the Company shall give to the Rights Agent and, to the extent possible, to each holder of a Rights Certificate, in accordance with Section 25 hereof, a notice of such proposed action, which shall specify the record date for the purposes of such stock dividend, distribution or offering of rights, warrants, options or any similar instrument or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of

 

  

33

  

the shares of Preferred Stock, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (i) or (ii) above at least ten (10) days prior to the record date for determining holders of the shares of Common Stock and/or Preferred Stock for purposes of such action, and in the case of any such other action covered by clause (i) or (ii) above at least ten (10) days prior to the date of such proposed action or the date of participation therein by the holders of the shares of Preferred Stock, whichever is the earlier.

 

(b)           If a Stock Acquisition Date occurs, then the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a Rights Certificate, to the extent feasible and in accordance with Section 25 hereof, a notice of the occurrence of such event, which shall specify the event and the consequences of the event to holders of Rights.

 

	
Section 25

	
Notices

 

(a)           Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to or on the Company shall be sufficiently given or made (a) immediately, if made by personal delivery to the party to be notified, (b) on the fifth (5th) day if sent by first−class mail, postage prepaid, (c) the next Business Day if by nationally recognized overnight courier or (d) upon confirmation, if transmission by facsimile combined with a phone call to the Company notifying it of such transmission, all addressed (until another address is filed in writing by the Company with the Rights Agent) as follows:

 

Abraxas Petroleum Corporation

18803 Meisner Drive

San Antonio, Texas  78258

 

Attention:  Barbara M. Stuckey

Facsimile:  (210) 918-6675

Phone:  (210) 490-4788

With a copy to:

Jackson Walker L.L.P.

112 East Pecan Street

Suite 2400

San Antonio, Texas  78205

 

Attention:  Steven R. Jacobs

Facsimile:  (210) 242-4640

Phone:  (210) 978-7700

 

(b)           Subject to the provisions of Section 20, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made (a) immediately, if made by personal delivery to the party to be notified, (b) on the fifth (5th) day if sent by first−class mail, postage prepaid, (c) the next Business Day if by nationally recognized overnight courier or (d) upon confirmation, if transmission by facsimile combined with a phone call to the Rights Agent

 

  

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notifying it of such transmission, all addressed (until another address is filed in writing by the Rights Agent with the Company) as follows:

 

American Stock Transfer & Trust Company, LLC

6201 15th Avenue

Brooklyn, NY 11219

Attention:  Shareholder Services Department

Facsimile:  (718) 236-2641

(c)           Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate (or, if prior to the Distribution Date, to the holder of certificates representing shares of Common Stock) shall be sufficiently given or made if sent by first−class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

 

	
Section 26

	
Supplements and Amendments

 

Subject to this Section 26, prior to the Distribution Date, the Company may in its sole and absolute discretion, and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement in any respect without the approval of any holders of Rights, any such supplement or amendment to be evidenced by writing signed by the Company and the Rights Agent. From and after the time at which the Rights cease to be redeemable pursuant to Section 22, except as otherwise provided in this Section 26, the Company may and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) to amend or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable, any such supplement or amendment to be evidenced by writing signed by the Company and the Rights Agent; provided, however, that no such supplement or amendment shall adversely affect the interests of the holders of Rights (other than an Acquiring Person or any Affiliate or Associate of an Acquiring Person), and no such amendment may cause the Rights again to become redeemable or cause this Rights Agreement again to become amendable other than in accordance with this sentence. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything contained herein to the contrary, the Rights Agent shall not be obligated to enter into any supplement or amendment that affects the Rights Agent’s own rights, duties, obligations or immunities under this Agreement.

 

	
Section 27

	
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.

 

  

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Section 28                      Determinations and Actions by the Board

 

(a)           For all purposes of this Agreement, any calculation of the number of shares of Common Stock or any other class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d−3(d)(1)(i) of the General Rules and Regulations under the Exchange Act or the provisions of Section 382 of the Code or any successor or replacement provision.

 

(b)           The Board shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations and calculations deemed necessary or advisable for the administration of this Agreement (including without limitation a determination to redeem or not redeem the Rights or amend this Agreement).

 

(c)           All such actions, calculations, interpretations and determinations (including, for purposes of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Rights and all other parties, and (y) not subject the Board, or any of the directors on the Board to any liability to the holders of the Rights. Unless otherwise notified, the Rights Agent shall always be entitled to assume that the Board acted in good faith and the Rights Agent shall be fully protected and shall incur no liability in reliance thereon.

 

	
Section 29

	
Process to Seek Exemption

 

Any person who desires to effect any acquisition of Common Stock that would, if consummated, result in such Person (together with its Affiliates and Associates) beneficially owning 4.9% or more of the then-outstanding Common Stock (or, in the case of an Exempt Person, additional shares of Common Stock representing .5% or more of the then-outstanding Common Stock) (a “Requesting Person”) may, prior to the Stock Acquisition Date and in accordance with this Section 29, request that the Board grant an exemption with respect to such acquisition under this Agreement so that such acquisition would be deemed to be an “Exempt Transaction” for purposes of this Agreement (an “Exemption Request”).  An Exemption Request shall be in proper form and shall be delivered by registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company.  To be in proper form, an Exemption Request shall set forth (i) the name and address of the Requesting Person, (ii)  the number and percentage of shares of Common Stock then beneficially owned by the Requesting Person, together with all Affiliates and Associates of the Requesting Person, and (iii) a reasonably detailed description of the transaction or transactions by which the Requesting Person would propose to acquire Beneficial Ownership of Common Stock aggregating 4.9% or more of the then outstanding Common Stock (or, in the case of an Exempt Person, additional shares of Common Stock representing .5% or more of the then-outstanding Common Stock) and the maximum number and percentage of shares of Common Stock that the Requesting Person proposes to acquire.  The Board shall make a determination whether to grant the exemption in response to an Exemption Request as promptly as practicable (and, in any event, within ten (10)

 

  

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Business Days) after receipt thereof; provided, that the failure of the Board to make a determination within such period shall be deemed to constitute the denial by the Board of the Exemption Request.  The Board shall only grant an exemption in response to an Exemption Request if the Board determines in its sole discretion that the acquisition of Beneficial Ownership of Common Stock by the Requesting Person will not jeopardize or endanger the availability to the Company of the NOLs.  Any exemption granted hereunder may be granted in whole or in part, and may be subject to limitations or conditions (including a requirement that the Requesting Person agree that it will not acquire Beneficial Ownership of shares of Common Stock in excess of the maximum number and percentage of shares approved by the Board), in each case as and to the extent the Board shall determine necessary or desirable to provide for the protection of the Company NOLs.  Any Exemption Request may be submitted on a confidential basis and, except to the extent required by applicable law, the Company shall maintain the confidentiality of such Exemption Request and the Board’s determination with respect thereto.

 

	
Section 30

	
Benefits of this Agreement

 

Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Common Stock) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, registered holders of shares of Common Stock).

 

	
Section 31

	
Severability

 

If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, null and 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 nothing contained in this Section 30 will affect the ability of the Company under the provisions of Section 26 to supplement or amend this Agreement to replace such invalid, null and void or unenforceable term, provision, covenant or restriction with a legal, valid and enforceable term, provision, covenant or restriction ; and provided, further, that if any such excluded term, provision, covenant or restriction shall materially adversely affect the rights, immunities, duties or obligations of the Rights Agent, the Rights Agent shall be entitled to resign upon five (5) Business Days’ prior written notice to the Company.

 

	
Section 32

	
Governing Law

 

This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York 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.

 

	
Section 33

	
Counterparts

 

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.  In the

 

  

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event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

	
Section 34

	
Descriptive Headings; Interpretation

 

(a)           Descriptive headings of the several sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

 

(b)           The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not any particular provision of this Agreement.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.  All Exhibits and Schedules annexed hereto or referred to herein are herby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalization terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.   Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.   Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any agreement or contract are to the agreement or contact as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule.  References to any Person include the successors and permitted assigns of that Person.  References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.  References to any statute, rules or regulations shall be deemed to refer to such statute, rules or regulations as amended from time to time and to any successors thereto.

 

 [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the day and year first above written.

 

ABRAXAS PETROLEUM CORPORATION

By:   /s/ Robert L.G. Watson    

Robert L.G. Watson

Chairman of the Board, Chief Executive Officer and President

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent

By: /s/Herbert Lemmer               

Name: Herbert Lemmer

Its: General Counsel, Vice President

Signature page to Rights Agreement

 

  

  

  

Exhibit A

 

CERTIFICATE OF DESIGNATION

 

OF

 

SERIES 2010 JUNIOR PARTICIPATING PREFERRED STOCK

 

OF

 

ABRAXAS PETROLEUM CORPORATION

 

(Pursuant to Chapter 78, Section 1955 of the Nevada Revised Statutes)

 

Abraxas Petroleum Corporation. (hereinafter called the “Company”), a Nevada corporation, does hereby certify:

 

1.           The name of the Company is Abraxas Petroleum Corporation.

 

2.           The Board of Directors of the Company adopted the following resolutions creating a “Series 2010 Junior Participating” series of Preferred Stock:

 

RESOLVED:  That a series of the class of authorized Preferred Stock of the Company be and hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows:

 

SERIES 2010 JUNIOR PARTICIPATING PREFERRED STOCK

 

	
Section 1

	
Designation and Amount.

 

The shares of such series will be designated as Series 2010 Junior Participating Preferred Stock (the “Series 2010 Preferred”) and the number of shares constituting the Series 2010 Preferred is 82,000. Such number of shares may be increased or decreased by resolution of the Board; provided, however, that no decrease will reduce the number of shares of Series 2010 Preferred to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Company and convertible into Series 2010 Preferred.

 

	
Section 2

	
Dividends and Distributions.

 

(a)           Subject to the rights of the holders of any shares of any series of Preferred Stock ranking prior to the Series 2010 Preferred with respect to dividends, the holders of shares of Series 2010 Preferred, in preference to the holders of Common Stock, par value $0.01 per share (the “Common Stock”), of the Company, and of any other junior stock, will be entitled to receive, when, as and if declared by the Board out of funds legally available for the purpose, dividends payable in cash (except as otherwise provided below) on such dates as are from time to time established for the payment of dividends on the Common Stock (each such date being referred to herein as a “Dividend Payment Date”), commencing on the first Dividend Payment Date after the first issuance of a share or fraction of a share of Series 2010 Preferred (the “First

 

Exhibit A - 1

  

  

  

Dividend Payment Date”), in an amount per share (rounded to the nearest cent) equal to, subject to the provision for adjustment hereinafter set forth, the greater of (i) $10.00 and (ii) one thousand (1,000) times the aggregate per share amount of all cash dividends, and one thousand (1,000) times the aggregate per share amount (payable in kind) of all non−cash dividends, other than a dividend payable in shares of Common Stock, or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Dividend Payment Date or, with respect to the First Dividend Payment Date, since the first issuance of any share or fraction of a share of Series 2010 Preferred. In the event that the Company at any time (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series 2010 Preferred are then issued or outstanding, the amount to which holders of shares of Series 2010 Preferred would otherwise be entitled immediately prior to such event will be correspondingly 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 Company will declare a dividend on the Series 2010 Preferred as provided in paragraph (a) of this Section 2 immediately after it declares a dividend on the Common Stock (other than a dividend payable in shares of Common Stock). Each such dividend on the Series 2010 Preferred will be payable immediately prior to the time at which the related dividend on the Common Stock is payable.

 

(c)           Dividends will accrue, and be cumulative, on outstanding shares of Series 2010 Preferred from the Dividend Payment Date next preceding the date of issue of such shares, unless (i) the date of issue of such shares is prior to the record date for the First Dividend Payment Date, in which case dividends on such shares will accrue from the date of the first issuance of a share of Series 2010 Preferred or (ii) the date of issue is a Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series 2010 Preferred entitled to receive a dividend and before such Dividend Payment Date, in either of which events such dividends will accrue, and be cumulative, from such Dividend Payment Date. Accrued but unpaid dividends will cumulate from the applicable Dividend Payment Date but will not bear interest. Dividends paid on the shares of Series 2010 Preferred in an amount less than the total amount of such dividends at the time accrued and payable on such shares will be allocated pro rata on a share−by−share basis among all such shares at the time outstanding. The Board may fix a record date for the determination of holders of shares of Series 2010 Preferred entitled to receive payment of a dividend or distribution declared thereon, which record date will be not more than sixty (60) calendar days prior to the date fixed for the payment thereof.

 

Exhibit A - 2 

  

  

  

Section 3                      Voting Rights.

 

The holders of shares of Series 2010 Preferred shall have the following voting rights:

 

(a)           Subject to the provision for adjustment hereinafter set forth and except as otherwise provided in the Articles of Incorporation or required by law, each share of Series 2010 Preferred shall entitle the holder thereof to 1,000 votes, on all matters upon which the holders of the Common Stock of the Company are entitled to vote. In the event the Company shall at any time after the Record Date 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 2010 Preferred were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

 

(b)           Except as otherwise provided herein, in the Articles of Incorporation or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, and except as otherwise required by law, the holders of shares of Series 2010 Preferred and the holders of shares of Common Stock and any other capital stock of the Company having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Company.

 

(c)           Except as set forth herein, or as otherwise provided by law, holders of Series 2010 Preferred 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

	
Restrictions.

 

(a)           Whenever dividends or other dividends or distributions payable on the Series 2010 Preferred are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series 2010 Preferred outstanding have been paid in full, the Company will not:

 

(i)           Declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) (“Junior Stock”) to the shares of Series 2010 Preferred;

 

(ii)           Declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) (“Parity Stock”) with the shares of Series 2010 Preferred, except dividends paid ratably on the shares of Series 2010 Preferred and all such Parity Stock on which dividends are payable or

 

Exhibit A - 3

  

  

  

in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

 

(iii)           Redeem, purchase or otherwise acquire for consideration shares of any Junior Stock; provided, however, that the Company may at any time redeem, purchase or otherwise acquire shares of any such Junior Stock in exchange for shares of any other Junior Stock of the Company; or

 

(iv)           Redeem, purchase or otherwise acquire for consideration any shares of Series 2010 Preferred, or any shares of Parity Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board) to all holders of such shares upon such terms as the Board, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, may determine in good faith will result in fair and equitable treatment among the respective series or classes.

 

(b)           The Company will not permit any majority-owned subsidiary of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under paragraph (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

 

	
Section 5

	
Reacquired Shares.

 

Any shares of Series 2010 Preferred purchased or otherwise acquired by the Company in any manner whatsoever will be retired and canceled promptly after the acquisition thereof. All such shares will upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Articles of Incorporation of the Company, or in any other 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 Company, no distribution will be made (a) to the holders of shares of Junior Stock unless, prior thereto, the holders of shares of Series 2010 Preferred have received an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided, however, that the holders of shares of Series 2010 Preferred will be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to a minimum per share liquidation payment of $1,000 but will be entitled to an aggregate per share liquidation payment of 1,000 times the payment made per share of Common Stock or (b) to the holders of shares of Parity Stock, except distributions made ratably on the shares of Series 2010 Preferred and all such Parity Stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Company at any time (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (ii) subdivides the outstanding shares of Common Stock, (iii) combines the outstanding shares of Common Stock into a smaller number of shares or (iv) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any

 

 

  

Exhibit A - 4

  

such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series 2010 Preferred are then issued or outstanding, the aggregate amount to which each holder of shares of Series 2010 Preferred would otherwise be entitled immediately prior to such event will be correspondingly 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 the event that the Company enters into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then, in each such case, each share of Series 2010 Preferred will at the same time be similarly exchanged for or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to one thousand (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 Company at any time (a) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock, (b) subdivides the outstanding shares of Common Stock, (c) combines the outstanding shares of Common Stock in a smaller number of shares or (d) issues any shares of its capital stock in a reclassification of the outstanding shares of Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then, in each such case and regardless of whether any shares of Series 2010 Preferred are then issued or outstanding, the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series 2010 Preferred will be correspondingly 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

	
Redemption.

 

The shares of Series 2010 Preferred are not redeemable.

 

	
Section 9

	
Rank.

 

The Series 2010 Preferred ranks, with respect to the payment of dividends and the distribution of assets, junior to all other series of the Company’s Preferred Stock, unless the terms of such series shall so provide.

 

	
Section 10

	
Fractional Shares.

 

Series 2010 Preferred may be issued in fractions of a share that shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series 2010 Preferred.

 

 

  

Exhibit A - 5

  

Section 11                      Amendment.

 

At any time that any shares of Series 2010 Preferred are outstanding the Articles of Incorporation of the Company shall not be amended, by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the Series 2010 Preferred so as to affect them adversely without the affirmative vote of the holders of two-thirds of the outstanding shares of Series 2010 Preferred, voting separately as a class.

 

FURTHER RESOLVED:  That the statements contained in the foregoing resolutions creating and designating the said Series 2010 Junior Participating Preferred Stock and fixing the number, powers, preferences and relative, optional, participating, and other special rights and the qualifications, limitations, restrictions, and other distinguishing characteristics thereof shall, upon the effective date of said series, be deemed to be included in and be a part of the Articles of Incorporation of the Company pursuant to the provisions of Section 1955 of Chapter 78 of the Nevada Revised Statutes.

 

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Exhibit A - 6

  

 

Exhibit B

 

FORM OF RIGHTS CERTIFICATE

 

Certificate No. R−___________ ___________Rights in respect of Common Stock

 

NOT EXERCISABLE AFTER MARCH ___, 2010 OR EARLIER IF REDEEMED, EXCHANGED OR AMENDED. THE RIGHTS ARE SUBJECT TO REDEMPTION, EXCHANGE AND AMENDMENT AT THE OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS THAT ARE OR WERE BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) OR A TRANSFEREE THEREOF SHALL BECOME NULL AND VOID AND NO LONGER TRANSFERABLE.

 

RIGHTS CERTIFICATE

 

ABRAXAS PETROLEUM CORPORATION

 

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 March 16, 2010, (the “Rights Agreement”), by and between Abraxas Petroleum Corporation, a Nevada corporation (the “Company”), and American Stock Transfer & Trust Company, as Rights Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 p.m. (New York time) on the Expiration Date (as such term is defined in the Rights Agreement) at the office or offices of the Rights Agent designated for such purpose, one one−thousandth of a fully paid nonassessable share of Series 2010 Junior Participating Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company, at a purchase price of $7.00 per one one−thousandth of a Preferred Share (the “Purchase Price”), upon presentation and surrender of this Rights Certificate with the Form of Election to Purchase and related Certificate duly executed. If this Rights Certificate is exercised in part, the holder will be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates for the number of whole Rights not exercised. The number of Rights evidenced by this Rights Certificate (and the number of one one−thousandths of a Preferred Share which may be purchased upon exercise thereof) set forth above, and the Purchase Price set forth above, are the number and Purchase Price as of the date of the Rights Agreement, based on the Preferred Shares as constituted at such date. Terms used herein with initial capital letters and not defined herein are used herein with the meanings ascribed thereto in the Rights Agreement.

 

As provided in the Rights Agreement, the Purchase Price and/or the number and/or kind of Preferred Shares (or other securities, as the case may be) which may be purchased upon the exercise of the Rights evidenced by this Rights Certificate are subject to adjustment upon the occurrence of certain events.

 

This Rights 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

 

 

 

5705655v.4

  

Exhibit B-1

  

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 of the Rights Agent, the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability of the Rights under the circumstances specified in the Rights Agreement. Copies of the Rights Agreement are on file at the principal executive offices of the Company and can be obtained from the Company without charge upon written request therefor.

 

Pursuant to the Rights Agreement, from and after the occurrence of any Person becoming an Acquiring Person, any Rights that are Beneficially Owned by (i) any Acquiring Person (or any Affiliate or Associate of any Acquiring Person), (ii) a transferee of any Acquiring Person (or any such Affiliate or Associate) who becomes a transferee after the occurrence of any Person becoming an Acquiring Person or (iii) a transferee of any Acquiring Person (or any such Affiliate or Associate) who became a transferee prior to or concurrently with any Person becoming an Acquiring Person pursuant to either (a) a transfer from an Acquiring Person to holders of its equity securities or to any Person with whom it has any continuing agreement, arrangement or understanding regarding the transferred Rights or (b) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has the purpose or effect of avoiding certain provisions of the Rights Agreement, and subsequent transferees of any of such Persons, will be null and void without any further action and any holder of such Rights will thereafter have no rights whatsoever with respect to such Rights under any provision of the Rights Agreement. From and after the occurrence of any Person becoming an Acquiring Person, no Rights Certificate will be issued that represents Rights that are or have become null and void pursuant to the provisions of the Rights Agreement, and any Rights Certificate delivered to the Rights Agent that represents Rights that are or have become null and void pursuant to the provisions of the Rights Agreement will be canceled.

 

This Rights Certificate, with or without other Rights Certificates, may be exchanged for another Rights Certificate or Rights Certificates entitling the holder to purchase a like number of one one−thousandths of a Preferred Share (or other securities, as the case may be) as the Rights Certificate or Rights Certificates surrendered entitled such holder (or former holder in the case of a transfer) to purchase, upon presentation and surrender hereof at the office or offices of the Rights Agent designated for such purpose, with the Form of Assignment (if appropriate) and the related Certificate duly executed.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company at its option at a redemption price of $0.01 per Right or may be exchanged in whole or in part. The Rights Agreement may be supplemented and amended by the Company, as provided therein.

 

The Company is not required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one−thousandth of a Preferred Share, which may, at the option of the Company, be evidenced by depositary receipts) or other securities issuable, as the case may be, upon the exercise of any Right or Rights evidenced hereby. In lieu of issuing such fractional Preferred Shares or other Securities, the Company may make a cash payment, as provided in the Rights Agreement.

 

 

5705655v.4

  

Exhibit B-2

  

No holder of this Rights Certificate, as such, will be entitled to vote or receive dividends or be deemed for any purpose the holder of the Preferred Shares or of any other securities of the Company which may at any time be issuable upon the exercise of the Right or Rights represented hereby, nor will anything contained herein or in the Rights Agreement be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any 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 Rights Certificate have been exercised in accordance with the provisions of the Rights Agreement.

 

This Rights Certificate will not be valid or obligatory for any purpose until it has been countersigned by the Rights Agent.

 

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5705655v.4

  

Exhibit B-3

  

WITNESS the facsimile signature of the proper officers of the Company and its corporate seal. Dated as of _______________, 20___.

 

ABRAXAS PETROLEUM CORPORATION

By:                                                                      

Name:                                                                      

Its:                                                                      

Countersigned

AMERICAN STOCK TRANSFER & TRUST COMPANY, LLC, as Rights Agent

By:                                                                      

Name:                                                                      

Its:                                                                      

Signature page to Rights Agreement

 

 

5705655v.4

  

Exhibit B-4

  

Form of Reverse Side of Rights Certificate

 

FORM OF ASSIGNMENT

 

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

 

FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers unto

 

 

_____________________________________________________________________________

 

(Please print name and address of transferee)

 

 

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

 

Dated : __________, __________________

 

 

 

Signature_______________________________

Signature(s) Guaranteed:    _______________________

                                                            

 

SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO SEC RULE 17Ad−15.

 

_________________

 

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

 

 

Signature______________________________

 

5705655v.4

  

Exhibit B-5

  

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1)           the Rights evidenced by this Rights Certificate   are   are not  being sold, assigned, transferred, split up, combined or exchanged by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights Agreement); and

 

(2)           after due inquiry and to the best knowledge of the undersigned, it   did   did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

Dated: _________, ___________________

 

 

Signature_____________________________

 

5705655v.4

  

Exhibit B-6

  

Form of Reverse Side of Rights Certificate – continued

 

FORM OF ELECTION TO PURCHASE

 

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

 

To Abraxas Petroleum Corporation:

 

The undersigned hereby irrevocably elects to exercise ________________ Rights represented by this Rights Certificate to purchase the one ten−thousandths of a Preferred Share or other securities issuable upon the exercise of such Rights and requests that certificates for such securities be issued in the name of and delivered to:

 

Please insert social security or other identifying number: _________________________

 

______________________________________________________________________________

 

(Please print name and address)

 

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

 

Please insert social security or other identifying number: _______________________________

 

______________________________________________________________________________

 

(Please print name and address)

 

Dated: ___________, __________________

 

Signature__________________________

Signature(s) Guaranteed:                                                                

 

SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO SEC RULE 17Ad−15.

 

_________________

 

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

 

Signature______________________

 

5705655v.4

  

Exhibit B-7

  

CERTIFICATE

 

The undersigned hereby certifies by checking the appropriate boxes that:

 

(1)           the Rights evidenced by this Rights Certificate   are   are not being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement); and

 

(2)           after due inquiry and to the best knowledge of the undersigned, it   did   did not acquire the Rights evidenced by this Rights Certificate from any Person who is, was, or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

 

Dated: ______________, _____________

 

 

Signature_________________________

 

5705655v.4

  

Exhibit B-8

  

NOTICE

 

The signature in the Form of Assignment or Form of Election to Purchase, as the case may be, must conform to the name as written upon the face of this 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, such Assignment or Election to Purchase will not be honored.

 

 

5705655v.4

  

Exhibit B-9

  

Exhibit C

 

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

 

SUMMARY OF RIGHTS

 

On March 16, 2010, the Board of Directors (the “Board”) of Abraxas Petroleum Corporation, a Nevada corporation (the “Company”), adopted a Tax Benefits Preservation Plan and declared a dividend of one preferred share purchase right (“Rights”) for each outstanding share of common stock.  The dividend is payable to our stockholders of record as of March 16, 2010. The terms of the Rights and the Tax Benefits Preservation Plan are set forth in a Rights Agreement, by and between us and American Stock Transfer & Trust Company, as Rights Agent, dated as of March 16, 2010 (the “Tax Benefits Preservation Plan”).

 

This summary provides only a general description of the Tax Benefits Preservation Plan, and thus, should be read together with the entire Tax Benefits Preservation Plan, which is incorporated into this summary by reference. All capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in the Tax Benefits Preservation Plan. Upon written request, the Company will provide a copy of the Tax Benefits Preservation Plan free of charge to any of its stockholders.

 

Our Board adopted the Tax Benefits Preservation Plan in an effort to protect stockholder value by attempting to protect against a possible limitation on our ability to use our net operating loss carryforwards (the “NOLs”) to reduce potential future federal income tax obligations. We have experienced, and may in the future experience, substantial operating losses, and under the Internal Revenue Code and rules promulgated by the Internal Revenue Service, we may “carry forward” these losses in certain circumstances to offset any current and future earnings and thus reduce our federal income tax liability, subject to certain requirements and restrictions. To the extent that the NOLs do not otherwise become limited, we believe that we will be able to carry forward a significant amount of NOLs, and therefore these NOLs could be a substantial asset to us. However, if we experience an “Ownership Change,” as defined in Section 382 of the Internal Revenue Code, our ability to use the NOLs will be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could therefore significantly impair the value of that asset.

 

The Tax Benefits Preservation Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding common stock (an “Acquiring Person”) without the approval of our Board. Stockholders who own 4.9% or more of our outstanding common stock as of the close of business on March 16, 2010 will not trigger the Tax Benefits Preservation Plan so long as they do not (i) acquire any additional shares of common stock or (ii) fall under 4.9% ownership of common stock and then re−acquire 4.9% or more of the common stock. The Tax Benefits Preservation Plan does not exempt any future acquisitions of common stock by such persons.  Any Rights held by an Acquiring Person are null and void and may not

 

 

  

Exhibit C - 1

  

be exercised. Our Board may, in its sole discretion, exempt any person or group from being deemed an Acquiring Person for purposes of the Tax Benefits Preservation Plan.

 

The Rights. Our Board authorized the issuance of one Right per each outstanding share of our common stock payable to our stockholders of record as of March 16, 2010. Subject to the terms, provisions and conditions of the Tax Benefits Preservation Plan, if the Rights become exercisable, each Right would initially represent the right to purchase from us one one−thousandth of a share of our Series 2010 Junior Participating Preferred Stock (“Series 2010 Preferred Stock”) for a purchase price of $7.00 (the “Purchase Price”). If issued, each fractional share of Series 2010 Preferred Stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of our common stock. However, prior to exercise, a Right does not give its holder any rights as a stockholder of the Company including, without limitation any dividend, voting or liquidation rights.

 

Series 2010 Preferred Stock Provisions.  Each one one-thousandth of a share of Series 2010 Preferred Stock, if issued: (1) will not be redeemable; (2) will entitle holders to quarterly dividend payments of $0.01 per one one-thousandth of a share of Series 2010 Preferred Stock, or an amount equal to the dividend paid on one share of common stock, whichever is greater when, as and if declared by the Board of Directors out of funds legally available therefor; (3) will entitle holders upon liquidation either to receive $1.00 per one one-thousandth of a share of Series 2010 Preferred Stock or an amount equal to the payment made on one share of common stock, whichever is greater; (4) will have the same voting power as one share of common stock; and (5) if shares of our common stock are exchanged via merger, consolidation, or a similar transaction, will entitle holders to a per share payment equal to the payment made on one share of common stock.  The value of one one-hundredth interest in a Preferred Share should approximate the value of one share of common stock.

 

Exercisability. The Rights will not be exercisable until the earlier of (i) ten business days after a public announcement by us that a person or group has become an Acquiring Person and (ii) ten business days after the commencement of a tender or exchange offer by a person or group for 4.9% of the common stock.

 

We refer to the date that the Rights become exercisable as the “Distribution Date.” Until the Distribution Date, our common stock certificates (or book entry shares) will evidence the Rights and will contain a notation to that effect. Any transfer of shares of common stock prior to the Distribution Date will constitute a transfer of the associated Rights. After the Distribution Date, the Rights may be transferred other than in connection with the transfer of the underlying shares of common stock.

 

After the Distribution Date, each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, that number of shares of common stock, having a market value of two times the Purchase Price.

 

Exchange. After the Distribution Date, the Board may exchange the Rights (other than Rights owned by such person or group which will have become null and void), in whole or in part, at an exchange ratio of one share of common stock, or a fractional share of Series 2010

 

 

  

Exhibit C - 2

  

Preferred Stock (or of a share of a similar class or series of the Company’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subject to adjustment).

 

Expiration. The Rights and the Tax Benefits Preservation Plan will expire on the earliest of (i) March 16, 2015, (ii) the time at which the Rights are redeemed pursuant to the Rights Agreement, (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement, (iv) the repeal of Section 382 of the Code or any successor statute if the Board determines that the Rights Agreement is no longer necessary for the preservation of Tax Benefits and (v) the beginning of a taxable year of the Company with respect to which the Board determines that no Tax Benefits may be carried forward.

 

Redemption. At any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (the “Redemption Price”). The redemption 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. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

 

Anti−Dilution Provisions. Our Board may adjust the purchase price of the Series 2010 Preferred Stock, the number of shares of Series 2010 Preferred Stock issuable and the number of outstanding rights to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of the Series 2010 Preferred Stock or our common stock.  No adjustments to the purchase price of less than 1% will be made.

 

Amendments. Before the Distribution Date, our Board may amend or supplement the Tax Benefits Preservation Plan without the consent of the holders of the Rights. After the Distribution Date, our Board may amend or supplement the Tax Benefits Preservation Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Tax Benefits Preservation Plan, but only to the extent that those changes do not impair or adversely affect any rights holder and do not result in the rights again becoming redeemable, and no such amendment may cause the Rights again to become redeemable or cause the Rights Agreement again to become amendable other than in accordance with this sentence.

 

 

  

Exhibit C - 3

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